March 20th, 2009
12:52 PM ET

Financial Dispatch: Bonus backlash & Madoff stays locked up

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/POLITICS/03/19/aig.spitzer/art.spitzer.cnn.jpg caption="Ex-New York Gov. Eliot Spitzer says focusing on those AIG bonuses misses the bigger financial picture."]

Andrew Torgan
CNN Financial News Producer

The House passed legislation Thursday to try to recoup bonuses paid to Wall Street executives with taxpayer money.

The measure passed, 328-93; with most Democrats supporting it while Republicans were sharply divided. The measure would tax individuals on any bonuses received in 2009 from companies getting $5 billion or more in money from the Troubled Asset Relief Program.

Bonuses for people with incomes over $250,000 would be taxed at a 90% rate.

Treasury Secretary Tim Geithner told CNN Thursday that his department, concerned that language about bonuses would not hold up to a court challenge, asked Sen. Chris Dodd to include an executive pay provision in the stimulus bill. The loophole allowed bailed-out insurance giant American International Group to pay out $165 million in bonuses.

In an interview with CNN Chief Financial Correspondent Ali Velshi, Geithner said the Treasury Department was concerned the government would face lawsuits if contracts were breached for the bonuses.

And be sure to watch Ali Velshi and the rest of the CNN Money Team for “AIG: Facts and Fury.” How is your money being spent on AIG? Who is responsible for the AIG mess? Why is there so much outrage? That's Saturday and Sunday night at 8:00pm ET.

Under pressure, AIG sent the New York Attorney General's office a list of employees who received bonuses, according to a statement released Thursday.

New York Attorney General Andrew Cuomo's office confirmed it had received the list, but said it would not release any names yet.

Outrage over AIG’s bonuses may grab headlines, but its payouts on complicated financial instruments deserve closer examination, Former New York Gov. Eliot Spitzer said Thursday.

In his first television interview since being forced from office in a prostitution scandal, Spitzer told CNN's "Fareed Zakaria GPS" that the insurer was at the "center of the web" of transactions that have forced a massive bailout of the U.S. financial system.

AIG is now being kept afloat by U.S. taxpayers, and Spitzer said its woes stem from financial practices he first investigated as New York's attorney general.

Wall Street's bid for a second straight week of gains faces a test today. Stocks opened modestly higher as investors continue to fret about the economy. Should stocks end the day higher, it will be Wall Street’s first weekly back-to-back win in nearly a year.

Oil prices are hovering around the $51 a barrel mark today. Crude jumped more than 7% Thursday, closing above the $50 threshold for the first time since late November, as the dollar weakened significantly after the government announced it would spend another $1 trillion.

Gas prices rose 9-tenths of a cent overnight to $1.942 a gallon. 11 states and the District of Columbia have regular unleaded gas prices of $2 and higher. 39 states have regular unleaded gas prices below $2. The highest gas prices are in Alaska ($2.510). The cheapest gas prices are in Wyoming ($1.755)

Nike today announced the details of its previously announced plan to restructure that could result in the cutting of as many as 1,400 jobs.

The athletic apparel maker said it would pare its management teams and reorganize its Nike brand to focus on six geographic regions instead of the current four.

Finally, Bernard Madoff, the masterminded of the biggest Ponzi scam in history, has been denied his latest bid to get out of jail.

The U.S. Court of Appeals for the 2nd Circuit shot upheld a trial judge's decision to revoke his $10 million bail ahead of his June 16 sentencing. Madoff, 70, faces a potential 150-year sentence in federal prison.

Madoff has been locked up in the Metropolitan Correctional Center in lower Manhattan since March 12, when he pleaded guilty to 11 criminal counts, including fraud, money laundering and perjury.

Filed under: AIG • Andrew Torgan • Economy • Finance • Gas Prices • Oil • Unemployment • Wall St.
soundoff (10 Responses)
  1. Linda B., Ga.

    I think ALL of the WALL STREET biggies should go on a hunting trip with Cheney!

    I think ALL of Bernie M's family need to join him, in his cell.

    I think Good Old Boy Dodd and Good Old Whatever Frank, need to be removed of their Committee duties.

    I think we need to let the Pres. and his Cabinet run the country. They were handed a HUGE PILE OF SH*T when they took over, now we have to give them a little more time to wipe it clean. It'll happen....

    Remember the Good Lord and his followers mentioned several times in the Bible to start LOOKING AHEAD and not back. Let's give Pres. Obama a chance to clean up things.....

