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  • ARGH: The AIG Fiasco Gets Worse

    As more details emerge as to bonuses paid by bail-out insurance giant AIG, the nation’s outrage is growing. According to figures released by New York Attorney General Andrew Cuomo, no less than 73 employees received bonuses of $1 million or more. Seven received more than $4 million. One employee received more than $6.4 million.

    To be fair, little is known about the circumstances of each case – we don’t know the names of the recipients, never mind the unique value of each. Many are no doubt engaged in unwinding AIG’s obligations, saving the firm – and taxpayers – money. We just don’t know.

    Nonetheless, the general picture hardly fits a firm in financial distress, supported only by massive infusions of taxpayer money. Taxpayers are right to be upset.

    Outrage of course, is the easy part. The hard part is figuring out what to do about it, especially since many of the payments were apparently required by contract. Bad ideas abound. Several members of Congress, for instance, today suggested retroactive taxes of 91 percent or more targeted to AIG employees receiving bonuses.

    In addition to being legally suspect, such ideas hardly get to the root of the problem. As pointed out by the Wall Street Journal in an editorial today, the real AIG outrage goes beyond bonuses. It’s the bailout itself. Altogether, taxpayers have committed $173 billion to “rescuing” AIG, including $30 billion still in the works. Yet, it was only this weekend that AIG officially reported where that money was going. And while the whole exercise has been justified by the risk posed to the global financial system of an AIG failure, that term has never been defined. Moreover, the exact nature of the threat has only been vaguely defined, at least to the public.

    This is not to say the bailout was not justified – it may have been. But certainly taxpayers deserve a better decision-making process, and more oversight and transparency than has been provided so far.

    The Obama Administration has already indicated that limits on bonuses will be attached to the next payment to AIG. It shouldn’t stop there, however. Taxpayers also deserve a detailed, critical – and to the extent possible public — justification for the support and of the alternatives. And any aid that is provided should be subject to strict oversight by Congress as well as the executive branch, and fully disclosed to the public.

    Such steps of course won’t ‘solve’ the problem: one should always expect unexpected consequences whenever government plays the bail out game. But that makes them no less necessary.

    Posted in Ongoing Priorities [slideshow_deploy]

    13 Responses to ARGH: The AIG Fiasco Gets Worse

    1. Victor Fryling says:

      I am a former COO of a Fortune 500 Company and currently sit on 3 Company Boards.

      Corporate America needs to become more accountable for their performance. Today's executives get a signing bonus before they work one day. Bonuses that have nothing to do with performance (individually or for the shareholder) and an exit payment if they fail. Today's Boards of Directors have allowed executives to become mercenaries that care only for themselves.

      Corporate Boards need to make a commitment of "pay for performance". If the shareholders and the workers do well — then they do well. Our current corporate mess and failures have been brought on by Boards that have abandoned their fiduciary obligations to operate in the best interests of the shareholders. Bonuses (when the company is doing porly and employees are being layed-off)and large contract buy-outs have no place in corporate America and will be the downfall to capitalism.

    2. Ron, Derry NH says:

      This is slick packaging by the embezzlers and I mean congress not AIG.

      AIG had chapter 11 as an out. The books would have gone to a judge and a panel would have reorganized the company, into a more profitable model.

      When the fraud artists of Washington CHOSE to give them a gift from every Americans pocket, that was time for outrage.

      This subterfuge of anger by congress at the money being allocated according to the usual companies methods are their fault. Congress was in the wrong giving money to companies that are allegedly failing with out looking at their business model and discovering their value in their business practices.

      That is why chapter 11 works and tax payer gifts do not.

      Unless of course the entire boondoggle was to protect the money laundering and then use the turmoil as a political gain later.

      George Bush had a Vietnam like scenario developing in the mid East where as the Democrats create that scenario in every thing they handle; yet no one is the wiser or sees the comparison, that our governments intervention CREATES the corruption and open ended vast waste of energy and money aimed at no real solution.

      Festering political intrigue is their MO, there should be no outrage. The disgust should lie on the lapse of CONGRESS and OBAMA for their Naivete` and arrogance.

