WASHINGTON (Reuters) - President Barack Obama on Wednesday assailed AIG’s hefty executive bonuses as an “inappropriate use of taxpayer funds,” saying the government needed tools to prevent a situation like AIG’s from ever again posing a risk to the financial system.
“Just as outrageous is the fact we find ourselves having to clean up after AIG’s mess,” Obama told reporters after the head of the bailed-out insurance giant said in congressional testimony the “cold realities of competition” compelled it to pay $165 million in bonuses.
Obama also said the administration was working on a proposal to create a “resolution authority” with powers over institutions like AIG, a giant insurer, akin to the FDIC’s ability to shut down insolvent banks.
Obama said Americans were “right to be angry, I’m angry” over American International Group Inc accepting up to $180 billion in government aid and then handing out large bonuses, and that every effort was being made to find a way to recoup the rewards.
In response to a reporter’s question, Obama said that he had “complete confidence” in Treasury Secretary Timothy Geithner and his other economic advisers to deal with the crisis.
Geithner was standing at Obama’s side as he spoke on the South Lawn before leaving on an overnight trip to California.
Fury over the bonuses threatens to undermine Obama’s efforts to solve the credit crisis and pull the economy out of a deep recession.
Many voters view the financial rescues as free handouts to wealthy executives who made bad decisions, and the fat bonuses — although relatively small compared to the government’s $700 billion bailout fund — have fueled that anger.
“What we are working on is a resolution authority that would be similar to ... the powers that the FDIC has over banks,” Obama said.
“What they’re able to do is at the same time protect creditors, depositors and consumers while also exercising greater power proactively over institutions like AIG, which is not a bank, which is an insurance company with a hedge fund on top of it.”
Editing by Jackie Frank