President Barack Obama on Monday lent the most authoritative voice yet to the growing chorus of government officials critical of American International Group's (Stock Quote: AIG) award of about $165 million in federal bailout funds as bonuses to executives.
Obama, speaking at a White House gathering of small business owners, said he directed Treasury Secretary Timothy Geithner to pursue "every single legal avenue" to block AIG from awarding the bonuses. The federal government controls some 80% of the giant insurer after pouring in more than $170 billion in bailout funds to stave off its collapse since September.
"This is a financial company that finds itself in distress due to recklessness and greed," Obama said. "It's hard to understand how derivative traders warranted any bonus -- how do they justify this?"
AIG reported this month that it lost $61.7 billion in the fourth quarter of last year, the largest corporate loss in history. AIG has argued that it contractually obligated to pay the bonuses.
"This isn't about dollars and cents, it's about our fundamental value," Obama said.
Meanwhile, New York Attorney General Andrew Cuomo told AIG he wanted a list on his desk by the end of the day of employees set to receive the bonuses. He said his office will investigate whether the employees were involved in the insurance giant's near-collapse and whether the bonus payments are fraudulent under state law.
Cuomo made good on a threat he made Monday in a letter to AIG's government-appointed chief executive, Edward Liddy, in which he said he would issue administrative subpoenas after 4 p.m. if he didn't get the employees' names, information about their work at AIG's financial products subsidiary and the contracts the company said required paying the bonuses, the Associated Press reports. The financial products unit sold credit default swaps, the risky contracts that caused massive losses for the insurer.
"Four o'clock has come and gone. We haven't got the information. We'll be issuing subpoenas immediately," Cuomo told reporters in a conference call after the deadline.
Several other key law- and policymakers have been critical of AIG in recent days.
Rep. Barney Frank (D., Mass.), the chairman of the House Financial Services Committee, hinted on NBC's "Today" show earlier Monday that some top AIG brass may lose their jobs as a result. He said the bonuses were "going to people who screwed this thing up enormously."
"Maybe it's time to fire some people," Frank said on NBC's "Today" show. "We can't keep them from getting bonuses but we can keep them from having their jobs."
Frank is one among a chorus of legislators and regulators who are disgusted with the handling of AIG's rescue, which the government has poured $170 billion into so far.
Federal Reserve Chairman Ben Bernanke said the AIG situation has made him "angry" in an interview on CBS's "60 Minutes" that aired Sunday night.
"I slammed the phone more than a few times on discussing AIG. It's -- it's just absolutely -- I understand why the American people are angry."