The pay reductions mandated by the Treasury's special paymaster Kenneth Feinberg--AKA the pay czar--seemed to come and go without a lot of controversy. But then came the simmering tensions with AIG that broke out into the open.

The Financial Times reports that relationship between Feinberg and the company "has come close to breaking point" after a heated exchange between Feinberg and members of the board. CEO Robert Benmosche apparently told Feinberg his recent decision to slash salaries for 12 top executives by more than 90 percent had led to departures, poor morale and reduced chances that the company will repay TARP funds.

Feinberg's position is clear; the company is 80 percent government owned. It would not be around were it not for bailout efforts. There's a lot of posturing all around. While some executives have left, AIG has posted profits for two quarters in a row, and appears to be in position to pay off its government obligation and buyback the government's stake.

By the way, it looks like Benmosche will be staying at the firm after all.

For more:
- here's the article

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