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    AIG Chief on Bonuses: Our 'Hands are Tied...' Are You F-in Kidding Me?

    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 lawsuits 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 the employees would be the ones taking years to try and fight to get their money back as opposed to the government doing the same through a 'clawback' attempt (which i predict will happen if these payments go through).

    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 doling out $175 billion in bailout money if we can't have a say in how those taxpayer dollars are used?

    It's all a joke. 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 are clearly 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. They must be stopped.

    It will be a huge black mark for the Obama administration - and particularly Geithner and the Treasury Department - if we can't make that happen.


    Update (3/16): Just want to make it clear that the $165 million in bonus payments being delivered this weekend was unbelievably only a first tranche, a mere down payment if you will. According to a WSJ Story:

    In his letter to Mr. Geithner, dated Saturday, AIG's Mr. Liddy said the firm's "hands are tied" on making $165 million of the payments that were due Sunday.

    The payments at AIG's financial-products unit are in addition to $121.5 million in incentive bonuses for 2008 that AIG will start making this month to about 6,400 of its roughly 116,000 employees. Separately, AIG is also making $619 million in retention payments to 4,200 employees.

    Together, the three programs could result in roughly $1.2 billion in retention and bonus payments to AIG employees. At least some individual employees are receiving millions of dollars -- at the financial-products unit, for instance, seven employees will get more than $3 million for 2008, according to an AIG document.



    Sing along link:

    Are you gonna get bailed again tonight
    Or will Uncle Sam finally put up a fight
    Are you gonna let your losses all hang out
    Fed Bailout Whore AIG
    You spin the capitalist world upside down

    Hey I had just a skinny NAV
    Never knew Wall Street good from Wall Street bad
    But I knew life before I left my trader nursery
    Left alone with AIG's fat bailout fanny
    Lord such a mega scammy
    Heap big bailout zombie you made market losers out of we
    Hey hey!

    Ive been seeing TARP bailout scams
    Across the Bloomberg wire across the land
    I seen every sorry financial service floozy on the way
    But their wily bailout guile
    Went kind of smooth for quite a while
    That low down bailout whore AIG will con you every time

    Are you gonna get bailed again tonight?
    Or will Uncle Sam finally put up a fight
    Oh will you take em for all they got
    FED bailout whore AIG
    You spin the capitalist world upside down

    Hey listen here
    Now you bloated bailout bonus pig
    Doin the Paulsen bailout bonus jig
    Sure aint no AAA beauty queen in this locality (I tell you)
    Oh but we still get some pleasure
    Watching Geithner fish for subprime treasure
    Heap bailout whore you make a circus clown of Bernanke
    Now get this

    Are you gonna get bailed tonight?
    Or will Uncle Sam finally put up a fight
    Oh will you take em for all they got
    FED bailout whore AIG
    Will you ever get out of town?

    Get on your bankruptcy bike and ride....

    nice one william. i did the sing-along and it flowed pretty nicely!

    AIG is not the only location of festering greed, even when our country is submerged in  dark chasm of unemployment and foreclosures.   The reason AIG, a massive mega insurance company became insolvent is that it got too big?    It is a stain on America integrity as the ponzi scheme of  Mr. Maldoff has shown us.  When Americans taxpayers are suffering from this terrible  plight cause  by  so many individual  issues.

    The import of  thousands of fraudulent  cheap labor through the H-1B visa game, hardly ever supervised by the dept of labor, engineered by iniquitous immigration attorneys.  The unceasing betrayal of our politicians as Speaker Nancy Pelosi (D-CA) who has sold out the American worker by killing E-Verify.   Unfair trade agreements that have seen our industrial base disappear into third, cheap labor countries, so that millions of US companies have closed their gates.

    All around the country we have seen the padlocked factories and silent machines, because it was cheaper to import car parts from Mexico. Then to import them back across the distressed  drug infested borders. Then the taxpayer bails out banks, insurance and hundreds or other defaulted business to the tune of more than a trillion dollars.  Then without any  oversight the executives are still receiving  massive bonuses even though the company has failed.  As we sink lower into this financial quagmire, our bumbling politicians led by Sen. Harry Reid (D-NV), has dishonored his Oath to Nevada constituents and the US people. By tearing out the E-Verify amendment in both the Stimulus/omnibus spending bills.  It will now allow at the least 300.000 illegal immigrant labor to take construction jobs from documented workers.

    Thanks to the Democratic leadership even our workforce  must--submit--to millions of  illegal  cheap  labor. They have squirreled into the both blue collar to the higher professional echelon of positions. We have till September to right this disgusting wrong, by demanding every politician revise--EVERIFY-- in perpetuity. Washington switchboard for your incensed calls to 202-224-3121

    I disagree with your premise that 300,000 undocumented workers will get construction jobs due to stimulus money. During the economic boom times, undocumented workers were taking jobs that employers couldn't find enough American citizens to fill. Now that unemployment is high, you can bet that American workers will be lining up to fill those construction jobs. And even if you're right, so what? There are around 12 million undocumented immigrants living in this country, paying rent, buying cars and food and clothes, going out to eat and to the movies. If they have jobs, they will continue to spend their money in this country. Stimulating consumer spending is the point of the stimulus bill. Whether or not the consumer is a citizen is of little matter. These people are already living in country and they are already a part of our economy.

    "During the economic boom times, undocumented workers were taking jobs that employers couldn't find enough American citizens to fill."

    correction and reality checik: illegal aliens were taking jobs employers WOULDN'T pay American cititzens enough to do.AND a huge percentage of that income whent BACK to home countries...

