UPDATE: Fareed Zacharia’s Sunday afternoon interview with former Treasury Secretary Paul O’Neill is very much worth watching. (If you remember, O’Neill served early on under George W. and was also the CEO of ALCOA.) He doesn’t talk about AIG, per se, but about the whole kit and caboodle of the financial crisis as it relates to the banking community. He’s just very down-to-earth and….sane. if you haven’t see it, do take a minute. it’s split into 2 parts, but I promise it’s not long.
Here’s part 2.
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The hits just keep on coming. It is honestly hard to find words to adequately describe the jaw-dropping irresponsibility expressed by the latest outbreak of Corporate Bonus Psychosis for which you and I are personally footing the bill.
Here are a few clips from the New York Times article on the subject of AIG’s bonuses:
The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to 400 executives in the same business unit that brought the company to the brink of collapse last year.
Word of the bonuses last week stirred such deep consternation inside the Obama administration that Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them.The payments to A.I.G.’s troubled financial products division are in addition to $121 million in previously scheduled bonuses for the company’s senior executives and 6,400 employees across the sprawling corporation.
Even more horrifying, the $165 million is only the last payment in a total $450 million in bonuses that will be paid to the 400 people in AIG’s ” financial products unit”—AKA, the very 400 people who took AIG off a cliff—to the tune of $61.7 billion—with their wrong-way bets on credit- default swaps, at the same time drop kicking your 401K into the mud pit below as they fell.
The bonus bucks handed out to those 400 Heck-of-A-Job-AIG employees range from as little as $1,000 to as much as (sound of blogger wheezing with blind fury) $6.5 million. Seven executives at the financial products unit, reports the NY times, will receive more than $3 million in bonuses.
(Sunday’s LA Times has more on the story. And here’s a link to the WSJ article, which is very good, but no doubt soon to disappear behind their fire wall.)
We are told that the Obama administration, after initially protesting, feels that it has no choice but to cave in to the bonus deal because, if AIG management welshed, the bonus-grubbing employees could sue.
Sue. Yeah. Right. So let me get this straight. After making ruinously short-sighted decisions that helped wreck the world’s economy, and then taking $173.3 billion of taxpayer money so AIG wouldn’t fail so completely that it collapsed what is left of our economy like a day old party balloon, the top players out of the group that personally made these catastrophic decisions will freaking sue if they aren’t rewarded handsomely for their actions—because, by God, they were contractually promised the money.
A further irony to all this is the fact that, had the company gone bankrupt, which it assuredly would have done had WE not bailed them out THREE TIMES, those nice, law-suit worthy contracts would have magically turned into toilet paper.
(More specifically, management would have had to petition the bankruptcy judge for permission to hand out bonuses and, trust me, bankruptcy judges are not in a very chipper, philanthropic mood, these days.)
And while we’re on the subject of a staggering lack of personal responsibility for one’s actions, if you have not seen Thursday’s Daily Show, the one in which Jon Stewart interviews CNBC’s Jim Cramer, please do yourself a favor and watch it.
The link to the full show is here>
Happy Sunday.
These are the devils in the details that should have been addressed before the bailout of AIG was begun…one is, of course, stunned at the shamelessness of these guys. But the truth is that if, and I assume this is a reasonable assessment, AIG is “too big to fail” and we need to prop them up – hoping that the money comes back to us someday, somehow (this actually happened in the case of the S&L bailout, incidentally) – what we need to do more than agonize over allowing scumbags to profit from the average taxpayer, which happens in these rarified circles all the time via the tax codes that are expressly written to their advantage if nothing else, is to work on regulatory reform. “Too big to fail” is TOO BIG. Among other things – I’d like to see the banks that have been consolidating in the midst of this crisis be broken up into smaller, regional entities as soon as the worst of this is over. The overwhelming majority of community banks have done fine in the midst of this mess, because they are run prudently like most other smaller businesses. The giant financial corporations have had their shot and they screwed us. And they are positioned so that they can continue to screw us as we attempt to re-stabilize the system. There’s little or nothing we can do about that, because they are who they are, positioned where they’re positioned and they have no conscience or conception of compensation being tied to productivity. They’re gamers. But the organizations that rely on these types – who make money whether or not they fail or whether or not their schemes contribute to the real economy – should be treated as some combination of incompetent and criminal moving forward and a regulatory system needs to be adopted that takes those facts into account and limits their ability to accumulate this kind of power and blackmail an entire nation.
Our government is not qualified and does not have the information to determine which employees deserved bonuses and for how much, and Celeste certainly isn’t, though she tries to pretend such in her analysis.
If these worker earned them or it’s part of their compensation package, then the bonuses should be paid. The situation might have been worse without them. You can’t hold everyone accountable for bad results from others, but you can usually find government in the mix of the problem. And, payments to the business weren’t just to support it specifically, but to help the government with an overall recovery plan–supposedly.
What government does do well is to take tax money away from those who earn it and throw it into the wind. If citizens don’t like the results, then the government should stop rather than blame people who work hard, put in extra hours, and meet their performance standards to help the company survive.
