Feingold doubts legality of AIG bonuses

WASHINGTON, March 15 (UPI) -- U.S. Sen. Russ Feingold, D-Wis., is urging federal officials to prevent insurance giant AIG from paying out a reported $165 million in bonuses and compensation.

In a letter to U.S. Treasury Secretary Timothy Geithner, Feingold said AIG, which has received at least $170 billion in federal bailout funds, should not be able to pay bonuses. Feingold questioned the legality of the payouts.

"I write to ask why any bonuses would be legally required, given the company's abysmal performance," Feingold wrote.

He also asked whether the bonuses could be canceled or recouped and whether the Obama administration will sue AIG executives for breaching their duties to shareholders.

Appearing Sunday on CBS' "60 Minutes," Ben Bernanke, chairman of the Board of Governors of the Federal Reserve System, said of all the troubles the U.S. economy has experienced since 2007, the AIG matter "makes me the angriest."

"Here was a company that made all kinds of unconscionable bets," he said. "Then, when those bets went wrong, we had a situation where the failure of that company would have brought down the financial system.

"I understand why the American people are angry," he said. "It's absolutely unfair that taxpayer dollars are going to prop up a company that made these terrible bets, that was operating out of the sight of regulators, but which we have no choice but the stabilize, or else risk enormous impact, not just in the financial system, but on the whole U.S. economy."

In a letter to Geithner, obtained Saturday by CNN, AIG Chairman and Chief Executive Officer Edward Liddy pledged to reduce 2009 bonuses that AIG calls "retention payments" by at least 30 percent.

In the letter, Liddy reportedly promised that the 25 highest-paid contract employees in the company's AIG Financial Products unit will reduce their salaries to $1 this year and all other officers in the unit will reduce their salaries by 10 percent.

Meanwhile, other "non-cash compensation" will be reduced or eliminated at AIG Financial Products, which brought the company to the brink of collapse by issuing billions of dollars in credit default swaps, CNN reported.