AIG Spends Millions in "Bonuses"

[Professor S]

We haven't talked about the economy in a while, but I think the latest news about AIG spending millions in bailout money on employee retention bonuses warrants it. This situation has shown our goverment (republicans and dems) to be hipocritical, our news organizations to be lazy and/or corrupt and our populace to be simple minded and spiteful.

I have no issues with the bonuses. For the following reasons:

1) AIG is contractually obligated to pay them. If they don't pay them, they will be sued and even MORE bailout money will be spent on lawyers and court fees and they'll end up paying out the money anyway. Part of the problem with propping a company up to keep them out of bankruptcy is that they are still beholden to their existing contracts. If AIG filed for bankruptcy, or was allowed to, this wouldn't have been an issue. But, WE bailed them out so WE have to pay for their contractual obligations.

Do you see any journalists pointing out this obvious fact that takes 3 minutes of Googling to discover? Because reason and honestly is meaningless in front of populism in a crisis.

2) We knew about this is January. Why didn't the government get up in arms about this then? What about the news orgs (frightening how lock step American journalism is with this administration)? I'll tell you: The government still had billions they needed to give to AIG. Now that they're (hopefully) done, the government can now turn on them, yell and scream to high heaven about AIG's irresponsibility, when that irresponsibility never stopped them from giving any money in the first place or the three times after that.

Like I said a few weeks ago: The government wants to give these companies money to survive, many of whom never asked for it and instead were "asked" to take it, and then punish them for taking it and dictate to them what they can do with it. Why would you expect a company to change what they do with money when you don't allow them to fail or at least give them legal options to postpone or forego their obligations.

This all simply seems very calculated. AIG has always been identified as one of the worst run companies of this entire debacle, and yet we continue to feed the beast and then punish it for eating what we feed it! If we're going to throw trillions into toxic investment, we can't shocked and outraged when we get sick from them. If you don't like it, blame those who invested the money, not those who dared to accept the help but were never asked to change nor given the avenues to affect change.

In the end, this entire controversy is populist NONSENSE. I don't care if AIG has to pay out billions in bonuses (a small percentage of the bailout money). What I care about is if this bailout actually works and if companies are allowed to get past the old mistakes, learn from them and then work towards a new, smarter business future. Right now the government, news orgs and populace seem to want to simmer in their own justified anger instead of allowing this process to take place naturally ragrdless of whether or not it leaves a sour taste in our mouths. Medicine rarely tastes good.

[Bond]

I agree. This is just a distraction, and continues the trend of "dumbing down America."

Can Americans understand the financial crisis? No! Can Americans understand paying out bonuses to "undeserving people?" Yes!

[manasecret]

Maybe they should have been fired instead of been given performance bonuses when their company just lost the most money in corporate history? The argument for holding on to great talent doesn't work when that great talent ran the business into the ground.

At what point were the bonuses written into their contract, before or after the news that they might be getting billions of dollars in bailout money?

Were any of the bonuses given to individuals who decided to invest in the derivatives (or whatever) that ruined the company?

I'm not saying that giving out bonuses is a bad idea to those who deserve it even for AIG, but to me there is a huge chance of fraud against me and all others, the taxpayers paying the bonuses, in all of this, and so it definitely warrants investigation.

Keep in mind, I don't have all the information on these contracts, does anyone have that?

[Professor S]

Maybe they should have been fired instead of been given performance bonuses when their company just lost the most money in corporate history? The argument for holding on to great talent doesn't work when that great talent ran the business into the ground.

Even if they fire them they are still obligated to pay thje bonuses. It's in their contracts.

At what point were the bonuses written into their contract, before or after the news that they might be getting billions of dollars in bailout money?

I'm not positive, but knowing the nature of business contracts, before.

Were any of the bonuses given to individuals who decided to invest in the derivatives (or whatever) that ruined the company?

I'm sure there were, but thats irrelevant. A contract is a contract. You can argue whether or not AIG should have offered them to begin with, but thats beside the point. No one is arguing that AIG is a great company.

I'm not saying that giving out bonuses is a bad idea to those who deserve it even for AIG, but to me there is a huge chance of fraud against me and all others, the taxpayers paying the bonuses, in all of this, and so it definitely warrants investigation.

Keep in mind, I don't have all the information on these contracts, does anyone have that?

Agreed, but from what I've read and heard, those contracts are pretty tight and AIG would be legally culpable to pay them. In the end, this is quibbling over small points. We're arguing over millions when TRILLIONS are being thrown around. A Trillion is comprised of a million millions, and we're obsessed over 170 of them. Its' all a distraction.

[BreakABone]

And it seems as all those execs were loyal to the end, as 11 of them left the company after receiving their bonuses.

that AIG paid 73 employees bonuses of more than $1 million each.

Cuomo also wrote that 11 of the employees no longer work for the company.

http://www.cnn.com/2009/POLITICS/03/17/aig.bonuses/index.html

I agree with Prof though, at this point it is just a terrible idea to harp on it, I know the American public wants justice, but I hope this giant flashlight on the business world helps in getting in more regulation to these practices as no one seemed to have an issue with it until they started taking money.

