New FDIC-Like Entity to Oversee Corporate Bailouts, Post-AIG?
In the wake of widespread anger over news of big bonuses paid to executives at American International Group in the midst of a taxpayer-funded bailout that could hit $185 billion, the Obama administration is now proposing a new regulatory entity to oversee the operation of struggling corporations.
Akin to the Federal Deposit Insurance Corp., the agency would oversee such issues as the $165 million in bonuses paid to AIG executives who reportedly ran the insurer into the ground and the payments the U.S. opted to make, at 100 cents on the dollar, to foreign banks that had purchased credit insurance from AIG, according to the Associated Press and the New York Times.
Meanwhile, a Reuters reports that U.S. Sen. Charles Grassley (R-Iowa) asked the U.S. Treasury Department’s inspector general to look into whether Treasury officials “made any effort to forestall payments of bonuses or demanded waivers of bonuses.” (AIG’s chief was calling today for some executives to give back half the bonus money they received—a move described by New York’s attorney general as too little, too late, reports the New York Times in another article.)
Amidst the furor, President Barack Obama is seeking to create a new FDIC-like federal agency that would have the power to abrogate contracts and dispose of property in such situations, reports the Wall Street Journal.
This “would allow us proactively to get out in front, make sure that we are separating out bad assets from good, dealing with contracts that may be inappropriate, and preventing the kinds of systemic risks that we’ve seen taking place with AIG,” the president says.
Related coverage:
ABAJournal.com: “Outraged Congress Mulls Special AIG Bonus Law: Tax Could Be 100%”
Wall Street Journal (sub. req.): “Hedge Funds May Get AIG Cash”
Wall Street Journal Law Blog: “Bonusgate Rolls On: A Ruling in Merrill; Cuomo Slams AIG”
