AIG plans new round of "bonuses" totalling $100 million

[King Barry's Back]

According to Washington Post:

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News Alert: AIG planning another round of bonuses
06:01 PM EST Tuesday, February 2, 2010
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American International Group plans Wednesday to pay another round of employee bonuses worth about $100 million, said several people familiar with the matter, a year after similar payments at the bailed-out insurance giant infuriated many Americans and inflamed Washington.
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I thought AIG didn't have any assets anymore? Or are they in bankruptcy-protection status, and can therefore spend-spend-spend w/o repaying their creditors?

No matter what your feelings regarding AIG's bonus policies -- I know that inexplicably there are a number of fans of this on this board -- this can't be good news for President Obama.

[jkjsooner]

IMO, the government should have let AIG go bankrupt while at the same time promising to fulfill some percent (say 50%) of AIG's obligations. That way:

1. All bonus related contracts with undeserving AIG executives would have been invalidated.

2. The government would have done just enough to keep AIG's failure from triggering cascading failures at other financial organizations.

3. The other organizations who were insured via AIG would have been sufficiently punished.

I think this is what the administration wanted to do but they said there was no precedent for doing something like this and they weren't sure how they could pull it off legally.

[TUSooner]

More reason to hate Manchester United, which wears AIG on its shirts.

[Tulsa_Fireman]

I'M RICH, BEEYOTCH!

[StoopTroup]

Damn Pubs.

They should do something to stop this.

[OUDoc]

Reminds me about was said about firing GM's CEO:


"It seemed completely obvious to us," said Steven Rattner, "that any management team that had burned through $21 billion of cash in a year and another $13 billion in the first quarter of 2009 could not be allowed to continue."

[soonervegas]

John Maynard Keynes sucks!

[Dio]

So what we're saying is:

When the government sinks a crap-ton of (our) money into something, there are usually unintended consequences that suck.

Why do we want them in charge of our healthcare, again?

[OUDoc]

So what we're saying is:

When the government sinks a crap-ton of (our) money into something, there are usually unintended consequences that suck.
More precisely, I would say they should now be somewhat accountable to us.
They aren't, but they should be.

[Okla-homey]

FWIW, those ads you see on TV now for "21st Century Insurance" are actually AIG. They re-named their auto insurance line to fly under the radar since people generally take a pretty dim view of "AIG."

www.21st.com

[soonerscuba]

So what we're saying is:

When the government sinks a crap-ton of (our) money into something, there are usually unintended consequences that suck.

Why do we want them in charge of our healthcare, again?Heh, you are aware of what AIG does, correct?

[Chuck Bao]

That is why all future bail-outs should come with state ownership, or at least very heavy dilution of previous shareholders. For those of you bitterly complaining about nationalization and inefficient government, it doesn't have to be that way. The government can buy talent just as well as the private sector and the nationalized financial firms can be privatized at a profit later. All of the downside is already covered. Now, how about the upside potential?

And, kudos for AIG rebranding their product. Some of them may be earning their bonuses.

[Okla-homey]

The government can buy talent just as well as the private sector

Sorry Chuck, but you obviously have no concept whatsoever of federal hiring and personnel management regulations, policies and practices.

[sooner_born_1960]

Has AIG paid us back yet? Have they repaid the baliout money?

[SCOUT]

Does anyone know what the $100 million is as a percent of their total payroll? I am just curious.

[Chuck Bao]

Sorry Chuck, but you obviously have no concept whatsoever of federal hiring and personnel management regulations, policies and practices.

You may be right. Most countries in the world clearly distinguish between government agencies and government enterprises. Government enterprise employees are not civil servants. It would be the height of lunacy for the state to take over a failed financial institution and try to immediately convert all of the employees to civil servants. That is the opposite of what I am proposing - inject capital, take control, rehabilitate and then sell. If you need to hire some professionals to get the job done, so be it.

[Okla-homey]

You may be right. Most countries in the world clearly distinguish between government agencies and government enterprises. Government enterprise employees are not civil servants. It would be the height of lunacy for the state to take over a failed financial institution and try to immediately convert all of the employees to civil servants. That is the opposite of what I am proposing - inject capital, take control, rehabilitate and then sell. If you need to hire some professionals to get the job done, so be it.

Do you think the gald-danged AFSCME would let the gubmint get away with that? That bastage represents the largest conglomeration of worthless corksuckers in North America.

[soonerboomer93]

Are they performance bonuses, or retention bonuses?

There is a difference.

Depending on the bonus type, and size (some of them are outrageous) I'll be more, or less annoyed.

[sooneron]

But all that money will "trickle down" so it's no biggie...

[King Barry's Back]

Yeah, Chuck is factually right. The govt can buy (or take) a share of a company's stock -- I guess even up to 100% -- and the employees would still work for that company, not the US govt.

That's pretty much what's happening right now at GM, from what I can figure.

And regarding the policy aspects, I think I am with Chuck on this. These guys have no business getting any bonuses, much less obscene ones, on the taxpayer's back.

Maybe their execs should be paid in line with what their govt equivalents get paid? For example, a Sr VP might be roughly equal to a GS-15, so instead of $32 million, he'd get $120k or so.

ANd the President of the Company? He shouldn't take home more than the President of the United States. So instead of $84 million, he'd take home $350k or so.

