American Credit Cleanup Plan

Floor Speech

AMERICAN CREDIT CLEANUP PLAN -- (Senate - March 17, 2009)

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AIG BONUSES

Mr. SCHUMER. Mr. President, I will speak on a letter that myself and a number of colleagues are sending to the head of AIG, and I believe a few other colleagues will be here in the next half hour to speak on the letter as well.

I rise today to express my outrage and the outrage of the American taxpayers at the bonus payments the American International Group intends to make to the employees of its Financial Products division.

Yesterday, we learned that AIG is in the process of paying $165 million in bonuses to the employees of its Financial Products division as part of the plan that will pay them $450 million in bonuses by the end of 2009.

This is disgraceful, this is unacceptable, and it is an offense to millions of hard-working Americans whose tax dollars are the only reason AIG continues to exist as a going concern.

Today, I rise to assure you, the leadership of AIG, my fellow Americans, and my colleagues, that we intend to do everything in our power to prevent those payments from being made and to recoup the money that has already been paid. As of now, eight of my colleagues and I have joined in a letter to Edward Liddy, the chairman of AIG, demanding that he renegotiate these contracts, and letting him know that we will not stand by. If Mr. Liddy does nothing, we will act, and we will take this money back and return it to its rightful owners--the American taxpayers. We will take this money back by taxing virtually all of it. So let the recipients of these large and unseemly bonuses be warned: If you don't return it on your own, we will do it for you.

In the letter, joining me are the majority leader, Senator Reid; secretary of the caucus, Senator Murray; Senator Klobuchar; Senator Carper; Senator Lincoln; Senator Menendez; Senator Johnson; and the occupant of the chair, Senator Begich. The number is growing, and I believe many other people will put their names on the list.

In the past year, we have learned much about the reckless behavior within our financial system. No firm was more reckless than AIG. What they did was not only irresponsible but, from a business perspective, it was immoral. They took what was a very solid, well-made business that sold insurance to individuals and firms around the globe and turned it into a gambling den that they used to enrich themselves. They sold credit default swaps and other derivatives to all comers as though they were playing with monopoly money, but it was real money. When their deals went sour, when they actually had to pay, they had nothing with which to pay anyone.

As Warren Buffet said, ``When the tide goes out, you see who is swimming without a bathing suit on.'' The leadership of this unit of AIG was doing just that.

Just this month--in fact, less than 3 weeks ago--AIG reported that in the final quarter of 2008, as a firm, it lost $61.7 billion. Let me repeat that. In a single quarter--in just the last 3 months of 2008 alone--this firm lost over $60 billion. That is by far the largest single quarterly loss in corporate history. For all of 2008, AIG lost $99.3 billion, nearly $100 billion. Nearly all of those losses were caused by the actions of the employees of the Financial Products division. But, yesterday, we learned the firm intended to pay nearly $165 million in ``bonuses'' this year and a total of $450 million in bonuses over the next year for the employees in the very same unit--not only bonuses but performance bonuses--a performance bonus for a firm that lost $100 billion.

I will repeat that. This is a performance bonus for a firm that lost $100 billion. If anything defines ``Alice in Wonderland'' business practices, this is it. It boggles the mind.

In the past 6 months alone, the American taxpayers have been forced to commit over $170 billion to AIG. If the Government had not stepped in, if it had not repeatedly acted to fill the hole in the financial system created by this firm and these employees' behavior, AIG would have been bankrupt. All these employees would have received nothing--zero.

We keep hearing that AIG is contractually bound to pay these bonuses; that if they don't, these supposedly talented people--those whose talent created this disaster--will leave. Here is what I would like to know from Mr. Liddy: Did he even attempt to renegotiate these contracts? Did he approach these individuals and point out to them the health of AIG and the condition of the United States and global economies and their own culpability in creating this mess? Did they respond by saying: I don't care, I want my bonus? Is that what Mr. Liddy is suggesting?

Well, Mr. Liddy, I urge you to fix this mess because, let me tell you something: We are all fed up. If you don't fix it, we will.

Here is what we are doing: My colleagues and I are sending a letter to Mr. Liddy informing him that he can go right ahead and tell these employees who are scheduled to get bonuses that they should voluntarily return them because, if they don't, we plan to tax virtually all of it. He should tell these employees if they don't give the money back, we will put into place a new law that will allow us to tax these bonuses at a high rate so it is returned to its rightful owners--the taxpayers.

For those of you getting these bonuses, be forewarned: You will not be getting to keep them.

I yield the floor, and I suggest the absence of a quorum.

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