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Bankers at AIG's disgraced Mayfair operations - dubbed the Ground Zero of the financial crisis - are receiving $1 million bonuses.
That is despite the AIG Financial Products division losing $40.5 billion (£28.6 billion) last year, triggering the collapse of the insurer and a subsequent bailout by the American taxpayer.
Documentation forced into the open by the US Congress reveals that at least seven executives are picking up more than $3 million at the division of what was once the world's biggest insurance company.
AIG, which has received $150 billion from the US government since September last year, is making payments of $450 million to 400 staffers.
Those payments are going to employees in AIG Financial Products, the part of the insurer that crippled the company by making huge losses on the toxic derivatives that have brought the world financial system to its knees.
Rather than calling the payouts bonuses, the insurer - which posted a record fourth-quarter loss of $61.7 billion on 2 March - is labelling them "retention" payments.
In London, AIG Financial Products worked in the heart of the Mayfair hedge-fund industry, sharing an impressive building with GLG Partners, London's biggest independent hedge-fund manager.
AIG's Mayfair office specialised in trading derivatives known as credit default swaps, the insurance that lenders take out to make sure their debts do not go bad, but the market imploded in the credit crunch, leaving AIG with liabilities of tens of billions of dollars.
The Mayfair operation was run by controversial financier Joe Cassano, whose departure from AIG's London office a year ago heralded the division's collapse. Recipients of the big bonuses in London could include directors of AIG's operations in Curzon Street.
They include British banker Andy Forster, reckoned to be a long-time right-hand man of Cassano in London and head of global credit trading.
Two years ago, Forster, now 38, was hailed by Cassano as having "done an amazing job of managing our portfolio [to] survive the trying times we are working in".
In that year, Forster insisted that AIG's credit derivatives business would in the worst scenario lose a "manageable" $600 million.
Others named as directors after last year's departure of Cassano are Mauro Gabriele, a 45-year-old Italian and some-time head of Banque AIG who has in the past kept an address in Belgravia's smartest square. Another director is named as American Bruce McCoy, 50.
News of the staff payouts has caused a storm in the US, where Treasury Secretary Timothy Geithner was so appalled by the payments that he attempted to have them blocked. The US government is in effect 80% owner of AIG.
President Obama's chief economics adviser, Larry Summers, said: "There are a lot of terrible things that have happened in the last 18 months, but what's happened at AIG is the most outrageous. [But] we are a country of law. The government cannot just abrogate contracts."
The White House was told the payments were contractual, drawn up before the scale of AIG's losses were known. AIG argues they are being made to staff being retained to unravel its liabilities.
AIG's new chief executive, Edward Liddy, who is receiving $1 salary for 2008-9, told Geithner in a letter: "I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed."
Reader views (5)
Blaming Cassano for the collapse is like blaming the captain of a ship for an accident during a storm. He did not "single handily bring down AIG" as some have claimed. He was stuck in the eye of the storm and was scapegoated by those who wanted a figure to blame. Scottrade makes an interesting argument (http://research.scottrade.com/public/markets/news/news.asp?searchtxt=cassano&go.x=0&go.y=0&go=Go§ion=headlines&searchtype=0&filter=) about it. I suggest people read it before passing judgment.
- Bob Jacobs, Canada
So, the proposition here is that we need these very same guys that brought the entire world banking system to its knees because everyone was happy riding the 'wave'. When I went to B-school we were told that assets were assets and liabilities, were, well, liabilites. But these guys sliced and diced the liabilites and called them 'assets' and then sold them off as AAA investments on a leveraging formula that defies gravity! To say they didn't do anything wrong is unbelievable. These guys have created structural problems on a massive scale and yet we still pay them, and no heads are rolling. I surely picked the wrong profession! I do agree wholeheartedly that Central Banks / GVT / Regulators carry the blame as surely the Credit Rating Agencies should do. Using complex financial instruments, which no-one understood, the wealth of millions of people has now been wiped out, that is the real tragedy here, lets hope we find a way out of this abyss, and soon.
- Entrepreneur, Milan, Italy
The law of contract embraces two key principles. Firstly Rights and secondly Responsibilities.
Quite simply these guys are blackmailing AIG and the American taxpayer despite their gargantuan failure. The easiest and most fair way to resolve this is to ask the Goldman Sachs and Morgan Stanley's of this world to second key staff to a resolution trust type entity to work out this mess, that way they repay the largesse bestowed on them by the American taxpayer and the guilty culprits at AIG are sacked forthwith with no payoff. As it stands the current "Dane geld" is utterly disgusting.
- James Macleod Ritchie, Oyster Bay Cove
Damn - time to re-negotiate my bonus, which strangely seems to be based on the profitability of the company and my performance. How could I ever have agreed to something so silly ?
- Julia, london
These payments do need to be made simply because if they don't, the only guys who know the risk will walk. No one can complain. The shareholders were happy to take the profits from the premiums in the good times and the regulators (i.e. the government) were happy to leave the business alone and take the tax revenues. To have these people at AIG is now essential but the admittedly somewhat distasteful fact is that you have to pay them to stay. They certainly don't work for free and why should they? They didn't do anything wrong and they didn't break any laws. Searching for scapegoats is just an easy way of distracting the public from the people who created the environment for this mess - the heads of the central banks, the governments (the opposition who are even more sympathetic to the city included i'm afraid mr cameron) and the regulators.
- Investment Banker, London
