AIG's decision to pay bonuses had prompted national outrage Nine of the top 10 recipients of bonuses from US insurance giant AIG have agreed to return them, New York's attorney general says. Andrew Cuomo said he hoped to recoup $80m (£55m) of bonus payments - which amounts to about half of the $165 million paid by AIG on 15 March. The US has spent a total of $170bn on rescuing AIG since September 2008. Treasury Secretary Timothy Geithner is due to testify on Tuesday on the need to reform the US financial system. He said on Monday that the banking crisis showed the country's financial regulatory system had failed and needed to be replaced by a stronger system with better regulations. "Our system basically failed its most fundamental test," he said in remarks before he was due to appear before the House of Representatives Financial Services Committee on Tuesday. "It was too fragile." Ben Bernanke, chairman of Federal Reserve, will also testify before the committee. While attention will focus on the outrage over the AIG bonuses, Mr Bernanke and Mr Geithner are expected to highlight the need for tougher regulation to tackle companies that pose a systemic risk. Bonus tax? AIG's decision to pay bonuses despite being bailed out by the government had sparked widespread outrage in the US. AIG:TIMELINE 16 Sept: AIG avoids bankruptcy with $85bn bail-out 10 Oct: Criticised for spending $223,000 on executive spa weekend day after bail-out 6 Nov: The amount of money made available to AIG reaches $123bn 10 Nov: AIG reports record quarterly loss of $24.5bn 25 Nov: AIG chairman says he will receive $1 salary in 2008/9 and seven senior executives will not receive bonuses 2 March: AIG announces biggest quarterly loss in corporate history of $61.7bn and receives a third bail-out of $30bn 14 March: Documents show AIG promised to pay $220m in retention bonuses. $55m was paid in December and $165m by March 15 17 March: President Barack Obama says he is outraged by the bonuses 18 March: AIG chairman calls on staff to repay at least half their bonuses 19 March: US lawmakers vote in favour of a bill to levy a 90% tax on big bonuses from firms bailed out by taxpayers 23 March: Nine of the 10 top executives who received bonuses agree to return them Source: Reuters Ranked the 18th biggest company in the world by Forbes at the start of 2008, it suffered massive losses related to the problems afflicting the housing and credit markets. AIG played a key role in insuring risk for financial institutions around the world. The troubled insurer reported a loss of $61.7bn for the last three months of 2008, the biggest quarterly loss in corporate history. The bonus debacle had prompted the approval of a bill by the US House of Representatives to impose a 90% tax on bonuses awarded by companies bailed out by the US government. But President Barack Obama said such a measure would be unconstitutional. The announcement that much of that money is now being returned seems likely to ensure that the bill never reaches his desk, says the BBC's Richard Lister in Washington. Mr Cuomo said that out of the top 20 bonus recipients, 15 had agreed to return their payments, which he estimated to total around $30m. "A number of them have risen to the occasion and I applaud them," Mr Cuomo - who is investigating AIG as well as several other financial institutions - said of the executives who had offered to give up their bonuses. He added that he expected to recoup all of the bonuses paid to US citizens working for AIG, which accounts for around half the $165m the company paid out, though so far it had only secured about $50m. Mr Cuomo said he did not plan to release the names of the employees who have agreed to return the bonuses, suggesting there was no implied threat that if an employee refused to return their bonus, their name would be disclosed. Bonuses ranging from $1,000 to more than $6m were paid to some 400 staff in the division handling the mortgage-backed assets at the heart of the financial crisis. Seven senior employees were paid more than $3 million, while 73 members of staff received bonuses of more than $1m.



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