Maybe a fail safe clause so that bonuses aren't paid for under performing members or in environments like this which I hope never happens again.

[Jason1]

Wow, I thought maybe this could finally be an issue everyone agrees on...nope. Giving out bonuses to these people is rediculous, and hopefully Obama will do everything in his power to stop it. (which he has said he will do)

[Fyacin]

Wow, I thought maybe this could finally be an issue everyone agrees on...nope. Giving out bonuses to these people is rediculous, and hopefully Obama will do everything in his power to stop it. (which he has said he will do) Hehehehe...

[KillerGremlin]

I'm with Fyacin on this. I'm the last person to be a grammar nazi but yeah.

Anyway....

People can be angry at AIG all they want, but it was their elected government that chose to bail everyone out. Obviously Obama and Co want to put that fact behind them...who wants to be remembered as the president of "Change" and "Hope" that screwed everything up by perpetuating the economy problems by bailing out failing companies that never should have received any money at all.

But it's not just the Dems and Obama. I don't want to polarize this....the republicans are mutually responsible.

I gotta agree with Prof S and Bond here....

[Professor S]

Wow, I thought maybe this could finally be an issue everyone agrees on...nope. Giving out bonuses to these people is rediculous, and hopefully Obama will do everything in his power to stop it. (which he has said he will do)

Jason, I agree with your moral outrage on this but in the end it is a tiny issue that is being exploited for political gain. The numbers we're talking about make up .097% of AIG's bailout money.

Whats a bigger issue to me is the government setting the precendant of being able to step in and dictate what people can and can't be paid after the fact by enacting retroactive taxes on a select individuals. The bottom line is that compensation is a matter between a company and the employee. Now that the government is part of the company they can have a say, but they can't start destroying contracts that are almost a year old and date well before the government became involved.

So so far the stimulus and bailout spending has achieved the following:

1) The government is dictate who and how businesses can operate on a micro level

2) They have begun to dictate who should be compensated and how much, though their investment and borderline intimidation

3) They're about to destroy 300 years of contract law by setting the precendent that any private contract can be busted up by the government at any time if they see fit. You can say that this is a special case, but when looking at the big picture (.097%), it really isn't. This is a power play, pure and simple.

Is anyone starting to get it yet? The more power the government assumes the less powers are afforded to it's people. Maybe you feel safe that this is only aimed at the rich, but precendents are being set, legal avenues are being constructed and we'll see this start creeping in elsewhere.

When the government "saves", they enslave.

And right now the government is talking about bailing out small businesses... hmm, I wonder how long it will take for our representatives to turn against them after the money is distributed, and start dictating what they can and can't do...

[Jason1]

Honestly Professor, I dont see those 3 things you just listed as bad things. In my opinion, they are all for the better of the country, and the country will be better off because of them. Hopefully the government can actually do all of those things and prevent these huge greedy mega corporations from ever pulling this crap ever again.

And there lies the basic difference of opinion between us.

Also you forgot to mention that the bailout will save or create 3.5 million jobs, promote green jobs, help make america less dependent on foriegn oil, ect.[/

[thatmariolover]

But it's not a payment. It's a BONUS. Hey, you did a good job, bonus!

You don't give out bonuses like that when you're company is doing so poorly.

[Fyacin]

Honestly Professor, I dont see those 3 things you just listed as bad things. In my opinion, they are all for the better of the country, and the country will be better off because of them. Hopefully the government can actually do all of those things and prevent these huge greedy mega corporations from ever pulling this crap ever again.

And there lies the basic difference of opinion between us.

Also you forgot to mention that the bailout will save or create 3.5 million jobs, promote green jobs, help make america less dependent on foriegn oil, ect.[/ Right, because the government is sooo good at running buisinesses. Why don't we go ask russia how that worked?

[Bond]

But it's not a payment. It's a BONUS. Hey, you did a good job, bonus!

You don't give out bonuses like that when you're company is doing so poorly.
To be fair, bonuses often equate to salaries in the financial services industry.

Point certainly taken though.

[Professor S]

But it's not a payment. It's a BONUS. Hey, you did a good job, bonus!

You don't give out bonuses like that when you're company is doing so poorly.

They weren't "given out", AIG was contractually obligated to pay them or else face lawsuits and end up paying them anyway. They are bonuses in name only.

[Bond]

Could someone please explain how Barney Frank is the Chairman of the House Financial Services Committee? Please!

[Professor S]

Could someone please explain how Barney Frank is the Chairman of the House Financial Services Committee? Please!

He is a pretty disgusting individual. While he might have come through this financial mess unscathed, even though he had a huge hand in creating it, I'm certain he'll face judgement in Hell. And I'm not saying that as a joke or exagerration. Barney Frank is a scumbag piece of shit.

BTW, I have further updates on the AIG bonuses, and I apologize for not having a source as I heard it on KYW News Radio this morning. If anyone has information disproving this, I'm open to it as I only have the one source.

