WASHINGTON, March 24, 2009 (AFP) - Executives with AIG's financial products division have agreed to pay back 50 million dollars in bonuses amid outcry over the insurance giant's use of taxpayer cash for executive perks, officials said.
Fifteen of the top 20 bosses who received big bonus checks after the US government spent 165 million dollars (120 million euros) to rescue American International Group will give back their bonuses, New York Attorney General Andrew Cuomo said late Monday.
The agreement comes as Treasury Secretary Timothy Geithner and Federal Reserve chief Ben Bernanke face a grilling from lawmakers Tuesday over government aid for AIG after a furor over bonuses at the troubled insurer.
The 15 executives from the financial products' unit are expected to return 30 million dollars in cash. Cuomo said a total of 50 million dollars, including bonuses from other employees of the unit, was to be returned, he said.
"I would like to say this to the individuals who have given the money back: 'You have done the right thing. You have done what this country now needs and demands'," Cuomo said in a statement.
Nine of the top 10 bonus recipients had agreed to return cash, Cuomo said, adding he hoped to eventually get back 80 million dollars paid out as bonuses in the United States.
Another 85 million dollars was given to employees outside the United States, and Cuomo said it was unlikely that US officials had the legal standing to seek to regain that cash.
The financial products division was widely blamed for the company's downfall through its investments in complex financial derivatives that turned out to be worth a fraction of their on-book value.
AIG has been lambasted for using 165 million dollars of government bailout funds to pay for staff bonuses, despite massive losses at the firm.
In the final quarter of 2008, AIG posted a 61.7 billion dollar loss, the largest quarterly loss ever recorded in the United States.
The US government has so far pumped around 170 billion dollars into the insurance giant to keep it afloat, fearing its collapse could deepen a market-wide liquidity crisis.
News that AIG staff had received retention bonuses derived from taxpayer cash prompted US lawmakers to propose a hefty tax on the premiums.
The House of Representatives last week approved a 90 percent tax on bonuses paid to employees who earned more than 250,000 dollars at firms if their firms received more than five billion dollars in government rescue funds.
Meanwhile, Geithner and Bernanke are to testify before the House of Representatives' Financial Services Committee, facing more questions over the government's actions and its monitoring of the titan insurer.
They "will have the opportunity to explain directly and publicly the actions they have taken to rescue AIG from collapse and monitor the company’s performance since then," said Democratic Representative Paul Kanjorski.
"They have much to clarify for the American public. I look forward to their appearances," said Kanjorski, chairman of the panel's subcommittee on capital markets, insurance, and government-sponsored enterprises.
Also to testify Tuesday is William Dudley, president and chief executive officer of the Federal Reserve Bank of New York.