    Correction and reality check right back atcha. Those jobs are well paying, which is why immigrants want them. And yeah, they send a lot of money home. So what? They spend a lot too. What's the difference between putting money in your 401K or giving it to your family? It's still out of the economy for a while.

    P.S. I suggest you direct your anger away from hardworking men and women who are just trying to make a living in order to support their families and turn it toward the executives who contributed greatly into getting us into this mess and are about to be rewarded with a new yacht.

    They didn't pay enough or citizens with a right to the job would have taken them. Illegal aliens do not have a "right" to work in this country. If they did they'd have the proper documentation. Illegal aliens' beef should be with their home country.And what economic world are you living in to see the remittances back to home country don't have a huge impact? Perhaps I should also add my issue with using illegal aliens is the huge exploitation I see... It is not right  to exploit those in such dire need. Not what I think our country is about... or at least should be about

    Interesting debate, but i agree with orlando, it's more of a sideshow issue.

    and as i've said many times in previous postings, when we turn the corner on this economic crisis (whenever that may be) we will be facing one of the largest demographic shifts in our history as baby boomers retire en masse. When that happens, we will be facing an incredibly productivity shortage and dying for as many immigrants to come to our shores as possible.

    our ability to welcome diversity may end up being our saving grace. it's not time to demonize immigrants, although i do believe illegal immigration is a tricky issue.

    I certainly don't mind my tax dollars going to pay to support crooks such as OJ & Madoff in cozy little cells...and will certainly gladly pay if this $ is to see all their arses in similiar accomodations.BUT if one red cent goes for anything else... there will be much hell to pay. Of that I am certain

    Our elected officials must all be idiots. Taxpayers are laying out hundreds of billions of dollars, you would think that the least our elected officials could do is to pass legislation which states; " If your company has been so poorly run that you need taxpayer dollars to stay in business, then until every dime of the money is repaid, no executive will receive any form of raises or bonuses." Instead, our elected officials are so eager to spend, spend, spend, they pass out bailout funds with virtually no limits or restrictions on salaries or bonuses. Only after bailout money is misspent do our elected officials feign outrage, and then only to make a show to appease the public. If they were truly outraged, they would have had the common sense to place clear restrictions on how bailout money may be used, and force the companies that need these funds to do whatever they have to do to comply with the no raise or bonus requirement. Our country is being run by people as stupid as the executives they are sending bailout funds to.

    I agree that our government should have anticipated this happening. perhaps you could excuse their lack of foresight during the first AIG bailout for being under the pressure of time, but we've had i think a couple of additional bailout tranches for AIG where this should have been addressed.

    As Josh Marshall over at TPM notes, the bonuses total closer to half a billion dollars, most of it to those in the AIG's financial products division, the very people responsible for most of the company's -- and by extension the taxpayers' -- losses.

    They are called retention payments, but let me suggest they are hush money. The people AIG is trying to keep on board and happy are the people who could testify as to who knew what and when. So clawing back those bonuses would kill two birds with one stone.

    great point about the total bonus pool being much larger than just the $165 paid out this Sunday - WSJ has the total due at $1.2 billion.

    I'm not sure if there's really an issue of keeping employees happy to keep them silent. Whatever happened at AIG will eventually come to light.

    I really just chalk up this weekend's payout to the company doing a very simple cost/benefit analysis of granting the raises vs. spending the money and time on the likely lawsuits if the bonuses are granted. not surprisingly given the company's history of valuing risk accurately in their core business, i think AIG wildly underestimated the cost of public outrage. My guess is these bonuses won't stand.

    thanks for the quote love. and an excellent post by you (and way to be ahead of the curve). without question, executive compensation contracts have become totally outrageous, completely misaligned with the interests of shareholders. the fact the boards often use shareholder interests as justification for these inexplicable contracts and their generous terms is deliciously ironic.

    I can't help but seriously question how things are being handled right now.  I try to keep in mind that there may be important factors that I (very likely) am unaware of, but the outward appearances aren't at all good presently.  How keen do you feel your sense is of the core politics at play here?

    not good at all, im afraid. it's almost unfathomable that the situation has gotten to this point. this seems like such a political landmine that I would normally feel  the government is going to somehow step in and stop this debacle. but apparently, the only thing geithner could get in negotiations with AIG is some minimal reductions in bonus payout and an agreement to try and limit next year's payouts by 'at least 30 percent' (woo-hoo!! how generous!!) ((And of course, a stern warning from AIG's CEO about executive compensation limits))

    apparently, AIG thinks they have the government and the taxpayers over a barrel.

    "apparently, AIG thinks they have the government and the taxpayers over a barrel."

    Dang, it's one thing when I think it in my quiet little head but when someone else writes it I feel like puking.  And my rage is futile.  There is nothing I can do to make a difference in this situation and that is what makes it so bad.  I did email the government at this morning and I felt better until I read your rant again.  I heard someone say something on the radio about they have families to take care of (the bonus getting people) ...  makes me wonder.

    On NPR this morning, they did a story on how banks are whining about how the bailout money is too restrictive. Poor wittle bankers. It must be so hard to have to spend money on banking instead of compensation and golf outings. When it was pointed out that they don't have to accept the money if their bank is solvent one banker actually made the case that they are afraid if they don't accept the money, federal regulators will make things difficult for them in the future. What a bunch of assholes.

    Orlando, I heard that I and I wanted to scream.  My thoughts exactly.  If they don't need the money, don't take it.  Jeeze Loueez, can't they come up with better BS than that?  No ffing wonder they failed.

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