Tuesday, March 17, 2009 | 2:06 a.m.
Insurance giant American International Group is a poster child for the collapse of the financial market. President Barack Obama said Monday the company’s problems were the result of “recklessness and greed.”
The recipient of $170 billion in federal bailout money, AIG seems to be going about business as usual. It was due to pay $165 million in “retention” bonuses Sunday, much of it to traders at AIG Financial Products, the group that sank the company with its risky deals.
Obama summed up the feelings of Americans, saying it was “hard to understand” how AIG traders deserved bonuses. The Financial Products group is still hemorrhaging red ink and is a major reason AIG lost $61.7 billion last year.
“How do they justify this outrage to the taxpayers who are keeping the company afloat?” Obama said.
AIG Chairman Edward Liddy said the company is legally obligated to make the payments under a deal struck by previous management, and he pledged to find ways to limit future bonuses.
Liddy’s argument is difficult for us to swallow. What would AIG have been obligated to pay if it had not received a bailout and instead went out of business? Of course, AIG received federal money because it was determined to be “too big” to fail. Now it sounds as if AIG is too big to think it should play by the rules.
AIG never should have agreed to these bonuses in the first place and is now rightfully under fire. On Monday, Obama instructed Treasury Secretary Timothy Geithner to find ways to try to block these bonuses. New York Attorney General Andrew Cuomo has demanded that AIG release the names and positions of the people who received bonuses.
There has been too little accountability under the bailout program. Congress should hold public hearings and subpoena the chief executives of AIG and every other bank that took federal bailout money. The companies should be pressed to provide a complete explanation of how they’ve been spending taxpayer money. Enough is enough.