      Sadly, there is more to come, in health care and the rest of the Obamanations.

      This is the great downward spiral of arrogance tripping itself into habitual loss, too drunk with power to stop and to arrogant to apologize and look in the mirror and see itself as every one else does. Whether we are strong enough stop carry this load will be anybodies guess, but we should at least stop being enablers.

    3. Dale, Cincinnati says:

      Regarding Charles Grassley's comment on the issue (provided below for reference), it's time to start handing out swords in Washington, starting with Frank, Waters, Schumer, Dodd, et. al.

      “But I would suggest the first thing that would make me feel a little bit better toward them if they’d follow the Japanese example and come before the American people and take that deep bow and say, I’m sorry, and then either do one of two things: resign or go commit suicide.”

    4. Marshall Hill MI. says:

      We have Laws on the books for Businees failures and all others,but this Elite group are so much

      smarter, that they will re-invent the Wheel so it

      can be their own! God is not in their vocabulary

      nor in their Hearts and this will be there Loss

      in the end! These very same People do the very

      same things in every situation they encounter!

      They will Lie,Cheat and Steal for Power!

    5. Gary Turnbull, IL says:

      Congress is at it again. Will ever anyone who is called before Congress be able to muster the courage and tell why what is happening is happening? Unfortunately they, Congress, have contributed in a very large to part to the problems we now find ourselves.

      Will Chris Dodd or Pres Obama return the rather large campaign contributions they receive from AIG? It must surely be our tax money also.

      While I am not happy about the bonuses, and I do not know when they were signed, for Congress to be able to go back and tax them is very dangerous. For them to write tax law covering a group of people estimated to be 15 to 20 individuals must give all of us pause for thought. What group will be next that they do not like the terms of their contract, hollywood liberals ( I doubt that one), sports figures, school administrations, or you name it?

      The really scary part of the bail out program is how, even if you really tried, can you keep track of several trillion dollars? We know that Barney Frank and Tim Geithner can not based on past tax returns.

    6. Jerome Zacny says:

      Mr. Geithner doesn't know how the AIG bonus package got into the bailout plan he crafted. Mr. Dodd doesn't know how his amendment to the bailout, restricting bonuses to executives, became "gutted" to exempt bonus payments to AIG executives from those restrictions. Mr. Obama doesn't know how all of this happened and is now "outraged". At least that's what his teleprompter said. These people are either the biggest liars in government, or they are the most inept, lazy and irresponsible people to ever work in Washington.

      I tend to believe the latter. Trying to determine the biggest liar in government is like trying to determine the largest grain of sand on the beach. The safer bet is that no one actually read the compilation of provisions that were crammed into the bailout legislation. Mr. Obama turned the whole enterprise over to Mr. Geithner and the Legislature. The Legislators put their ideas on paper and turned those papers over to their staffers, who completed the bill and sent it to the President. Mr. Obama promptly signed the bill into law. Now, those who are responsible claim to have no idea how these bonus payments ever found their way into the provisions of the bailout.

      Nobody, not the President, not Ms. Pelosi, not Mr. Geithner, not Mr. Dodd or his boss Harry Reid bothered to read the final version of the bailout legislation before putting it into law. Everyone involved trusted others to do their jobs for them. Now, when the fecal matter hits the fan, they are all "outraged".

      This isn't the only piece of important legislation that went unread before being signed into law. The "stimulous" legislation was well over a thousand pages long. It would be safe to say that no one read the entire draft of this legislation, other than the typist who produced it, before it was signed into law. There will be no shortage of "outraged" legislators, no doubt including Mr. Obama himself, when we all discover later exactly what was put into law. We may discover that we have negated the Constitution, ceded the Southwest U.S. back to Spain, the Southeast U.S. back to France, Alaska back to Russia and the rest of the Country back to England. Who would know, no one read those thousand pages before passing the legislation and signing it into law. Perhaps that's what Mr. Obama meant when he said the legislation "wasn't perfect".

