Outrage over AIG bonuses grows

WASHINGTON (AP) — Talking tougher by the hour, livid Democrats confronted beleaguered insurance giant AIG with an ultimatum Tuesday: Give back $165 million in post-bailout bonuses or watch Congress tax it away with emergency legislation.

Fresh details, meanwhile, pushed AIG outrage ever higher: New York Attorney General Andrew Cuomo reported that 73 separate company employees received bonus checks of $1 million or more last Friday. This at a company that was failing so spectacularly the government felt the need to prop it up with a $170 billion bailout.

And while Democratic lawmakers talked tax penalties, Republicans declared the Democrats were hardly blameless, accusing them of standing by while the bonus deal was cemented and suggesting that Treasury Secretary Timothy Geithner could and should have done more. Though the White House expressed confidence in Geithner, it was clearly placing the responsibility for how the matter was handled on his shoulders.

On Tuesday, White House chief of staff Rahm Emanuel categorically dismissed to The Associated Press any suggestion that Geithner is in trouble.

The financial bailout program remains politically unpopular and has been a drag on Barack Obama’s new presidency, even though the plan began under his predecessor, George W. Bush. The White House is well aware of the nation’s bailout fatigue — anger that hundreds of billions of taxpayer dollars have gone to prop up financial institutions that made poor decisions, while many others who have done no wrong have paid the price.

AIG chief executive Edward Liddy can expect a verbal pummeling today when he testifies before a House subcommittee.

On Capitol Hill late Tuesday, House Democrats directed three powerful committees to come up with legislation this week to authorize Attorney General Eric Holder to recover massive bonus payments made by companies such as the ones paid last week by American International Group Inc.

Senate Democrats, meanwhile, suggested that if the AIG executives had any integrity, they would return the $165 million in bonus money. One leading Republican, Sen. Chuck Grassley of Iowa, even suggested they might honorably kill themselves, then said he didn’t really mean it.

Whatever the process, lawmakers of all stripes said, the bonus money belongs back in the government’s hands.

“Recipients of these bonuses will not be able to keep all of their money,” declared Senate Majority Leader Harry Reid in an unusually strong threat delivered on the Senate floor.

“If you don’t return it on your own, we will do it for you,” echoed Chuck Schumer of New York.

Not all Democratic leaders were racing in that direction. Penalizing people with the tax code is inappropriate, declared Rep. Charlie Rangel, D-N.Y., chairman of the tax-writing Ways and Means Committee. He said, “It’s difficult for me to think of the code as a political weapon.”