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US Congress 'seeks AIG bonus law' US Treasury to reclaim AIG cash
(about 1 hour later)
The speaker of the US House of Representatives has said a law should be passed within days to reclaim huge bonuses paid by ailing insurers AIG. Huge bonuses paid out by ailing insurer AIG will be deducted from the firm's next bail-out payment, the US treasury secretary says.
Nancy Pelosi said several committees were working on ways to reclaim $165m (£116m) AIG paid to executives despite accepting a $180bn government bail-out. In a letter to congressmen, Timothy Geithner said $165m (£116m) would be taken from $30bn the firm is due to get as part of its government bail-out.
The committees are considering imposing a special tax on the bonuses or suing AIG for the money. The plan comes after Mr Geithner faced heavy criticism for his handling of the increasingly controversial issue.
Republicans said he should have done more to stop the bonuses being paid.
Channelling public anger
Frustration has been growing over the bonuses, and reports say that AIG offices have received hate mail and even death threats.
On Monday President Barack Obama called the AIG bonuses "an outrage".On Monday President Barack Obama called the AIG bonuses "an outrage".
Frustration has been growing over the issue, and reports say that AIG offices have received hate mail and even death threats. The BBC's James Coomarasamy, in Washington, says these are uncomfortable times for Mr Obama. AIG: QUICK FACTS 30 million US policy holdersOperates in 130 countriesProvides insurance to 100,000 companies and other entities class="" href="/1/hi/business/7945774.stm">Obama 'outraged' at AIG bonuses class="" href="/1/hi/world/americas/7947735.stm">US media homes in on AIG
The BBC's James Coomarasamy, in Washington, says these are uncomfortable times for Mr Obama.
The president is trying to channel public anger over the bonuses without becoming the object of that anger himself, our correspondent says.The president is trying to channel public anger over the bonuses without becoming the object of that anger himself, our correspondent says.
Court action Republicans have raised questions about when Mr Obama was told about the bonuses - and also criticised Mr Geithner for not preventing the payments before they were paid.
Politicians have been anxious to criticise the bonuses - with one congressman even suggesting that AIG executives receiving bonuses should kill themselves before swiftly retracting his statement. If these contracts are not renegotiated immediately, we will take action Democrat letter to AIG In a letter to Congress leaders, Mr Geithner outlined the measures he had taken to try to stop the bonuses being paid.
On Tuesday, the politicians' anger was stoked by a letter from the attorney general of New York state, Andrew Cuomo, revealing more details of the bonuses. He then confirmed that the bonus payments would be deducted from the next instalment of AIG's $180bn bail-out package.
He said that 73 AIG executives - including 11 who no longer work for the company - were each last week given bonuses worth more than $1m. "We will impose on AIG a contractual commitment to pay the Treasury from the operations of the company the amount of the retention awards just paid," Mr Geithner's letter said.
Mr Cuomo is pursuing AIG through the courts and has suggested that the bonuses might have broken New York state laws. "In addition, we will deduct from the $30bn in assistance an amount equal to the amount of those payments."
In Washington, Ms Pelosi said congressional committees were now working on legislation that could be brought "this week and next" on how to get back taxpayer money.
"They've all been working on something, we want them to bring some of it to closure," she said.
Democrat threatDemocrat threat
The two senior members of the Senate Finance Committee - a Republican and a Democrat - want to claw the money back through taxes. Politicians have been anxious to criticise the bonuses - with one congressman even suggesting that AIG executives receiving bonuses should kill themselves before swiftly retracting his statement.
They want to impose a 35% excise tax on the companies paying the bonuses and a 35% excise tax on the employees receiving them. On Tuesday, the politicians' anger was stoked by a letter from the attorney general of New York state, Andrew Cuomo, revealing more details of the bonuses. If these contracts are not renegotiated immediately, we will take action Democrat letter to AIG class="" href="/1/hi/world/americas/7947735.stm">Chorus of anger over AIG
AIG: QUICK FACTS 30 million US policy holdersOperates in 130 countriesProvides insurance to 100,000 companies and other entities class="" href="/1/hi/business/7945774.stm">Obama 'outraged' at AIG bonuses class="" href="/1/hi/world/americas/7947735.stm">US media homes in on AIG He said that 73 AIG executives - including 11 who no longer work for the company - were each last week given bonuses worth more than $1m.
Analysts believe taxation is the most likely form any new legislation will take. Before Mr Geithner's announcement, Nancy Pelosi, speaker of the House of Representatives, had said several committees were looking at passing legislation this week to reclaim the money from AIG.
But some congressmen have also suggested that the government should use its majority stake in AIG - thought to be about 80% - to force the firm to pay the money back. And Senate Democrats wrote to AIG Chief Executive Edward Liddy on Tuesday calling on him to hand over the bonuses.
Others said that empowering the US attorney general to recover the money was an option, and some politicians still favour asking the executives to simply hand the money back.
In that spirit, Senate Democrats wrote to AIG Chief Executive Edward Liddy on Tuesday calling on him to hand over the bonuses.
"If these contracts are not renegotiated immediately, we will take action to make American taxpayers whole by recouping all of the bonuses that AIG has paid out to its financial products unit," the letter stated."If these contracts are not renegotiated immediately, we will take action to make American taxpayers whole by recouping all of the bonuses that AIG has paid out to its financial products unit," the letter stated.
The financial products unit, the politicians added is seen as being primarily responsible for the "near-failure of the company", the letter stated. The financial products unit, the letter stated, is seen as being primarily responsible for the "near-failure of the company".
Mr Liddy has said the bonuses were paid to honour contracts AIG agreed to before the firm's value plummeted when the financial crisis set in in 2008. Mr Liddy has said the bonuses were paid to honour contracts AIG agreed to before the firm's value plummeted when the financial crisis set in last year.
He is due to testify before a House sub-committee on Wednesday. Analysts predict he will face a tough set of questions.He is due to testify before a House sub-committee on Wednesday. Analysts predict he will face a tough set of questions.