Salon’s Mike Madden:
The insurance company lost $108 billion in 2008; the federal government, which forked over $170 billion to keep it in business since last fall, now owns 80 percent of the company. But A.I.G. officials still felt compelled to pay $165 million in “retention bonuses” to people whose dealings in bizarre financial derivatives helped unravel the company and the global economy along with it. After such a dynamite performance, “plunder” or “booty” might do a better job of describing the extra pay.
As recounted below, there’s not so much that the executive branch can do — and should do — to prevent AIG from handing out loopy bonuses. But why can’t Congress pass a law requiring that bonuses granted by a company that has taken bailout money from the Federal Reserve or TARP be taxed at a very high rate?
Kevin Drum worries about business ethics:
If they don’t get their bonuses, these guys might not only leave AIG, but turn around and do their best to make things even worse. That’s just speculation, of course. But would it surprise anyone if that started to happen?
A back and forth b/w readers at TPM:
So, in short, we’re being told that if AIG doesn’t pay these bonuses the AIGFP personnel are going to bolt and that the whole firm is going to collapse because these people are, in fact, irreplaceable. Second, the firm is going to collapse because without these brilliant minds, nobody will trade with AIGFP and thus its risky positions will remain risky and become even riskier.
the Obama administration’s claim that nothing could be done about the AIG bonuses because AIG has solid, sacred contractual commitments to pay them is, for so many reasons, absurd on its face… As any lawyer knows, there are few things more common – or easier — than finding legal arguments that call into question the meaning and validity of contracts.
Hilzoy spells it out:
Dear Wall Street: bonuses are more politically radioactive than other kinds of compensation. You see, many people don’t understand that on Wall Street, bonuses are essentially part of your salaries. They imagine that bonuses have something to do with, well, performance. You can see how the idea that your recent performance deserves to be rewarded might rub people the wrong way, especially since so many of you are planning to reward yourselves with their money.
Hilzoy then quotes genius Republican thinkers:
[Sen.] Mel Martinez [R-FL] has one of the dumbest comments on the whole affair:
“”What executives have done is troubling, but it’s equally troubling to have government telling shareholders how much they can pay the executives,” said Sen. Mel Martinez (R-FL).”
Um, Senator Martinez: who exactly do you think owns 79.9% of AIG’s shares? Or do you just object to the government talking to itself?
Good point, that one. AIG fucked up, bigtime. I noted previously that AIG’s financial products departments was apparently selling everyone a freakin’ bill of goods – insurance that it could not and could basically never back up. So not only did those idiots ruin the economy, but they did so through enormous lack of foresight and borderline criminality. And so their mess wouldn’t really spread (I can only imagine what that would mean in light of the current circumstances), we bought them. Yes, we. As in “I and 300 million or so of my friends.” And it’s pretty clear that we are pissed, and we don’t feel that the AIGFP people deserve that bonus money this year. So it’s perfectly reasonable that we withhold it.