I'm going to bold this because I think it's that important and shows that all of this outrage is based on ignorance, class envy and political manipulation:

The bonues contracted by AIG were given to keep their executives employed while they disassembled poorly performing parts of the company. Essentially, many of these highly sought after employee's positions were going to be gone in a year or so. They were contracted to receive these bonuses as compensation for staying on through the end and winding down aspects of the company, selling off assets, etc. in an effort to reduce the financial damage the company would accrue if they simply shut these areas down. Without these guarantees the executives just could have found another job with more security and AIG would not be able to find anyone to do this work without promising bonuses at the end of their tenure. Basically, their job was to eliminate their department and any kind of job secutiry they had.

The reason why many of these executives received retention bonuses after leaving the company is because they did exactly what they were contracted to do. The retention bonsues weren't to stay indefinitely, they were to stay until they finished the job.

It's estimated that these executives saved or are saving AIG the better part of a trillion dollars by winding down those aspects of the company, and because our government believes it has to save AIG, they defacto saved the American taxpayer and government hundreds of billions of dollars.

So in the end we are crucifying these executives for taking millions in bonuses when they saved and are saving the taxpayer billions in bailouts for bad investments and debt.

And for the record not only did the current administration know about these bonuses... but they actually approved them. But why should hipocritical populism bother anyone?

The bottom line is that we already had avenues to help failing companies before all of this stimulus nonsense started taking place: It's called Chapter 11 Bankruptcy. File, re-organize and come back stronger. If you can't file Chapter 11 and have to file Chapter 7, then so be it. Chapter 7 means your such a failure that you can't be saved, and I see no reason to subsidize that level of failure and mismanagement.

Instead the result of the stimulus plan isn't stronger companies but instead has enabled the continuation of failed business models, created class envy, empowered the government's moronic interference with financial healing, created hatred of wealth, populist anger, non-thinking Congress only worried about their re-election, and a President who since the election has done more continued campaigning than governing.

But all anyone of consenquence seems to care about is Rush Limbaugh, John McCain's daughter, AIG bonuses that add up to .097% of their bailout funds, and Glenn Beck shedding a few tears on his TV show. Meanwhile the congress is getting set to trample over the Constitution yet again over a non-issue, and the worst part is even if the government passes the targeted tax against the executive bosuses, THEY WON'T STICK. Doing that is incredibly unconstitutional. These executives will simply sue the government, the case will go to the supreme court and the bonuses will be given back, likely with court costs attached because of the outrageous unconsitutional natute of all of this panicked idiocy.

In the end its all pointless, and I end up feeling like I'm watching Nero fiddle while Rome burns.

[BreakABone]

I think you are a tad over exaggerating, but I agree with the gist of your speech. :lolz:

I will say, I think its easier having some of these talks in the private as I came around a bit after talking with Bond, and just coming from a city that actually does heavily rely on these "bonuses" and more so recent news.

The fact of the matter is, on a personal level, I understand why everyone wants to find a scapegoat. We are in a terrible disaster and people need a place to lay the blame. We hear the gov't is giving out free money to help companies that got us into this mess and that money is trickling down to make the rich... richer.. it gets your blood boiling or it should, but honestly even if we strip them of their bonuses.. I have no idea how that would help anything more than someone's ego.

It is their money for the time, and they will just need to be more cautious in the future.

The only bright spot I see from this, is hopefully companies that receive bailout money are more inclined to pay it back ASAP so they can avoid public scrunity as much.

[manasecret]

What the AIG CEO said before Congress and the news I've heard from NPR has placated me that we're not being defrauded by giving these bonuses. Prof. S's news puts the nail in the coffin of any outrage I had over these bonuses.

I say to Congress: Move on.

[Professor S]

I say to Congress: Move on.

There lies the problem... move on to what? We're staring intently into a congress filled with dead, unimaginative and dishonest eyes. They've pretty much done everything they've set out to do for the economy, and now that it's done, they're talking about a Trillion more $ in bailout (we've barely started spendign the first bailout).

I don't think any elected official thinks more money will do anything, but they'd rather put us further in debt than give the impression that they're subject to the whims of the markets.

It's like they're afraid to admit that this is a situation that simply needs time to work itself out (including the stimulus money thats already been allocated), and are instead clamoring for anything they can latch onto to give the impression that they're doing something because they're more afraid for themselves than the people they represent.

Our congress needs to get beyond stage one thinking (an unthinking response to an immediate goal) and stop reacting instead of responding with a cohetrent dialogue that truly includes all sides and points of view. Sorry, but there has been no bipartisanship from anyone during this mess.

Intellectual honesty in politics seems all but dead, and looking at public opinion polls I think people are starting to see it for themselves.

[manasecret]

I think they should do what they did for these bonuses but for all the other billions of dollars going out. I think they should all be monitoring where that money is going and checking for any defrauding there.

I guess I'll rephrase: Congress, slow down.

[Bond]

Common sense from the Washington Post's Ian Bremmer: Outrage Is an Unaffordable Luxury (http://views.washingtonpost.com/leadership/panelists/2009/03/outrage-is-an-unaffordable-luxury.html).