Why am I providing an update on AIG? Good question, and there is a simple answer - crazy.
This is the stupidity of bailing out a company interested in nothing but itself. After much hoopla about the need to pay bonuses in order to retain the best staff and to turn the ailing, perhaps mortally wounded, business around, it seems that at least eleven executives have decided to take the money and run. So much for retaining staff.
The retention bonuses were paid to some 73 individuals, all of whom received at least USD 1 million, for their efforts in presiding over a prosperous business and running it to the brink of collapse. What is really bizarre is that these bonuses were paid from money provided by the government in order to bail the business out of trouble. Simply, the business can not be in that much trouble if it can make these types of payments. Or, if it is in trouble then payments of this kind and magnitude are totally irresponsible and make a mockery of hard working tax payers who are now feeling the pinch because of the bad business decisions of others.
As I said in the previous post on this topic. I wonder if letting this one fall is such a bad idea when the bonuses could have been used to provide golden handshakes to less fortunate employees of the company who are likely to be let go in any restructuring and streamlining of the business model.
Sad, very sad.
7 comments:
Rob, do you think this case has similarities with Indonesian BLBI case? It seems that the Congress starts pressing Obama on this issue. I'm curious to know what'd happen next
Rani...
There would be similarities to a certain degree. Generally, though I do not think AIG has dealt corruptly with the bailout funds, but rather acted in a really poor and irresponsible manner for a company that was supposedly on the brink before the government bought up 80% of it.
For a company who was bailed out to the tune of USD 170 billion to date, and with a further USD 60 billion likely to be coughed up by the government, then this just is plain wrong on all levels.
Supposedly, the government is going to "claw" some of the bailout money back.
Lets just think about this for a second. If AIG go under who the hell will sponsor Man United????
mmm..retro laws to break existing employee contracts..and pretty rich coming pollies and there fellow snouters
well...the bonuses were a small bit of the payments out.
You did happen to notice that AIG had to also pay several foreign market banks, too, yes?
Malasia, Europe, China, others.
They were a hurting puppy, for sure, and there's no doubt that the way business is done around them, as well as ALL banks, will be radically different.
That is, if we can just get our Professional Politicians to unwrap their greedy little fingers from their money!
To All...
I was playing devil's advocate to a degree. To evoke some of the comments that have been made to date.
In simple dollar terms it is an insignificant amount in light of the total bailout figure.
I was hoping some one would make the point that Oigal (aka Stumpy) made. No matter how you package it, these are contracts agreed to before the bailout, they are solid.
The only way in the US you can legally cancel a contract of the nature of these bonus contracts is to file for Chapter 11 bankruptcy protection (at least as I understand US law).
The retroactive tax law that takes some 90% of the bonus money back is problematic and will undoubtedly draw a constitutional challenge, and rightly so.
The whole bonus-paying affair leaves a bitter taste in one's mouth, but it all seems to be pretty legal to me. To tax the receivers of the bonuses sets a precedent which at best will ensure all Americans feel less secure about their work contracts, particularly where there is federal money involved.
I think that paying the bonuses in this kind of economic climate is in poor taste and wrong on moral grounds - how do you justify to yourself accepting a bonus when you have driven your company to the edge of the abyss?
However, on the other hand, these contracts seem legitimate and legal, and therefore it is problematic to arbitrarily break them through government legislation.
GJ...
Maybe MU should change their jerseys to AIG (majority owned by the US Government)
Thanks for the post, really effective info.
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