    March 20, 2009 at 8:27 pm |
  2. Edna

    Remember those cheap repos in Detroit? This is the place for Madoff to serve his time. He would be required to buy five house that are under say one thousand dollars each. He would then work to refurb them all with construction crews coming from others of his type crimes. This of course is under house arrest and requires a crew of twenty four hour armed guard in the neighborhood. This would all be overseen by gov financial after ceasing all of Madoffs and others assets.

    This would also help upgrade the rundown areas and make use of these people too. Saving tax payers and punishing and rehabilitating at the same time.

    After they are done in one place they move to another poverty area and work under house arrest and guard.

    March 20, 2009 at 6:31 pm |
  3. earle,florida

    If we as a nation fail the proportion test of equity distribution via Trillions, and Billions as a misnomer of reality versus insanity puts our entire nation on the verge of a "Financial Break-Down",...that even a World War couldn't rectify!

    March 20, 2009 at 5:18 pm |
  4. Mari

    @ Keith Kremer........... Well said!

    @ Annie Kate........ So true. People are angry, because when the Bush Disaster hit us, none of us, got bailed-out.

    Millions of small businesses go under each day or each week, families lose their homes, people lose their jobs, 401K's have plunged...... and no one bails us out.

    On the Keith Olbermann he covered an interesting story, Citibank which took bailout money just REMODELED their Executive Suites! How much? TEN MILLION DOLLARS. Our tax money at work!

    March 20, 2009 at 3:38 pm |
  5. Neo

    "The measure would tax individuals on any bonuses received in 2009 from companies getting $5 billion or more in money from the Troubled Asset Relief Program"

    After reading this you already know they gave too much to other companies. AIG is the one that is just the most public.

    Eliot Spitzer is missing the point. The bonuses are important but why AIG is this thing that must be saved is a consumer/taxpayer issue as well. Why would Spitzer stand behind a company that is obviously unstable. I'm glad he was the one interviewed here. Stupidity doesn't go away.

    March 20, 2009 at 3:17 pm |
  6. Keith Kremer

    The AIG bonus is just a symptom of a much larger problem with executive salaries, bonuses, and golden parachutes. Management in many companies are allowed to rob the company coffers with these compensation plans that provide no benefit to the shareholders of the company. The board of directors as well as the SEC are asleep at the wheel. I support plans that reward people that actually increase the value of a company, but I would not hire anyone that demand edany large payment if they were let go because of failure to do the job. That would tell me they are the wrong person for the job. Reward them when they provide real long term benefit to the real owners.

    March 20, 2009 at 1:39 pm |
  7. Annie Kate

    Between AIG, the rise in oil prices, and job cutting at Nike the only good news is that Madoff was denied bail. Guess he will have to get used to prison just like the rest of his investors will have to get used to their losses. He's probably safer in jail.

    AIG released the names of who got bonuses to the attorney general of NYC. I hope he does not disclose any of the names publically – I would worry about the safety of these people given the mood of the country. I hope that is an over-reaction on my part but I haven't seen this many people this mad in a long time.

    March 20, 2009 at 1:39 pm |
  8. Mary Ann Lerma

    Dear Anderson:

    Please look into the incompetence of congress in the AIG mess and if it is true that additional bonuses are due for AIG in March 2010, also please report on bonuses being paid to Freddie Mac and Fannie Mae.
    I think tax money should not be paid out at bonuses. Most of us aren't getting raises let alone bonuses in this economy, we are lucky to still have jobs!

    Trying to take the heat off themselves congress is trying to tax private citizens for accepting money congress authorized! This is not only hipocritical of them but also illegal.

    Also please report more on the money AIG paid to foreign banks and why that was done with tax payer money.

    Thank you.

    March 20, 2009 at 1:35 pm |
  9. Mari

    Madoff must go to prison, into the prison all of 'regular' people would be sent to if this was us!

    ALL of Madoff's assets must be sold and whatever money is made given to his victims.

    Am I the only American angered by the way Madoff has been treated by our Justice system?? A person stealing from a banks or the local coffee house would be thrown in jail and Madoff spends months in his penthouse? How is this justice?

    March 20, 2009 at 1:26 pm |
  10. Howard Kirkwood

    As drastic as it may sound, President Obama could declare “Marshall Law” for three days (or longer) to order all or part of the “Bail-out” money be returned to the U.S. Government Treasury from any Corporation without any Constitutional problems..

    March 20, 2009 at 1:04 pm |