In AIG flap, it’s not just about bonuses anymore

Scrutiny of bailout terms expands as critics question federal officials’ longtime ties to aid recipients.

By Tom Hamburger and Janet Hook
The Los Angeles Times
March 19, 2009

Reporting from Washington — The firestorm over American International Group is spreading beyond executive bonuses, with lawmakers and policy experts now questioning virtually all aspects of the taxpayer-financed rescue package for the insurance giant.

Among other issues, critics are asking why AIG was allowed to use federal bailout money to repay $13 billion in debt obligations to Wall Street powerhouse Goldman Sachs, as well as debts to foreign banks.

Prominent Republicans, joined by some Democrats, suggested that the answer could be found in longtime ties linking Washington to Wall Street.

Former Treasury Secretary Henry M. Paulson was once chief executive of Goldman Sachs, for example, while AIG’s chief executive, Edward M. Liddy, was a member of Goldman’s board. The Treasury official who is in charge of the bailout, Neel Kashkari, is a former Goldman executive.

“Look at where the money went: Goldman Sachs, Paulson’s firm, foreign banks,” Sen. Jim Webb (D-Va.) said Wednesday. “AIG gave more money to foreign banks than we gave in loans to the auto industry.”

“The real outrage over the AIG bailout isn’t executive bonuses, it’s that billions in taxpayer funds intended for AIG have been passed through to benefit foreign banks and Wall Street behemoths like Goldman Sachs,” former House Speaker Newt Gingrich wrote in an e-mail letter to conservatives Wednesday morning.

Gingrich and Republicans on Capitol Hill unleashed their anger on the current Treasury Secretary, Timothy F. Geithner, saying he bore responsibility for being overly generous in providing aid to failed companies like AIG.

Two outspoken House Republicans — Darrell Issa of California and Connie Mack of Florida — called for Geithner’s resignation, saying the AIG bonus controversy on top of existing doubts about the bailout made such a move necessary.

Other Republicans, including the ranking member of the Senate Banking Committee, Alabama’s Richard C. Shelby, offered caustic criticism of Geithner but stopped short of calling for his resignation.

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-aig-bailout19-2009mar19,0,2707699.story