Those who question the power and strength of American International Group may pay heed to their affect on the stock market last week, when the company’s plans to pay millions of additional dollars in bonuses to dozens of corporate executives resurfaced, setting off a wild ride on Wall Street.
Washington's newly-appointed compensation czar Kenneth Feinberg is currently reviewing the bonuses, which amount to $2.4 million payable on July 15, and another pending $235 million in retention bonuses in coming months. Feinberg, who President Obama appointed last month, will also oversee the compensation of top executives at six other firms that have received large federal bailouts.
Much of AIG's $99 billion in losses last year stemmed from derivatives written by that unit, reports Reuters. And responding to the news, Treasury spokesman Andrew Williams said in a statement, that “[AIG has] struck the right balance to discourage excessive risk taking and reward performance for their top executives.”
Some experts say that when the old news broke, however, AIG shares plummeted on fears that public perception would create even more furor over the company’s demise. But according to the Wall Street Journal, AIG’s big tumble began after the company enacted a 1-for-20 reverse stock split on July 1. And, the Journal reports, S&P Equity Research last week cut its investment rating on AIG shares to sell from hold, adding further pessimism as it cited still-weak fundamentals and a high degree of executive risk. Shortly thereafter, Citigroup reportedly said there's a strong chance AIG's equity may prove worthless.
Yet oddly, on Friday AIG saw a 24% jump in its share price, which analysts now are calling a partial correction from the first four days of last week. Today, shares of AIG have already risen as much as 25%. Analysts now say that AIG is piggybacking on a larger rally in the financial sector.
The New York Times did not mention AIG in its report this morning that markets rose on Monday as investors awaited a slew of bank earnings announcements this week.
