Letter to Senate Banking Committee Chairman Chris Dodd and Ranking Member Richard Shelby

Letter

Banking Committee Senators Request Subpoena of AIG Contracts

- U.S. Sens. David Vitter (R-Lousiana), Jim DeMint (R-South Carolina) and Jim Bunning (R-Kentucky) today requested that Banking Committee Chairman Chris Dodd and Ranking Member Richard Shelby formally subpoena the relevant AIG contracts as well as any other documents related to bonus and compensation materials.

"Since the very beginning of these federal bailouts, we have seen mishap after mishap at the taxpayer's expense," said Vitter. "This bonus fiasco is the most recent and is a direct result of a lack of transparency and accountability. The public has a right to understand how these bonuses came to be and what the Treasury knew about the contracts prior to the recent press reports since it is their tax dollars that paid for it."

"Americans have every right to be angry after Washington politicians rushed to give billions of their taxes to AIG and promised them unprecedented taxpayer protections. Americans deserve to know who broke these promises and why. One thing is clear already: Americans are fed up with bailouts for failed businesses and don't believe the rhetoric from Washington anymore," said DeMint.

"I am deeply disturbed by the fact that the very same executives who were responsible for the risky behavior that led to the financial problems at AIG are still being rewarded with millions of dollars in bonuses paid for by the American taxpayer. These people don't deserve bonuses. They deserve to be fired. I want to know exactly what Treasury Secretary Geithner, Fed Chairman Bernanke, and former Treasury Secretary Paulson knew about these contracts when the government decided to intervene and why they decided it was acceptable to reward bad behavior at the expense of the taxpayers. While this is an outrage, it is merely obscuring the larger problem that the money used to bailout AIG was really used to bailout European Banks and Goldman Sachs. This never would have happened if we hadn't bailed them out in the first place," said Bunning.

The rules of the U.S. Senate Banking Committee only require that the chair seek the agreement, approval, concurrence, or consent of the ranking member before issuing a subpoena, or the chair also may gain approval for a subpoena from a majority of the committee.

TEXT OF LETTER TO DODD

Dear Chairman Dodd and Ranking Member Shelby,

Last week, on March 14,2009, Edward Liddy, Chairman and Chief Executive Officer, American Insurance Group (AIG), wrote Treasury Secretary Timothy Geithner regarding compensation arrangements at AIG Financial Products (AIGFP) and AIG generally. The letter indicated that AIG had contractual obligations to make the bonus payments and could face lawsuits if it did not do so.

On Sunday, March 15, AIG announced that it would pay $165 million to approximately 400 employees at the AIGFP unit. This is the division of the company that underwrote the sizable credit default swap (CDS) contracts which contributed greatly to the company's liquidity issues. It is concerning that a company which has received $160 billion from the American taxpayer in the last six months, and lost $61.7 billion for the fourth quarter of last year, would still pay roughly $165 million in bonuses.

Since the inception of these federal bailouts, there has been mishap after mishap. This bonus fiasco is the most recent, and a direct result of a lack of transparency and accountability.

For this reason, the Senate Banking Committee must subpoena the relevant AIG contracts as
well as any other documents that will help determine:

(1) What legal obligations did in fact exist to pay these bonuses;

(2) What awareness did then Treasury Secretary Henry Paulson, then President of the Federal Reserve Bank of New York Timothy Geithner, and Federal Reserve Board Chairman Ben Bernanke have of these contracts when any of the government interventions in the company were contemplated; and

(3) Why was language inserted into H.R. 1, the American Recovery and Reinvestment Act, that seems to specifically exempt these AIG bonuses from executive compensation limits? [on page 404 of H.R. 1, D(iii): The prohibition required under clause (i) shall not be construed to prohibit any bonus payment required to be paid pursuant to a written employment contract executed on or before February 1 1,2009, as such valid employment contracts are determined by the Secretary or the designee of the Secretary.]

As you know, the rules of the Banking Committee only require that the chair seek the agreement, approval, concurrence, or consent of the ranking member before issuing a subpoena, or the chair also may gain approval for a subpoena from a majority of the committee. We urge you to use the most expedient means possible to issue these subpoenas so that the Committee can move quickly to safeguard American taxpayer money and develop an exit strategy for federal involvement in private companies.

Sincerely,

David Vitter
Jim DeMint
Jim Bunning

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