Apparently, $175 billion doesn’t buy what it used to.
AIG has decided that it has no choice but to pay out $165 million in bonuses to employees due to contractual obligations. And the government has decided it has no legal recourse to stop the payments.
To make matters even worse, AIG CEO Edward Liddy has the gall to ask the government to reconsider limitations on executive compensation, saying that such limits curtail the company’s ability to “attract and retain the best and brightest talent to lead and staff the AIG businesses.”
Are you kidding me?
First of all, the fact that AIG agreed to contracts where they would have to pay out these kind of bonuses in a year the company lost $99 billion ($61.7 billion in Q4 alone) is absurd and highlights the ridiculousness of the typical executive contract structure. Reform is needed now and responsiblity must start with the board of directors.
Secondly, the idea that AIG had no choice but to pay out these funds is laughable. AIG lawyers said the company would be subject to lawsuit if the bonuses weren’t paid. Now I’m no lawyer, but I say if an executive wants to sue the company because he or she didn’t get a bonus, then bring it on. Even if the legal argument is sound, the public outrage would be enormous. Plus, at least they would be the ones fighting to get their money as opposed to the government fighting to get it back.
Third, the US government should absolutely have the right to stop these bonuses. The government is the one that decided the company was too big to fail. If it wasn’t for the government – and the US taxpayer – AIG would have been gone long ago. We own the vast majority of the company. What’s the point of making that kind of investment if we can’t have a say in how to use the $175 billion in taxpayer money we’ve doled out?
One of the reasons this financial crisis is likely to linger for a very long time is that we are so concerned about honoring contractual obligations, especially to holders of debt and credit default insurance. I understand how important the sanctity of the contract is in a capitalist society, and I understand how not honoring certain contracts could trigger a ripple effect that brings down our entire economic system. But this is a crisis of unprecedented proportions and extraordinary measures clearly are called for. Certainly, we can find a way to have companies in the eye of the storm extricate themselves from ludicrous executive contracts.
AIG is the poster child for the reckless, greedy behavior that played a large part in getting us into this current mess.
We must set an example.
The bonuses are a fucking outrage.
Treasury Secretary Timothy Geithner has a chance to prove that he is not the impotent, incompetent clown I think he is by stopping this debacle from happening.
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