Page last updated at 16:32 GMT, Thursday, 19 March 2009

Probe into AIG bonuses launched

AIG sign
AIG's bonuses have caused a massive furore in the US

The man charged with overseeing how the US bail-out money is spent is to launch an investigation into tarnished insurer AIG's bonus payments.

Neil Barofsky, the special inspector general, told Congress he would look specifically at the Treasury's role.

AIG's decision to award $165m (119m) in bonuses has caused outrage in the US as the company has taken $170bn of aid from the US government.

President Barack Obama and lawmakers are seeking ways to recoup the bonuses.

'Act aggressively'

Mr Barofsky said he would "act aggressively to recover the taxpayer's money" if there was any evidence that something wrong was done to approve the bonuses.

He said that information he had seen showed that the Treasury and AIG discussed the bonuses in October as part of aid negotiations.

Mistakes were made at AIG on a scale that few could have imagined possible
Edward Liddy, AIG boss

Separately, US lawmakers are to vote on a bill that would penalise employees of companies that received bailout money, such as AIG.

Democrats are proposing to target companies that received $5bn in aid, and would levy a 90% tax on bonuses paid to employees with family incomes above $250,000.

"We figured that the local and state governments would take care of the other 10%," said Democrat Representative Charles Rangel, chairman of the Ways and Means Committee in the House of Representatives.

The committee also said at least 13 firms receiving billions of dollars in bailout money owe a total of more than $220m in unpaid federal taxes.

"This is shameful. It is a disgrace," said Democrat Representative John Lewis. "We are going to get to the bottom of what is going on here."

Liddy testimony

Treasury Secretary Timothy Geithner has been under pressure since news of the bonuses became public. He said that the government would deduct the bonuses from government funds due to be paid to the insurer.

Mr Obama has also reiterated his anger at the bonus payments.

AIG Chairman Edward Liddy on the "distasteful" bonuses

He referred to them as an "inappropriate use of taxpayer money".

Edward Liddy, the boss of AIG, on Wednesday called the bonuses paid to executives "distasteful" and said he had asked some recipients to return at least half.

"Mistakes were made at AIG on a scale that few could have imagined possible," he said.

But Mr Liddy, who took over AIG in September, told a Congressional committee that the Federal Reserve knew in November of the bonus payments to executives. He said he spoke regularly with the Fed, expecting them to pass on the details to Treasury officials.

Mr Geithner was head of the Fed Bank of New York when AIG was saved by a Fed loan last year.

Republicans have criticised him over the issue, saying Mr Geithner should have been aware of the payments before he was told last week and dealt with them.

Both the Treasury and Mr Liddy have said they had received advice that said they were legally bound to make the bonus payments.

Reports suggest that AIG is considering selling its New York headquarters and a nearby office block.

AIG was saved from bankruptcy with an $85bn lifeline last September.

The government has since pumped billions more into the troubled insurer, which reported a loss of $61.7bn for the last three months of 2008, the biggest quarterly loss in corporate history.

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