March 16, 2009

AIG: Failure's Fat Rewards

We continue to be amazed at the ongoing saga of AIG. We learn in Sunday's New York Times that 400 employees of the financial products unit (yes, the geniuses who destroyed the company) are receiving bonuses ranging from $1,000 (the hard-working and relatively innocent) to $6.5 million (the brains behind the fiasco). Commitments to pay these bonuses were made in the spring, after the troubles began, but before the proverbial all hell broke loose. Outside counsel (presumably paid at their usual and customary rates - and no doubt in advance) confirmed that the promised bonuses must be paid.

AIG's current CEO, Ed Liddy, expained to Treasury Secretary Tim Geithner that the bonuses were needed to keep the most skilled executives. "We cannot attract and retain the best the brightest talent [unfortunate choice of words, Ed] to lead and staff the AIG businesses - which are now being operated principally on behalf of American taxpayers - if employees believe their compensation is subject to continued and arbitrary [arbitrary?] adjustment by the U.S. Treasury."

So the bonuses are being paid with taxpayer dollars: had AIG been allowed to fail, there would be no money to pay these obligations. We surmise that the checks were cashed immediately, before the feds had an opportunity to figure out a way to shut this scam down.

As a tax-paying owner of AIG, you will be delighted to know that the top 25 executives of the financial products unit - all of whom needed the incentive of huge bonuses to stay on the job - have agreed to reduce their salaries for the remainder of the year to one measly dollar. Their pay is finally aligned with their performance. And for the record, that annual salary won't buy them a cup of coffee, but it will cover more than one share of AIG stock.

If AIG survives this current crisis, the company will be on the hook to repay the bonuses to taxpayers. Don't hold your breath. The company that is too big to fail probably should fail, precisely because it is too big.

Is there a moral to this sordid saga? Perhaps. The Bhagavad Gita, India's great spiritual document, describes three gates to hell: lust, anger and greed. Perhaps I am hallucinating, but I believe the logo inscribed over the third gate is that of its most recent corporate sponsor, AIG.


| 7 Comments

7 Comments

Jon:

Why don't you tell us how you really feel?

Charles

The bonuses are only the 'icing' on this rotten cake, but they make great headlines.

The real story is figuring out how much of AIGs payments have been for simple gambling - betting on the performance of a firm in which the party had no financial investment. When this information finally becomes available we'll see exactly how rotten this game was.

If the gov't had assumed real control of AIG - now that we 'own' 80% of it - these bonuses would not be an issue.

This is another legacy of the Bush administration that Obama has not been willing to abandon.

I been through this issue before with a Chapter 11 Corpoporate Bankruptcy. There is NO LAW against it, and when our employees balked ~ no one cared to listen, so now everyone is up in arms? Why? Corporations, the corporate entity was substantiated and made King by a 19th century Supreme Court ruling which gave more power to corporations than real flesh and blood people, the citizens and taxpayers in the United States. Unless Congress changes the laws folks, we have to bear the burnt of these legal ramifications and so will succeeding generations.

If you want to rant against AIG, then you need to start ranting against the greed and corruption of Barney Frank and Chris Dodd also. It is time to apply your "standards" evenly.

B Simmons,

I can't imagine how someone would compare anything Frank and Dodd did with the scam run by AIG & the subsequent billions they lost.

Frank & Dodd did not lead the charge to deregulate the industry, which facilitated this greedy blunder. This charge was led by the Republican Party and supported by a minority group of Democratic legislators (and supported by Clinton).

Nice try, but your ideological bias is center stage!

Guess which company underwrites the retirement plan of our Federal Legislators...AIG! Now is there any question as to why the taxpayers bailed them out? They will get even more if they want it!!!

i am a construction employee who got injured on the job and now receiving workers compensation. aig is the insurance carrier who suppose to give me checks. well long story short, aig had me without a check for a year and a half. I became homeless, i bought a brand new truck that i paid for in full, but lost that because i had parking tickets that i couldn't even pay for while AIG was doing all this crap with money. They ought to be ashamed of themselves. But i'm sure they aren't. They disgust me!!!!!!!

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This page contains a single entry by Jon Coppelman published on March 16, 2009 10:34 AM.

Cavalcade of Risk and Quick News Takes was the previous entry in this blog.

New day for OSHA? is the next entry in this blog.

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