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Treasury to Give AIG $30 Billion, Recoup Bonus Payments

Remember those AIG bonuses that went to the employees in the division that sunk the company? Well, here’s a sort of resolution. The Treasury Department wasn’t able to rescind them, but is taking a different route to get the money back – applying a “commitment fee” when it forks over nearly $30 billion more.

Here’s how it’s working, according to a regulatory filing yesterday. Treasury has already invested $40 billion in AIG. And in early March, it committed to providing $30 billion more – bringing Treasury’s total to $70 billion. AIG released the finalized agreement yesterday for that extra $30 billion, and in it, it disclosed that Treasury would be deducting $165 million (the total of the bonuses) from the $30 billion total. So that means AIG is actually only getting $29.835 billion.

Treasury has also charged AIG a “commitment fee” for the amount of the bonuses. The government is allowing AIG to pay that money back in an installment plan, three $55 million payments over the next five years. The fee is to be paid from the “operating cash flow” of the company – presumably guarding against the possibility that AIG would simply be paying the taxpayers back with their own money.

Not exactly the simplest solution, but there you have it.

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