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Quick Hits: Government Gives AIG Time-Out


Brief scrutiny of today's headlines.

It looks like American International Group (AIG) is getting some much-needed adult supervision.

The adult hand comes from government - not generally associated with rational allocation of resources.

New York Attorney General Andrew Cuomo says Edward Liddy, AIG's chief executive officer, agreed to freeze all of the $19 million in compensation the company owes former chief Martin Sullivan.

In addition, Liddy has agreed to make no payments out of AIG's $600 million bonus pool for employees in the firm's financial products group, the folks responsible for actions that led to the government bailout.

AIG has been forced to sell assets to stay afloat. Nevertheless, top executives spent $440,000 on a retreat at the St. Regis Monarch Beach Resort in Southern California after pocketing a taxpayer-backed bailout.

Four AIG top dogs also traveled to England to go partridge hunting. The cost: A mere $87,000. One aspiring Einstein told a reporter: "The recession will go on until about 2011, but the shooting was great today and we are all relaxing fine."

Against this backdrop, Cuomo said in a letter to Liddy, "It is my position that until the taxpayers are repaid with interest, the more than $120 billion that has been used in the rescue financing of AIG, no funds should be paid out of these pools to any executives. As AIG recovers using taxpayer money, these pools should not be used to reward executives ahead of taxpayers."

Joseph Cassano, former head of the financial products group, was due to receive $69 million from the $600 million bonus pool. He stepped down in March, but received $1 million a month in consulting fees until Uncle Sam took over AIG.

The freeze on bonuses is good news for taxpayers, but it took major huffing and puffing from the Attorney General to get Liddy to agree. Liddy was appointed head of AIG after the government took control of the company in September.

But c'mon, Andrew: You're a lawyer, and you didn't say anything about banning future junkets to Tahiti or anywhere else.

Oh, wait: Liddy has agreed to cancel all junkets and perks not justified by AIG's business.

That's reassuring.

But maybe you should have nailed down the definition of "justified," Mr. Cuomo.
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