President Obama's economic advisers expressed outrage and anger Sunday over revelations that bailed-out insurance giant American International Group was going ahead with plans to pay executives tens of millions of dollars in new bonuses.
"I don't know why they would follow a policy that's really not sensible. It's obviously going to ignite the ire of millions of people," Austan Goolsbee, of the White House Council of Economic Advisers, told "FOX News Sunday."
"It is outrageous," chief economic adviser Larry Summers told ABC's "This Week."
Summers said these kinds of bonus payments should be a matter of future regulations.
AIG has gotten more than $170 billion in a public bailout. Just this month, the company reported a loss of $61.7 billion for the fourth quarter of last year -- the largest corporate loss in history.
But AIG's chairman said the company entered into the bonus agreements in early 2008 before getting into severe financial trouble. Summers said the government determined it could not break those contracts after the fact.
Both advisers said the Obama administration had taken steps to limit the AIG bonuses.
Goolsbee said Treasury Secretary Timothy Geithner was "really upset" by the pay-outs and "berated" representatives from AIG after hearing about the plans.
Goolsbee said the administration, which is "angry" the bailed-out company would follow through on its bonus plans, has taken all available steps to prevent such a pay-out from happening again.
Asked if the bonuses could hurt the administration's attempts to sell its wide-reaching economic plans, Goolsbee said: "You worry about that backlash."
In a letter to Geithner dated Saturday, Liddy informed Treasury that outside lawyers had informed the company that AIG had contractual obligations to make the bonus payments and could face lawsuits if it did not do so.
Liddy said in his letter that "quite frankly, AIG's hands are tied" although he said that in light of the company's current situation he found it "distasteful and difficult" to recommend going forward with the payments.
The large bulk of the payments at issue cover AIG Financial Products, the unit of the company that sold credit default swaps, the risky contracts that caused massive losses for the insurer.
A white paper prepared by the company says that AIG is contractually obligated to pay a total of about $165 million of previously awarded "retention pay" to employees in this unit by Sunday, March 15. The document says that another $55 million in retention pay has already been distributed to about 400 AIG Financial Products employees.
The company says in the paper it will work to reduce the amounts paid for 2009 and believes it can trim those payments by at least 30 percent. AIG also pledged to Geithner that it would restructure $9.6 million in bonuses scheduled to go a group that covers the top 50 executives. Liddy and six other executives have agreed to forgo bonuses. The group of top executives getting bonuses will receive half of the $9.6 million now, with the average payment around $112,000.
This group will get another 25 percent on July 14 and the final 25 percent on September 15. But these payments will be contingent on the AIG board determining that the company is meeting the goals the government has set for dealing with the company's financial troubles.