President Barack Obama and members of Congress expressed outrage yesterday after the struggling insurance company AIG revealed that it had spent $165 million in bonuses to executives, even after receiving $170 billion in bailout money from taxpayers.
President Obama chastised AIG for wasting federal funding that was meant to help prevent the company from going out of business. AIG helped insure many of the bad loans that are now crippling the financial system. The government is keeping them afloat to prevent further damage to the economy.
"This is a corporation that finds itself in financial distress due to recklessness and greed. Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. I mean, how do they justify this outrage to the taxpayers who are keeping the company afloat?" President Obama said.
AIG CEO Edward Liddy defended the bonus payments saying that they were promised to employees before the company accepted money from the federal government.
In the first part of this video, NewsHour correspondent Ray Suarez reports on government frustration with AIG and two lawmakers weigh in on what must be done.
"All across the country, there are people who are working hard and meeting their responsibilities every single day without the benefit of government bailouts or multimillion-dollar bonuses. They are, in some cases, mortgaging their homes and doing a whole host of things just in order to keep things afloat. All they ask is that everyone, from Main Street to Wall Street to Washington, play by the same rules." - President Barack Obama
"So I do believe the federal government as the -- effect, as the owner can say, 'These bonuses may have been promised for performance, but I think we can look at the performance,' as the president was quoted in the show was saying, it's hard to argue that this is pay for performance." - Representative Barney Frank, D-MA
"The question mark that I think all of us have and all of America has, are these people that were AIG before, in this particular division, not the rest of it -- the insurance company and what have you -- but these particular people, are they really the best and the brightest that they did not see this coming, that they got us -- they got their company in the red for this, and now they've got all American taxpayers in the red, as well?" - Representative Scott Garrett, R-NJ
1. Why are many big American companies in financial trouble right now?
2. What is bailout money?
3. What is a bonus?
1. Do you think that it is right for AIG to give out bonuses that it promised employees when it is struggling to stay in business? Why or why not?
2. Why are President Obama and members of Congress so angry at AIG? How might this news affect politicians?
3. Do you think that large private companies like AIG deserve help from taxpayers to keep them from going out of business? Why or why not?
4. In what ways does the failure of big companies like AIG affect ordinary Americans?