In frantically rushing to the rescue of American International Group Inc. last fall, Treasury Department officials negotiated a $40-billion deal that explicitly allowed the company to set aside tens of millions of dollars for executive bonuses and richly reward individual senior executives without restrictions or any concern that the government might interfere.
Although the Obama administration has maintained that Treasury Secretary Timothy F. Geithner did not learn of the bonuses until this month, it has carefully avoided disclosing how long the agency itself was in the dark. White House spokesman Robert Gibbs said he could not detail when administration officials below Geithner learned of the existence of the AIG commitments.
But the record shows that on Nov. 25, Treasury Department officials signed a securities agreement to provide $40 billion to AIG in exchange for preferred stock and rights to buy common stock. In that 586-page document, the agency explicitly allowed AIG to pay individual executives as much as 3.5 times their base salary without any approval.
The agreement also allowed AIG to set aside as much money for such bonuses for 2008 as it had in 2006, a year when the insurance giant was raking in vast amounts of profit from a financial bubble that would later maim the world economy.
"None of this made any sense," the official said. "Didn’t anybody think of requiring the company to be profitable before shoveling this money out the door?"
Dan Pedrotty, director of investments at the AFL-CIO, said hourly auto workers were being forced to give up their contract rights, while top AIG executives are holding on to multimillion-dollar bonuses.