Bonus Pay at AIG Strikes a Nerve
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This is the VOA Special English ECONOMICS REPORT.
Anger was the common reaction of Americans this week to bonuses paid at rescued financial companies. Lawmakers held hearings and President Barack Obama denounced the extra pay at American International Group. The huge insurance company nearly collapsed last September.
Since then, it has received more than one hundred seventy billion dollars in government aid. Taxpayers now own about eighty percent of the company. Billions loaned to A.I.G. have gone to pay debts owed to Goldman Sachs and other American and foreign banks.
But the anger was directed mainly at one hundred sixty-five million dollars in bonuses paid to employees of A.I.G. Financial Products. That division caused many of the company's problems.
The bonuses were retention payments -- a way to keep good employees. Yet some who got them at A.I.G. have already left.
On Wednesday, A.I.G.'s new chief, Edward Liddy, told Congress that he has asked employees to return at least half of bonuses of one hundred thousand dollars or more. Some, he said, have already done so.
Even some critics agreed that A.I.G. had to honor contracts. But Thursday, the House of Representatives voted to place a ninety percent tax on those bonuses at A.I.G. and at other companies getting large bailouts. Yet such a measure could violate the Constitution's guarantee of equal protection under the law.
Earlier in the week, the president directed Treasury Secretary Tim Geithner to look for ways to block the bonuses. But there were questions about why new restrictions on companies had excluded contracts dated before February eleventh, including those at A.I.G.
Opinion polls show that more than half of Americans oppose more aid for the financial industry. Some observers said it was easy for politicians to attack big bonuses. Much harder, of course, is changing a system that let companies take the risks that led to the current financial crisis.
The Federal Reserve this week announced a new trillion-dollar plan to fight the recession. The aim is to help lower interest rates on housing and other loans and improve credit conditions.
The central bank said it would buy up to an additional seven hundred fifty billion dollars in mortgage-related securities. The Fed will also buy up to three hundred billion dollars of long-term Treasury bonds. The Fed has not tried to influence long-term rates this way since the nineteen sixties.
And that's the VOA Special English ECONOMICS REPORT, written by Mario Ritter. Transcripts, MP3s and podcasts of our programs are at voaspecialenglish.com.