Call it Bonusgate, the burgeoning scandal surrounding $165 million in newly cut checks to employees of global insurance and financial services giant AIG, which is blamed for triggering one of the biggest financial crises in history.
The awards to employees of American International Group—now 80 percent owned by taxpayers, after more than $180 billion in help from Uncle Sam—have unleashed a persistent torrent of coast-to-coast outrage that is showing little sign of losing steam.
President Barack Obama told CBS's 60 Minutes yesterday that "people are understandably upset." He noted that in North Dakota, Iowa, and Arkansas "folks would be thrilled to be making $75,000 a year without a bonus." But he was cool to a measure passed by the House last week to slap a hefty tax on bonuses at AIG and other firms rescued by taxpayers. Now the Senate is considering a related measure.
The ire was such last week that one senior GOP senator even suggested AIG executives commit hari-kari. That was Iowa's Chuck Grassley, who said that they should "follow the Japanese example" and "take that deep bow and say, 'I'm sorry,' and then either do one of two things: resign or go commit suicide."
Grassley's provocative advice wasn't even the most macabre. AIG CEO Edward Liddy, testifying last week before angry House lawmakers (and noisy protesters), was on the hot seat for a half-hour before he revealed the contents of just one of the death threats the firm received. The message suggested AIG executives be strangled with piano wire and even mentioned their kids.
Liddy announced that he'd asked employees with bonuses of $100,000 or more to give at least half back and that some had volunteered to return 100 percent. Seventy-three people got at least $1 million, and seven netted more than $4 million. The top beneficiary snared a cool $6.4 million.
The bonus frenzy has, of course, overshadowed the more significant question of how much of its money the U.S. government will ever get back. Liddy, the former chief of Allstate insurance who was recruited from retirement to take the reins of New York City-based AIG after its near meltdown last September, insisted his 116,000 employees worldwide have a common agenda: to "clean up the mess at AIG" and help the U.S. economy "get moving again." He said the company might return to profitability within two or three years, but he called the forecast "very dependent on market conditions."
A day after he testified, the House votedfor a 90 percent tax on large bonuses at firms that were given big boosts in the $700 billion federal bailout. Bonusgate has prompted scattered calls for the resignation of Treasury Secretary Timothy Geithner, whose department, along with the Fed, has been monitoring AIG since its rescue. But Obama has made his support for Geithner clear. And in his latest high-profile initiative to resuscitate the U.S. economy, the Treasury chief unveiled details today of a federal program to finance the purchase of up to $1 trillion in toxic assets from financial institutions. Tomorrow, he'll appear with Federal Reserve Chairman Ben Bernanke before House lawmakers to face tough questions on the AIG payouts.
Lawmakers fret that bailout fatigue—aggravated by AIG's antics—will jeopardize support for the additional hundreds of billions of dollars that may be needed to shore up the financial sector. There's concern, too, about collateral damage to Obama's ambitious domestic agenda, one focused on healthcare, clean energy, and education.
Amid all the finger-pointing between Republicans and Democrats, Bonusgate is playing out before an unforgiving public stung by a sharp rise in joblessness, which has grown by about 5 million in the past 12 months alone. One sure bet: Outrage fatigue isn't around the corner.