Whereas the Chairman of the Federal Reserve, Ben Bernanke,
said in testimony to Congress on March 3, 2008: If there is a single
episode in this entire 18 months that has made me more angry, I can’t think of
one, than AIG. AIG exploited a huge gap in the regulatory system; there was no
oversight of the financial products division. This was a hedge fund basically
that was attached to a large and stable insurance company, made huge numbers of
irresponsible bets, took huge losses. We had no choice.
;
Whereas, on March 15, 2009, Chairman Bernanke said on the
news program 60 Minutes
that we must address the problem
of financial institutions that are deemed too big—or perhaps too
interconnected—to fail. Given the highly fragile state of financial markets and
the global economy, government assistance to avoid the failures of major
financial institutions has been necessary to avoid a further serious
destabilization of the financial system, and our commitment to avoiding such a
failure remains firm.
;
Whereas the Treasury and the Federal Reserve have
committed almost $200 billion in various forms of taxpayer assistance to AIG
for the company’s liquidity shortages, the purchase of certain assets, and to
dispose of other assets for an orderly wind-down of the company;
Whereas the commitment of almost $200 billion in taxpayer
assistance represents one of the largest Federal government rescues of a single
private corporation in United States history;
Whereas the Federal Reserve has committed
tens of billions of taxpayer dollars in a combination of facilities to purchase
AIG’s mortgage-backed securities and liabilities tied to collateralized debt
obligations;
Whereas the Federal government has taken a 79.9 percent
stake in AIG in exchange for providing financial assistance extending
credit;
Whereas, under the Emergency Economic Stabilization Act of
2008, the Bush Administration and the Obama Administration have provided AIG
with access to $70 billion in direct capital infusions, which in turn have been
used, in part, to cover AIG’s collateral for positions taken by the company in
unregulated and risky credit default swaps;
Whereas AIG’s Financial Products division’s irresponsible
practice of not setting aside sufficient capital to cover its exposure on more
than $1 trillion of complex financial products, including credit default swaps,
have threatened the stability of the financial system and resulted in
substantial losses to the company, to pensioners, to investors, and ultimately
to the taxpayer;
Whereas, despite the irresponsible actions of AIG
executives that threatened the company as a going concern, and exposed
taxpayers to almost $200 billion to cover losses from excessive risks, these
executives will receive hundreds of millions of taxpayer money in retention
payments and bonuses for performance in 2008 and 2009;
Whereas, in a letter to Treasury Secretary Geithner, AIG
CEO Edward Liddy said that AIG also is committed to seeking other ways
to repay the American taxpayers for AIG Financial Products retention
payments.
;
Whereas, in the same letter, Liddy said that AIG’s
hands are tied. Outside counsel has advised that these [retention payments] are
legal, binding obligations of AIG, and there are serious legal, as well as
business, consequences for not paying. Given the trillion-dollar portfolio at
AIG Financial Products, retaining key traders and risk managers is critical to
our goal of repayment [to the taxpayer].
;
Whereas the appropriate committees in the House of
Representatives and the Senate have already convened hearings to examine the
sizable government assistance provided to AIG, and the House Financial Services
Committee has focused its oversight on the excessive compensation provided
AIG’s executives and employees, among other matters;
Whereas common sense dictates that a company such as AIG
that was so mismanaged as to threaten the stability of the financial system of
the Nation and that requires billions of dollars of taxpayer money for its
survival should not reward that mismanagement through lavish bonuses;
and
Whereas, on March 15, 2009, President Obama stated:
In the last six months, AIG has received substantial sums from the U.S.
Treasury. I’ve asked Secretary Geithner to use that leverage and pursue every
legal avenue to block these bonuses and make the American taxpayers
whole
: Now, therefore, be it
That it is the sense of Congress that
the President is appropriately exercising all of the authorities granted by
Congress under the Emergency Economic Stabilization Act of 2008, and any other
Federal law, by taking all necessary actions to ensure that—
(1)in the absence of a voluntary decision by
AIG employees and executives to forego their contractual retention bonuses, AIG
will repay taxpayers for the hundreds of millions of dollars the company
provided to executives and employees in retention bonuses;
(2)going forward, companies that receive a
capital infusion under title I of the Emergency Economic Stabilization Act of
2008 that the Secretary of the Treasury deems necessary to restore liquidity
and stability to the financial system of the United States are prohibited from
providing to executives and employees unreasonable and excessive compensation
payments that are not directly tied to performance measures, such as repayment
of the companies’ obligations to the taxpayers, profitability of the company,
adherence to appropriate risk management, and transparency and accountability
to shareholders, investors, and taxpayers; and
(3)companies that receive a capital infusion
under title I of the Emergency Economic Stabilization Act of 2008 that the
Secretary of the Treasury deems necessary to restore liquidity and stability to
the financial system of the United States are complying with the letter of the
provisions included in the American Recovery and Reinvestment Act that
strengthen executive compensation restrictions for recipients of capital
infusions, such as limiting base salaries for executives to no more than
$500,000 per year, banning golden parachutes, limiting bonuses for executives,
requiring shareholders to approve pay packages, requiring executives to certify
they are meeting the law’s restrictions, requiring a company-wide policy on
luxury expenditures, and prohibiting compensation on the basis of excessive
risks that threaten the viability of such companies, and adhering to all
executive compensation guidelines the Secretary of the Treasury may
establish.