You have to admire the chutzpah of American International Group. It took nerve for AIG to spend nearly half a million dollars last year feting senior managers and salespeople at a swanky resort days after its initial $85-billion federal bailout. Since then, the company's brazenness has grown along with the government's aid, which now exceeds $170 billion. AIG was slated to pay $165 million in "retention" bonuses and other rewards by Sunday to 400 workers in its financial services unit. This blue-ribbon group sold a type of insurance on complex mortgage-backed securities, a bad bet that would have bankrupted the firm had it not been rescued by Washington.
The bonuses quickly became a political hot potato, which the administration handled as deftly as it has other elements of the financial crisis: It stumbled over the news and then spent a day trying to regain its footing. Officials claimed that Treasury Secretary Timothy F. Geithner had browbeaten AIG into trimming its awards to top executives, but said there was little they could do about the retention bonuses because the company was contractually bound to make the payments. As outrage built on Monday, President Obama declared that the administration was determined to block the bonuses, with aides pledging that the White House would seek reimbursement for excessive payments through a pending $30-billion loan to AIG.