Bernanke responds to Kerry on AIG perks

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Exclusive: Bernanke says AIG tightens grip on perks, pay

Wed Mar 11, 2009

By Kevin Drawbaugh

WASHINGTON (Reuters) - Gone are the days of luxury California hotel retreats for executives of bailed-out U.S. insurance giant American International Group.

Once mighty AIG has a new employee expense handbook, a special governance committee, and strict limits on executive pay, according to a letter from Federal Reserve Chairman Ben Bernanke to Senator John Kerry that was obtained by Reuters on Tuesday.

The new expense policy was mandated by the U.S. Treasury Department and "may be materially amended only with the prior written consent of the Treasury," Bernanke said.

The letter from the Fed chairman to Kerry, a Massachusetts Democrat, opens a window onto how much influence the Fed and Treasury have over day-to-day events at AIG. It also shows that Kerry, at least, can get answers on AIG from the Fed.

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AIG came under fire in October for spending $200,000 on hotel rooms and $23,000 on spa services at an event, just days after it got an emergency government loan to avoid bankruptcy.

AIG has said that 10 employees from its subsidiary, AIG American General, attended the 100-guest event.

Kerry wrote to Bernanke and former Treasury Secretary Henry Paulson in October asking them to ensure AIG did not incur "unnecessary or excessive expenses at a cost to the taxpayer."

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