AIG passes bonus 'land mine' to government: report
Insurer due to give $2.4 mln to executives next week, Washington Post says
By Alistair Barr, MarketWatch
SAN FRANCISCO (MarketWatch) - American International Group is due to pay $2.4 million in bonuses to executives next week and is trying to pass the potential "land mine" to the government, the Washington Post reported Friday.
AIG has been pressing the government to bless the payments in hopes of shielding itself from public outrage, the newspaper said. Officials at the insurer and within the government see the payments as a "land mine," the newspaper added.
AIG almost collapsed last year under the weight of billions of dollars in derivatives-based guarantees it sold on mortgage-related securities. It was saved by more than $100 billion in government bailout money.
Earlier this year, AIG paid more than $160 million in retention bonuses to employees of the unit that wrote those doomed derivative contracts. Many employees returned the money, but the episode sparked a national furor of executive pay that's still simmering. See MarketWatch special report: Pay Dirt.
In the wake of the uproar, the White House appointed Kenneth Feinberg to oversee the compensation of executives at seven companies that have been saved by large government bailouts, including AIG, Citigroup , Bank of America and General Motors .
However, this compensation czar only has power over current and future compensation. AIG's upcoming payments involve bonuses delayed from 2008, the Washington Post explained. Some Treasury Department officials believe they are under no obligation to offer an advisory opinion, which could leave AIG to make the decision on whether to pay the money on its own, the newspaper said.