Obama 'pay czar' lacks clout to stop $198 million in AIG bonuses
The special inspector general for the government’s financial rescue program told Congress Wednesday that the ongoing bonus quandary was 'a mess.'
Million-dollar bonuses might happen all over again at the bailed-out insurance firm AIG.Skip to next paragraph
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That was the message congressional lawmakers heard – and didn’t want to hear – on Wednedsday from Neil Barofsky, the special inspector general for the government’s financial rescue program.
AIG has promised some $198 million in bonus pay to its employees next March, Mr. Barofsky said, and the Obama administration's "pay czar" has limited say over the matter.
"So we really haven’t solved the problem yet if we have a pay czar who doesn’t have the authority to oversee the bonuses," said Rep. Blaine Luetkemeyer (R) of Missouri.
When AIG paid out similar bonuses last December and March, it stirred public outrage – including protest bus tours past the homes of some of the firm's employees.
Barofsky said the ongoing bonus quandary was “a mess” involving lapses of management both at AIG and at government agencies.
To the public, and to members of the House Committee on Oversight and Government Reform, which heard Barofsky’s testimony, the basic issue is whether Wall Street-style bonuses are deserved at a firm that is surviving thanks to taxpayer aid, and which helped to send the global economy into a deep recession.
The firm made risky investment contracts, known as credit default swaps, that it couldn’t afford to pay. Now the firm has tapped about $120 billion in government bailout money.
The pay czar for bailed-out firms, Kenneth Feinberg, says the bonuses should be reduced. But the firm says its plans would simply make good on contractual obligations.
The hearing came as The Wall Street Journal reported that overall pay in the financial sector is headed substantially higher this year, even as the fallout from last year’s credit-market collapse has pushed the US unemployment rate to 9.8 percent.
The fireworks at the hearing went beyond AIG itself, putting scrutiny on other individuals and institutions: