Another $230 Million in AIG Bonuses: Why Don't We Take Our Chances?
AIG, the basket case insurance company, wants to pay out another $230 million in bonuses to its top executives. The word is that the government contractually obligated to make these payments. Furthermore, if we don't cough up the dough, AIG supposedly will lose good people. The claim is that this will cost us even more money, since the replacements will not be able to fix the AIG mess as well.
Why should we believe that claim? After all, the people who make the claim were either too incompetent or too corrupt to recognize an $8trillion housing bubble. These were the people who at every step along the way said that everything was fine. Even when things started to unravel, they told us that the problems would be contained in the subprime market. The question these people should answer is: "when did they stop being wrong about the economy?"
It seems bizarre that you can't get good people to work on Wall Street for less than several million dollars a year. I have had very bright people put in long hours for me, and I never paid anyone more than $100,000 a year. I realize that these people were motivated by the idea that they were doing something good for the world.
Maybe we can make cleaning up AIG a public service project. We could have public-minded business school students (an oxymoron?) put in two years fixing up the disaster created by the previous group of alleged geniuses, before going on with their careers.
One issue with AIG that need not concern us is the "sanctity of contract" line. AIG is a bankrupt company. Contracts do not survive bankruptcy. This is a fact that has been made very clear to hundreds of thousands of auto workers, who are losing the retiree health care benefits that they worked three decades to earn.
The boys and girls at AIG presumably understood this feature of bankruptcy law. If not, they probably are not smart enough to be of much help in the clean up effort.
In short, the sanctity of contract line as applied to AIG is a great lie detector test. Anyone who raises it to defend the bonuses is not being truthful.
Hummmmm---Is the AIG bailout a case study of how trickle-down economics work? How much of the bailout helps people like AIG executives, and the theory is that the process to stimulate the real economy will “take time”?
Bob Spencer
July 14, 2009 6:20 AM | Reply | Permalink
AIG is and has been a conduit used by the government to surreptitiously recapitalize the banking (and I fear, the "shadow banking") system.
The point of the "contractually obligated" meme is to reinforce the idea that AIG has not been nationalized and to imply one or two degrees of separation between AIG and the government. For so long as AIG can be treated as a private, standalone company, the government can deny the public the right to learn what the $183 billion the public gave AIG is being used for.
My question is why AIG even "asks" whether or not to pay bonuses. The USG may be a stockholder, but stockholders don't tell management what to pay a firm's employees.
July 14, 2009 8:38 AM | Reply | Permalink
I think they only "ask" to get the idea out there in front of the actual payments because they're worried about an angry and perhaps violent public reaction if people are "surprised" by this. They've been talking about making these payments in the pages of the Wall Street Journal for months. It's like they're conditioning the public to accept that they're inevitable and if they can make it look like the government itself agrees there's a contractual obligation, all the better.
July 14, 2009 10:50 AM | Reply | Permalink
"Why Don't We Take Our Chances?'
- why don't you?
July 14, 2009 9:12 AM | Reply | Permalink
Lalo is the only person I know who could be robbed of everything he owns at gun point and then go and bail the guy out of jail and pay for his legal counsel.
C
July 14, 2009 10:21 AM | Reply | Permalink
How so? I'm only asking "where's the action" amid the constant impotent whining of progressives who just triumphantly got a president into the WH.
July 14, 2009 10:59 AM | Reply | Permalink
The idea that we would be 'taking a chance' in throwing out these bums really needs justifying. These are ostensibly the worst portfolio managers in history. You really need to some serious evidence if you're going to argue that they might not be the worst.
An anecdote: http://www.acredittrader.com/?p=65
July 14, 2009 11:02 AM | Reply | Permalink
My understanding is that this particular round of bonus money will be spread among some 4,000 employees. So we are talking about ~$60,000 per person. Not chump change, by any means. But, depending on the market, it might not be totally unreasonable.
I wish that the average Wall Street job paid a lot less. It does seem that the compensation for these folks is way out of line with the actual value they add to our society.
So I understand your point, Dean. But did you have to reference "the $8 Trillion housing bubble" again? It almost seems like you wanted to point out -- just in case anybody missed it -- that you did see the bubble. Congratulations, but you're going to have to get past that, eventually.
-- ARG
July 14, 2009 11:06 AM | Reply | Permalink
I'll get past that when the ideas of the people who were right about the bubble are driving the economy and the ideas of the people who were wrong about it (or, worse, lied about it) are banished to the darkest corners of the intellectual marketplace.
As to the larger point, hell, no, don't pay the bonuses. Let those folks walk if they want -- they've got nowhere to go and they know it. AIG's ostensible independence is irrelevant; the company SHOULD have been nationalized and may yet have to be.
July 14, 2009 2:49 PM | Reply | Permalink
As in every other area of life we know this argument about losing good people is self-serving bullshit. If you can't pay these kinds of salaries out it becomes harder and harder for the very top executives justify their obscene and thoroughly unearned salaries too.
I see stories on the evening news about once mighty wall street kingpins now working as waiters in NYC. There's no need to keep salaries high in this sector except to protect the leeches who make those salaries. Those people will work for almost anything at this piont and ought to have to do so too.
What is good in every other sector of employment and cheered by the financial parasites is the driving down of wages as a means of making companies more profitable. I think it's time those criminal swine get a real good taste of that medicine.
July 14, 2009 11:17 AM | Reply | Permalink
I like your idea here, Dean. Why would AIG want to retain these folks anyway? Let them go elsewhere (on second thought, who'd hire them?).
Anyway, I figured I'd post a comment if for no other reason than to show-off that nifty snapshot self-portrait. Yes, that's the AIG Financial Products office building sign (that is now gone!).
July 14, 2009 2:27 PM | Reply | Permalink
Obama should fire all of top top executives.
There are millions people have no job and could not find the jobs. When the goverment loaned 184 billions dollars for those gang.
THEY DO NOT DESERVE FOR BONUS.
July 14, 2009 10:48 PM | Reply | Permalink
Issue the bonuses. In AIG stock options. With a pre-crash strike price. Now that would be an incentive.
July 15, 2009 12:23 PM | Reply | Permalink