The report, "Troubled Asset Relief Program: March 2009 Status of Efforts to Address Transparency and Accountability Issues," was released during a Senate Finance Committee hearing on TARP. Acting U.S. Comptroller Gene L. Dodaro in prepared testimony noted that the Treasury Department still has $30 billion in assistance to disburse to the New York-based company as part of its more than $170 billion bailout package.
Therefore, Treasury has an opportunity to further improve the integrity and accountability associated with this announced additional assistance. In our report, we recommend that Treasury require that AIG seek to renegotiate existing contracts with management, employees and counterparties, among others, as appropriate, as it finalizes its agreement for the up to $30 billion in additional assistance announced on March 2," the report said.
Noting that Treasury could consider a number of actions in dealing with AIG, "one in particular—obtaining concessions from others with an interest in the outcome—seems most relevant in light of AIG’s recent payment of $165 million in retention bonuses to employees of its Financial Products division," the GAO report said. "In past crises…we have stated that the government should require concessions from those with a stake in the outcomes."
"For example, concessions could include requiring AIG to seek to renegotiate existing employee bonus contracts and derivatives contracts, as appropriate." The report added that concessions "are not meant to extract penalties for past actions, but to ensure cooperation and flexibility in securing a successful future outcome. Treasury has an opportunity to negotiate additional requirements into its latest agreement," the report said. "While the purchase of preferred shares in AIG differs from previous cases of federal assistance, which were usually loans or loan guarantees, the fundamentals are the same in terms of the need to protect the government's interests. If such concessions are not considered to be in the government’s interest, the reasons should be clearly articulated and explained."