The real disgrace in what A.I.G. did with almost $200 billion in government bailouts was not the payment of executive bonuses, but payments to banks, such as Bank of America and JP Morgan Chase, Eliot Spitzer, former Governor of New York, told WNYC radio in an interview this Wednesday morning.
Edward Liddy, CEO of American International Group, was, meanwhile, testifying before a House subcommittee over the payment of $165 million in bonuses, which has caused a political outcry and prompted an unprecedented 7,000 comments from readers of The New York Times in response to recent stories on AIG.
Representative Barney Frank, shown testifying before Congress in this video has argued against AIG's claim that is was contractually obliged to pay executive bonuses. As AIG's owner, the government sets its terms, Frank said.
Spitzer, a controversial figure since his forced resignation amid a sex scandal last year, was the target of some of approximately 100 comments posted by WNYC listeners within hours of the show airing.
Spitzer said AIG should not have passed through government funds it received to banks that were themselves receiving government funding. He said AIG was "a conduit" of bailout money to banks. Spitzer named Bank of America, Charlotte, N.C, the top U.S. bank by assets with $2.72 trillion in assets, J.P. Morgan Chase (New York; $2 trillion in assets) and Goldman Sachs Group (New York; $884 billion in assets) as recipients.
AIG was paying out on collateralized debt obligations (CDOs), which functioned like insurance policies, but which, unlike with regular insurance, AIG was not required to keep capital reserves to cover all the claims that might arise.
Spitzer, when he was Attorney General of New York, won the biggest ever civil suit ($1.4 billion) against AIG's previous CEO, Hank Greenberg.