The announcement that New York Attorney General Andrew Cuomo made yesterdaythat he hopes to recoup $80 million of the much-maligned bonuses paid out by American International Group Inc. (AIG)seemed immaterial to Federal Reserve Chairman Ben Bernankes desire to push for federal supervision of the insurance giants future business dealings.
Cuomos office said that 15 AIG employees have agreed to return more than $30 million worth of bonus payments in full, representing approximately $50 million of the $165 million in bonuses awarded earlier this month, according to an AP report.
Cuomo also said he hoped more employees will return their bonuses and, in the end, that his office could recoup $80 million of the bonusesapproximately the amount paid out to AIG employees.
"I applaud the employees who are returning the bonuses," Cuomo said during a conference call with reporters. "I think they are being responsive to the American people."
Meanwhile, Federal Reserve Chairman Ben Bernanke said today that although the September rescue of AIG was warranted to avoid a potential catastrophe, there is a critical need for new rules, according to a Reuters report.
In prepared testimony to the House of Representatives Committee on Financial Services, Bernanke said, "AIG highlights the urgent need for new resolution procedures for systemically important nonbank financial firms, he said. Second, the AIG situation highlights the need for strong, effective consolidated supervision of all systemically important financial firms.
While he defended the decision to fund the firm, Bernanke said AIGs demise would have occurred just a day after the bankruptcy filing of investment bank, Lehman Brothers, creating a financial disaster of global proportions.
"Conceivably, its failure could have resulted in a 1930's-style global financial and economic meltdown, with catastrophic implications for production, income and jobs," Bernanke said.
Bernanke said he tried to stop the bonus payments, but was warned that if the lawsuit failed, it could end up with the recipients getting two or three times as much money.
"My reaction upon becoming aware of these specific payments was that, notwithstanding the business purposes that might be served by this action, it was highly inappropriate to pay substantial bonuses to employees of the division that had been the primary source of AIG's collapse," he said.
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