[StoopTroup]

What's not funny about any of this is....Americans are unable to really check any of this out. To sit here on the internet and ask if AIG has paid any of the dough back is as crazy as the Politicians giving it to them the way they did in the first place. It's like giving $500 to get your meth addicted BIL to get out of jail. You know you shouldn't do it but your gonna give him one more chance and maybe he'll get it together this time and even pay you back.

I'd say this was laughable...but it's not.

[sooner_born_1960]

Because if they are square with the taxpayers, they really should only have to answer to stockholders on how the money is spent.

[OUDoc]

Has AIG paid us back yet? Have they repaid the baliout money?


Because if they are square with the taxpayers, they really should only have to answer to stockholders on how the money is spent.

I was thinking about that last night. If they paid us (the guvment) back, go for it.
If they still owe us, there should be hell to pay.

[Bourbon St Sooner]

That is why all future bail-outs should come with state ownership, or at least very heavy dilution of previous shareholders. For those of you bitterly complaining about nationalization and inefficient government, it doesn't have to be that way. The government can buy talent just as well as the private sector and the nationalized financial firms can be privatized at a profit later. All of the downside is already covered. Now, how about the upside potential?

And, kudos for AIG rebranding their product. Some of them may be earning their bonuses.

Uh, the previous shareholders have already been diluted haven't they. Most of these companies are issuing new stock offerings to pay back the TARP money, diluting the previous shareholders.

The thing is that the people who ran the firm into the ground are still getting rich while their shareholders have been ****ed! There's apparently no fiduciary obligation anymore in these financial firms and corporate governance is a joke.

[crimson monkey]

I saw them covering this story yesterday morning on the local news. It was stated that they still owe billions back to the government. It really confuses me how these companies justify this crap.

[Dio]

Heh, you are aware of what AIG does, correct?

Well yeah, but it's the same with GM, Chrysler, and good old fashioned welfare- our gubmint is paying through the nose to reward failure. My understanding is that these bonuses are contractually obligated to the recipients- contracts that would have been null and void had AIG been allowed to fail.

[sooner_born_1960]

Yeah, it seems AIG hasn't repaid the govt. yet, but these contracts aren't any less valid than any other contract.

[King Barry's Back]

Yeah, it seems AIG hasn't repaid the govt. yet, but these contracts aren't any less valid than any other contract.

Let me just ask, "Why not?" If you don't have any assetts, that means you can't pay people that you owe money too. Usually in that situation, your own fat cats are at the back of the line -- not first in queue to feed themselves on the drying skeleton of their own firm.

Are you sure of that, born_1960, or are you just guessing that? And are we sure that these are even "contractually required"? And even if they are "contractually required," can't the company just fire them, thereby negating the contracts, and then hire someone else for 1/100th the price? I mean, there are PLENTY of financial professionals walking the streets with freshly typed resumes. I am willing to bet that many of those with resume in hand have years of experience at AIG even, if that matters.

Finally, let's say the contracts ARE binding. What's to stop the company from lobbying Chairman Franks's Banking Committee, or Sen Dodd's Financial Services Committee, to seek legislative relief to get them out of the onerous obligation? Oh, yeah, only one thing. THE COMPANIES WANT TO PAY THIS, because the company decision makers are the ones putting the money in their own pockets.

And does anybody know if the "90% bonus tax" ever passed, or was just talked about?

[sooner_born_1960]

Yeah, there was a way out of paying up on those contracts. It was called bankruptcy. The bailout helped them avoid bankruptcy. These bonuses become some of the unintended consequences of that.
And, unilaterally getting out of a contract should be nearly impossible, even with Sen Dodd's help.

[King Barry's Back]

Yeah, there was a way out of paying up on those contracts. It was called bankruptcy. The bailout helped them avoid bankruptcy. These bonuses become some of the unintended consequences of that.
And, unilaterally getting out of a contract should be nearly impossible, even with Sen Dodd's help.


Here's the unvarnished truth: Contracts are only legally binding because Congress says they are legally binding. If Congress says some contracts are NOT legally binding (and the President agrees), then those contracts are no longer legally binding.

I am sure there are examples of this somewhere, but that's speculation as I don't know of any specifics -- but basically anybody that ever contracted to deliver a legal product, and that product was later made illegal, was released from that contract. Off the top of my head I speculate that contracts for absinthe and cocaine (the primary ingredient in the original Coke Cola) were voided by federal law -- so I am sure these ridiculous contracts can be voided by Congress as well.

As an aside: Let's say that such action by Congress was unconstitutional. Of course, it would be years before the Supreme Court could hear and rule on the case (assuming one was brought by the executives), and even if they won, I don't think there are any financial awards given to winners of constitutional cases before the Supreme Court -- so in short the fat cat execs would be S-O-L.

[sooner_born_1960]

Well, other than the fact that the terms of the contracts would once again be enforceable.

[Okla-homey]

Here's the unvarnished truth: Contracts are only legally binding because Congress says they are legally binding. If Congress says some contracts are NOT legally binding (and the President agrees), then those contracts are no longer legally binding.



While I generally agree with your drift, the fact is, the Constitution states contracts are legally binding. See Article VI.

[Position Limit]

populist outrage aside, you guys do know that AIG bonus recipients and employer were bound by a contract?