News/Lawmaker News/Economy & Budget

News/Lawmaker News/Economy & Budget

$450 million in AIG bonuses?

While the left and the right condemned reports that AIG will pay $165 million in bonuses after receiving $170 billion in taxpayer bailout funds, it is worthy noting that the Wall Street Journal is now reporting that the number is much higher: $450 million in bonuses.
American International Group Inc. will pay $450 million in bonuses to employees in its financial products unit. That division was at the heart of AIG's collapse last fall, which compelled the U.S. government to provide $173.3 billion in aid to keep it running.

Chief Executive Edward Liddy told Treasury Secretary Timothy Geithner in a letter dated Saturday that the next payments to employees of the financial products unit -- whose woes caused massive losses at the giant insurer -- are due on Sunday, and added "quite frankly, AIG's hands are tied."

Those payments are in addition to $121.5 million in incentive bonuses for 2008 that AIG will start making this month to about 6,400 of its roughly 116,000 employees. AIG, which was rescued in September as it faced potential bankruptcy, is also making over $600 million in retention payments to over 4,000 employees.

Together, the three programs could result in roughly $1.2 billion in retention and bonus payments to AIG employees.

Recommended Reading: Citi history

The Washington Post has a must read history of Citigroup this morning. The gist: The bank has always pushed the envelope with investments that, at times, has led to big gains and, at others, led to massive losses.

Here's the key graf:
The company was just another New York bank until the last decade of the 19th century, when a new chief executive, James Stillman, began to win the business of an emerging class of giant corporations. Those firms were concentrating the control of American industry -- and eventually global industry -- on the island of Manhattan. Citigroup would prosper as their partner. A pattern was set. The city's business community and the bank would push further than their rivals, and prosper more, and every so often they would stumble badly. "It became a great bank because they were innovators," said Richard Sylla, an economics professor at New York University who specializes in the history of financial institutions. "They were early to become a great corporate bank, they were early to get overseas, they were early to get into the investment banking business, they were early to get into consumer lending."

Citi, it is worth noting, saw its stock prices shoot up nearly 40 percent on Tuesday after CEO Vikram Pandit said the company has been profitable for the first two months of 2009. This comes as the government continues to consider more bailout funds for the company, on top of the $45 billion in has already sunk into the bank.