Reply #12: Oversight

[ProSense]

10/20/2008

Kerry Calls On Paulson, Bernanke for Strict Oversight of AIG

WASHINGTON, D.C. – On Friday, Sen. John Kerry called on the Bush Administration to provide strict oversight of American International Group (AIG)’s expenses to insure taxpayer funds are not wasted.

In a letter to Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, Kerry called AIG’s recent lavish spending days after receiving a massive government loan “inappropriate” and “unacceptable” and specifically asked that all excessive spending and undue executive compensation be firmly prohibited.

“In these turbulent economic times, we must do everything possible to insure that the taxpayer’s hard-earned funds used to bailout big corporations are not spent on lavish parties, lobbyists, or bonuses for executives,” said Sen. Kerry. “I call on Secretary Paulson and Chairman Bernanke to do all they can to prevent AIG and other corporations from wasting taxpayer dollars.”

The full text of the letter is below:

October 17, 2008

Dear Secretary Paulson and Chairman Bernanke:

I am writing to ask you to use the authority provided under the Emergency Economic Stabilization Act of 2008 (EESA) to insure that the American International Group (AIG) does not incur any unnecessary or excessive expenses at a cost to the taxpayer. In addition, I ask you to insure that executives at AIG do not receive any salaries, bonuses or benefits beyond those allowed under the executive compensation provisions in EESA.

According to published reports, AIG executives hosted a lavish $400,000 retreat at a California resort only days after AIG received an $85 billion loan from the federal government and while negotiations were ongoing for a second $37.8 billion loan. I am deeply concerned that the actions by AIG executives are inappropriate, unacceptable and are an insult to taxpayers who are providing their hard earned money to bailout this company. Every action needs to be taken to insure that AIG executives and all other corporations who receive taxpayer assistance do not abuse that trust.

I supported the Emergency Economic Stabilization Act of 2008 because I believe that it provides you the tools that are needed to respond initially to the current financial crisis. However, I believe that corporations that receive federal assistance must live by rules that limit the costs to taxpayers, I believe the EESA provisions on executive compensation should be followed in every instance where a corporation receives either Treasury or the Federal Reserve funds, I also believe stronger limits on executive compensation are necessary and this issue should be addressed in the 111th Congress.

As you know, the executive compensation provisions included in EESA provide for the recovery of any bonus or incentive compensation paid to a senior executive officer based on statements of earnings, gains or other criteria that are later proved to be materially inaccurate. I ask you to provide me in detail the procedures that Treasury will implement to enforce the clawback provision and to ensure that companies receiving assistance are using this assistance for their daily operations and not unnecessary expenses. In addition, I ask you to take every action possible under current law to ensure that current AIG executives repay unnecessary expenses such as the $400,000 spent on the retreat. Please inform me if you need any additional authority to require companies like AIG to repay wasteful spending.

Thank you again for your consideration of my request. I appreciate your efforts to respond to this financial crisis and look forward to working with you on this important issue.

This is going to be an issue in the next Congress. We've only seen the tip of the iceberg.