You don’t encourage productivity of individuals when you punish them for problems that they didn’t help cause. Get over your economic group-think. It didn’t work for the Soviet Union. I don’t remember you blaming all the journalists for problems at the LAT or asking them to take cuts.
Best yet, government should stay out and let the market determine winners and losers and quit forcing mandates on financial institutions, like those to make loans to unqualified borrowers, which started this mess.
Celeste: had the company gone bankrupt…those nice, law-suit worthy contracts would have magically turned into toilet paper.
Fine. Also, keep in mind that union contracts with companies in bankruptcy also are voided–a better reason to allow them to go under or to reorganize.
For those who care, Jane Hamsher of Firedog Lake is circulating a petition. Her blog post explaining the action is, CAMPAIGN LAUNCH: Tell Congress No More Dough Till We Know Where It Goes.
The direct link to the petition is here.
And here’s a link to the WSJ article, which is very good, but no doubt soon to disappear behind their fire wall.
PS. Apparently, it is a little known fact that the WSJ‘s subscription paywall is, let’s say, an allusion the WSJ would kind of, sort of, but not really, like to preserve.
The Wall Street Journal’s Web site is already (secretly) free
Robert Reich weighs in…
http://www.huffingtonpost.com/robert-reich/the-real-scandal-of-aig_b_175105.html
Thanks for the link to the Reich article, reg.
“[The real scandal is] that even at this late date, even in a new administration dedicated to doing it all differently, Americans still have so little say over what is happening with our money.”
No kidding. Former Bush Treasury Secretary Paul O’Neil made much the same point with Fareed Zacharia today. Not only do we have little say, but we are told that the corporations in which we have invested so much don’t really have to reveal much of anything.
We are not allowed to know the real worth of the assets for which we are paying.
The implication is, as Woody say, that the average, intelligent investor can’t possibly get it—which is not only nonsense, it is, at this point, dangerous to our financial health.
It all depends on the contractual conditions of the payouts. If these are just executive bonuses, they are shameful. But they may be direct commission payment to salesmen – in other words, their equivalent of a salary. In that case, they should be payed.
Of course, if AIG had been allowed to go bankrupt, all of the contractual obligations would have vanished (same should be applied to auto makers).
PS – My employer cancelled all bonuses this year, due to economic conditions, the day after a 10% layoff.
John, I think most people would agree that commissions should be paid because, as you said, they are part of one’s salary and can’t be withheld just because a company does badly.
Thus far, however, this does not appear to be the case. In all paperwork and reports the payments are described as falling into one of two classes: “bonuses and retention payments.”
It would be nice to know in a bit more detail, since we’re paying for the damned things and own 80% of the company’s stock. The fact that there is so little transparency about this and a great many other things grows ever more vexing.
Of course most people are really pissed off at AIG giving out bonuses with tax-payer dollars, but this type of boondoogle of the government has been happening for decades and happens every day. How many defense contractors spent millions developing a useless weapons system, how many government employees work %50 of the time or collect an early retirement for “stress”? But what really makes me mad is that I didn’tt learn at an earlier age to how to collect my share of the government welfare.
You pays your money and you takes your chances.
Given the choices of taking goverment cash with stupid government strings or getting nothing, as a company, I’d take nothing. You can’t have “investors” running and approving the day-to-day operations of a company. Show up at the annual Shareholder’s Meeting and express your concerns. Until then, you can get mad at your representatives for taking our money and handing it out without better planning.
An interesting question to ask is: what if AIG had been allowed to go bankrupt.
The California cities (a new post on this blog) would have been out over a billion.
But it might still have been the right thing to do.
Any time you give money to somebody in response to a promise of a return, you do and should run the risk of default. Even if you are a city or pension fund.
So now, we taxpayers are bailing out Ca cities which made bad investments too.
Just for the record, the AIG bailout was initiated to the tune of $85 billion by the Federal Reserve, with Paulson’s blessing, last September. Congress had nothing to do with the decision to go down this road. Although it’s likely they would have assented if the initial proposal had been presented to them rather done solely under the uber-elite Fed’s jurisdiction, it’s also likely more questions would have been asked than in a backroom deal between AIG and the secretive priests of the Fed.
The notion that a lender-of-last-resort can’t dictate any terms to a company that’s totally bankrupt and on the brink of total collapse without an assist is absurd.
The Obama administration just gave them $30 bn, and then, lo and behold, discovered that the bonuses were to be paid out.
Oops. Sometimes it pays to do the homework. But hey, it’s only our money.
Blaming this on Obama is proof you’re an utterly dishonest hack.
When were these contracts written – since January 20 ?
Face the fact that – aside from your fascist proclivities – you’re a yammering partisan idiot, Moore.
reg, you are one pathetic loser.
reg is so easy to bait
reg: Congress had nothing to do with the decision to go down this road.
Yeah, the money was stolen right out from under their noses. Actually, one thought that the money was worth designating for special purposes, since Congressional pork and earmarks weren’t involved.
Man, talk about ducking responsibility.
Moore just admitted that he is rally nothing but a provocateur, or as the term goes, a troll.