      This kind of irresponsibility would not be tolerated in any other environment. Can you imagine standing before a judge trying to explain how you, an ostensibly rational adult, should not be held accoutable to the terms of an agreement or contract that you signed, based on the argument that you didn't read it?

      This administration likes to talk a lot about accountability. Teachers, doctors, bankers, stock brokers, insurance companies all should be held accountable. But what about U.S. Representatives, Senators, the President and their minions? Should they not be held accountable? How can the American public have any confidence at all in "representatives" who don't read the legislation for which they vote? Why should the American public have any confidence in a President that signs into law legislation that he has not read?

    7. bob, atlanta says:

      The recipients of those bonus checks are not criminals. They entered into agreements with a private company to do a specific job and in return receive compensation. It would be assumed that these folks held up to their end of the bargain since aig is cutting their checks. Since these people are not criminals, the government has no right to seize their property. The call to seize these assests through legislation is contradictory to every principal this nation is founded on.

    8. Tim AZ says:

      Everyone of these clowns knew a year in advance that these bonuses would have to be paid out contractually. So what was their motive for pretending to be upset? They need to feed the class warfare they have created among the citizenry. The purpose of class warfare is to maintain a division between the achievers of the American citizenry and those who do not whish to achieve. This allows the liberal elites to present themselves as knights in shining armor to the non achievers by punishing achievement and rewarding non achievement with entitlements. Sadly everyone is playing into this strategy of the liberals including Charles Grassley. I don't care how private businesses spend their money. If they are allowed to fail then the problem is corrected. I do care about a govt. whos spending makes private businesses spending look like a welfare recipient shopping in Macy's.

    9. RG St Simons Is, Ga says:

      Cudos to Mr. Zacny. You are spot on.

    10. Joanne Tellez Giron says:

      All of this is a distraction. This administration is doing everything possible to destroy our economy and the capitalist system so that the Obama Administration can push through its Socialist agenda. I am really afraid of what is in store for us.

      It's so hard for me to accept that this country, that I love so dearly, is headed in this direction. I pray that they don't succeed. God help us if they do.

    11. Tim/Ohio says:

      One thing to keep in mind people. The AIG takeover is a distraction from other policy matters that deserve our consideration. Obama now wants private insurance to pay for injuries sustained in combat with the enemy. This is totally outrageous. Those liberals down there in Washingtoin loathe the military. The very patriots that we count on to keep this country safe are being asked to pay for their own combat injuries. Wheres the outrage? We are losing our country to the extremist liberals. Obama can't seem to make a speech without his security blanket, (The Teleprompter). I long for the days when our President could stand up before the American people and look us in the eye, and tell us the truth. Wake up America.

    12. Frances/Texas says:

      Obama and his gang are gutting the Constitution before our eyes. This government is an embarrassment and dangerous to individual rights: the right to property, life, liberty, and the pursuit of happiness. They are attempting to foist upon us a Socialist regime of proportions unseen since the USSR and Stalin. They are despicable. Pelosi, Frank, Dodd, Obama are the poster children for irresponsible, stupid, vindictive ideas.

    13. Patriot, Minneapolis says:

      Well, the bootomline is this, financial institutions betrayed the trust of everyone. They abused the liberty given to them. Think about this if a large group of people commit serious crime, not neccessarily everyone in the group agreed to it. But they did not show courage to run away or distance themselves from the group, inform the police, etc. which this country provides every opportunity. So they all remained together and when it came time to share "booty", the ones which did not commit any crime but were with group probably carrying or storing others "weapons" only, also enjoyed the benefits. So, though these bonus receivers are percevied to be "hard working" normal people in one way they are not ethical, honest, or responsible. So, I do not have any sympathy with them. They should be treated as criminals along with the same group. I understand the point people are advocating individual rights (how congress can tax 90%, etc etc) but what about duties? Can all these guys receivng bonus can say under oath that did not a thing about this scam going on at AIG (even now). Retaining them, it is a cover up. Let them go, it is an employers job market right now. AIG may get AA+ instead of AAA+ employees, but at least the new ones may be more honest and ethical. I do not want a genious thug in my company.

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