Transparency Demanded From Banks

Although we have seen a glimmer of hope this week in hopes of a recovery of the financial system in this country, taxpayers don’t appear to be fully prepared to trust banks to run themselves without some accountability just yet.  A big reason for the current lack of trust is AIG, who is making negative headlines again this week after announcing that they plan to go ahead with $165 million in bonus payments to executives, even though the company has collected $170 billion in taxpayer dollars to continue operations.

The move makes one wonder whether or not these financial institutions really get it.  These same executives are the ones who were making the catastrophic decisions that run a multi-billion dollar company into the ground when it was discovered that the insurance giant had loaded up on risky debt over the course of the past several years.  The word “bonus” has become a dirty word in the financial world as banks and insurance companies required massive government bailouts in order to survive.

President Obama spoke out against the proposed bonuses Monday, saying that the government would use every legal means in order to stop the company from making the bonus payment.  One senator even proposed a special tax on AIG to recover the $165 million in taxpayer funds.  Some lawmakers have also proposed that the government withhold a recently promised $30 billion cash injection if the company pays the bonus.  The Government owns about 80% of AIG as a result of ownership shares transferred to Uncle Sam in exchange for bailout money, but they still may not be able to intervene in the decision AIG makes on the bonus payments.

AIG claims that the bonuses have been a part of executive contracts since before the financial collapse began, and that they are legally obligated to make the payments.  The CEO of AIG admitted that the bonuses were “distasteful” but indicated that the company would go through with the payments.

It’s unclear what the end of the story will be for AIG, whether they will find a way to recover or whether they will disappear from the financial scene when the financial crisis is behind us.  What is clear is that lawmakers and taxpayers alike are committed to holding financial institutions that accept TARP money accountable for how that money is spent.

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