That’s a bad idea. The government shouldn’t be in the business of creating a special tax to invalidate contracts between a company and its workers because it doesn’t like the outcome. The money was promised, it was paid. Trying to claw it back now will only encourage the talented people at any company that took federal help to look for a job elsewhere, preferably a place not so beholden to the whims of politicians and public anger.
Sure, $165 million is a big number. But let’s remember the one-thousand-times-bigger number that is at stake here: $170-plus billion. That’s how much American taxpayers have put into AIG. That means every American has a vested interest in turning AIG around, making it profitable again. A healthy AIG could repay the government’s loans and be sold to private investors at a handsome profit for the U.S. treasury.
What is bizarre about this desire to defend AIG over the bonuses is that the only way they can be considered reasonable is if you accept the accounting for 2008. Yet, we know that accounting is almost certainly fraudulent or we wouldn’t be where we are today.
Now, if the people who created a financial instrument that has nearly destroyed the global economy are the talented people the Ed Board is talking about above, they should be finding new jobs one way or another. There is nothing magical about what they did. They created a fairly complex instrument that supposedly would reduce the risk from bundling mortgages together. They then didn’t properly value those instruments and led their company and many others into complete collapse because they fudged the valuation.
There’s a simple name for it–fraud. And those aren’t the people who I want determining how to get back the taxpayers’ investment.
Let’s say you’re a relatively honest analyst-broker-banker-whatever at AIG who didn’t contribute to the mess. Wouldn’t you have been looking for a new job even before the bailout, as soon as it was evident that AIG was going down?
These “retention” bonuses are completely unnecessary because those employees are staying anyway rather than join the ranks of unemployed investment bankers. Moreover, it’s pretty clear that the retention bonuses were designed in a way to give the bonus regardless of performance.
Keep in mind that the bonuses probably would not have been paid if AIG was in bankruptcy. So in a very real sense, the only reason the retention bonuses are available is because of the bailout. The people getting the bonuses are lucky to be working at all, let alone with bonuses equalling 75-100% of their salaries.
Given the mindset of the people in the AIG division that got bonuses (the same division that caused the downfall of AIG), I think taxpayers are in fact better off if they did find other employment.
They called them ‘retention’ because they knew they couldn’t get away with ‘performance’. It’s a major bamboozle.
P.S. It’s important to keep in mind the next time the Tribune Editorial Board starts beating its chest in excessive moral superiority (here’s a particularly obnoxious example) that they’re ultimately nothing but a bunch of corporate toadies.
Executive compensation for these people is a human right.
How can you guys be so indignant when you wouldn’t know a credit default swap if you owned one? You would think the only thing AIG does is write credit default swaps by reading all the outraged comments.
AdmChesterMynutz asks:
How can you guys be so indignant when you wouldn’t know a credit default swap if you owned one? You would think the only thing AIG does is write credit default swaps by reading all the outraged comments.
Let’s be very clear about who received these bonuses: it was employees in the AIG Financial Products Division. This was the division that traded in derivates, and its credit default swaps brought down AIG. I doubt there would be the same outrage for bonuses paid to AIG employees working on its traditional reinsurance business.
@AdmChesterMynutz:
Matt Taibbi concludes his article in Rolling Stone with a series of questions to the ‘Wall Street types’: