WASHINGTON, May 13 – Every month or so another AIG story emerges that raises the ire of Congress and the public, at least for a while.
While most of the public attention has been focused on the evolving bonus scandal, even more disturbing is the fact is that, at the end of the day, U.S. taxpayers have spent $170 billion bailing out the company that has endangered their economic security.
On Wednesday it was a “who knew what and when” about the AIG bonuses. New documents show that the Federal Reserve Bank of New York knew about the AIG bonus millions several months before they turned into public scandal.
Earlier this month, AIG let on that it was paying out nearly $1.5 billion in bonuses, some $454 million in “performance” bonuses – three times the $165 million the company had previously disclosed.
Congress responded sharply – demanding that the bonuses be taxed at a rate of 90 percent, although the bill didn’t go anywhere. A March Gallup poll showed what the public thinks: some 76 percent want the government to intervene.
But nothing much came of the collective outrage, except that AIG quietly returned (or promised to) about a third of the original $165 million.
On Wednesday, AIG CEO Edward Liddy faced another congressional hearing, this one at the House Committee on Oversight and Government Reform.
Congressman Dennis Kucinich (D-OH) grilled Liddy, focusing on AIG’s payment of $90 billion to its domestic and foreign trading partners.
Kucinich used that story to point out what’s been wrong with this bailout all along: The culprits have been rewarded – failed executives get their bonuses and their business partners collect on their bets – while everyday taxpayers have endured the losses, since there’s no government bailout to swoop in and make them whole.
States such Michigan, Florida and Ohio have filed class action suits against AIG over the past year on behalf of hundreds of thousands of taxpayers – public servants like policemen, firemen and teachers – whose pension funds evaporated because of AIG’s mismanagement and misconceptions.
Even more frightening is the fact that the very same taxpayers who have lost millions now own 80 percent of AIG, so they are losers on two accounts. They own a company whose share value has plummeted, down 98 percent from where it stood two years ago, at $1.60 on May 13.
While there is a lot of uncertainty whether the bailout “works” and what the future might hold, one thing is certain: the taxpayers are last in line.
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U.S. PIRG serves as the federation of non-partisan, non-profit state Public Interest Research Groups. PIRGs are public interest advocacy groups that take on powerful interests on behalf of their members.
