AIG To Use Bailout Cash To Pay $165 Million In Bonuses. Yes, Seriously
So, those guys at AIG who underwrote trillions of dollars worth of credit default swaps backed by securitized mortgages? The ones the Times says were "at the very heart of A.I.G.'s worldwide conflagration?" They're taking $165 million of our bailout money for bonuses. Because if we don't pay them, these people—described by AIG's government-appointed Chairman Ed Liddy as the "best and brightest talent"—will apparently leave to go ruin some other country's financial system, and we can't have that. Liddy acknowledged that the bonuses were "distasteful and difficult" before saying that he had "grave concern about the long-term consequences" of not paying up.
The bonuses will be paid to executives at American International Group's Financial Products division, the unit that wrote trillions of dollars' worth of credit-default swaps that protected investors from defaults on bond backed by subprime mortgages.
Of all the financial institutions that have been propped up by taxpayer dollars, none has received more money than A.I.G. and none has infuriated lawmakers more with practices that policy makers have called reckless.
Mr. Liddy, whom Federal Reserve and Treasury officials recruited after A.I.G. faltered last September and received its first round of bailout money, said the bonuses and "retention pay" had been agreed to in early 2008 and were for the most part legally required.
The company told the Treasury that there were two categories of bonus payments, with the first to be given to senior executives. The administration official said Mr. Geithner had told A.I.G. to revise them to protect taxpayer dollars and tie future payments to performance.
The second group of bonuses cover some 2008 retention payments from contracts entered into before government involvement in A.I.G. that the company says it is legally obligated to fulfill. The official said Treasury concluded those contracts could not be broken.
Indeed, in his letter to Mr. Geithner, Mr. Liddy wrote that he had shown the details of the $450 million bonus pool to outside lawyers and been told that A.I.G. had no choice but to follow through with the payment schedule.
Six fair-minded chaps, including Mr. Liddy, have declined the bonuses. Others will get between $1,000 and $6.5 million. Seven execs in the financial services unit will get around $3 million.
Don't worry, though, AIG, which has taken $180 billion of our dollars so far, will do its best to reduce its taxpayer-funded bonuses next year to only $70 million.
A.I.G. to Pay $100 Million in Bonuses After Huge Bailout [The New York Times]
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Always hiding behind those cruddy contracts.... at least six of them were smart enough to realize the money wasn't fairly earned.
This is why we need to let the companies that can't make any money fail
I can't mind them still giving the smallest bonuses -- the $1000 ones -- because those go to low-ranking folks who pretty much do the best they can with the company they're given. Those are peons (I too am at the peon level in my company, which is happily NOT AIG) who are doing the actual writing and copying and calling and what-have-you.
Executive bonuses, on the other hand, are subject to an entirely different set of rules. You put a lot on the line by being a senior executive; it's a high-risk / high-reward kind of job. It's a job you can lose a lot more easily than you can a lower-profile one (when a network's ratings sag, it's not the editors who are made to leave; similarly, when a team has a failed season, it's not the equipment manager who gets fired). Sure, one of the benefits is supposed to be that IF you perform well, THEN you get a huge bonus. But if you run the company into the ground, you're supposed to be out on your ass.
I'm mostly dismayed that they had the balls to write a fixed bonus level into the CONTRACTS. Then it's not a bonus, it's an end-run around comp, and that's yet another dirty trick.
tl;dr: AIG deserves to be drop-kicked into the nearest active volcano.
Can't help but wonder how this obligation was overlooked by our government officials while negotiating the bailout.
Surely, with the right terms and agreements, this could have been avoided or at least merit based.
I like that their excuse is that the company is contractually obligated to pay them.
Isn't that why people get laid off right before bonuses like this are due? I wonder if AIG is forced to ditch typical underhanded corporate BS because there's a spotlight on them right now.
There are some 113 million households in the United States.
AIG's $180 billion bailout is costing each of household about $1,600 via taxes.
What would the per household loss be if this place went under?
No. No. Absolutely no.
They need to demand back all of the money put in and let AIG die. If we need to prop up anything then prop up either with the homeowner or the bank in between that is holding the note but no more money to AIG. No wonder they were failing they were diverting so much money to executive excess and swanky trips while writing sketchy products.
I want a list of these people who are still taking bonuses. The people in those supposed contracts could opt to not take that portion of the contract. We should know who they are.
Are these incentive bonuses where the incentive is to see how much money a company can lose?
If Congress wanted to do something, they could impose a 100% tax on any bonus in excess of $X for a company receiving government bailout funds. The company would be fulfilling its legal "obligation" to pay these bonuses but the money would wind up back in the Treasury.
"Best and the brightest" my ass. The best and the brightest are what got us into the Vietnam war and now seem to be the ones who have decimated the international banking system.
Another thought. The government owns the majority of the shares of AIG. Wouldn't the shareholders be within their rights to replace the entire AIG board with people who have some common sense?
I'm so fucking tired of hearing about having to keep the 'best and brightest' or whatever other bullshit euphemism they use to justify paying off these assholes.
These people fucked up the company and now get rewarded for having done so.
And there's tons of people waiting in the wings to take over for these jerks, people that would do a much better job of actually running the company properly.
Just let fucking AIG die a big nasty death and get it over with already. These bloodsuckers have drained enough cash from our coffers and they deserve to rot in hell.
Put them in jail for treason.
Traitors don't get paid anything.
Where would they go? No one would hire them based on their resume....Yeah I worked at AIG which tanked based on my decisions so please hire me for millions so I can tank your company....THEY GOT NO PLACE TO GO....LET EM LEAVE, HELL.
Like Stewart said, we foot the bill while they get rich... capitalism at its finest....
Dear AIG,
You Suck.
With all our hatred,
Hard working Americans who pay for your greed.
First of all, I don't think it's right to call AIG a company anymore, they're a state-subsidized rapist, anally penatrating the American public on a daily basis.
Secondly, real companies base their bonuses on the overall performance of the company and the performance of the individual. How much did that individual have to do with the company's success? That's how a bonus is determined in the real world.
Based on that criteria the bonus for every AIG exectutvie should be a hot iron shoved up their sphinter.
It's only fair.
So.....had AIG been able to go bankrupt like they would have, these bonuses would have been null and void by the bankruptcy judge. Assuming that they would have gone bankrupt had the taxpayer bailout not been given, the bonuses should still be null and void. This should have been a condition fo the handout, if the fucked up Feds had written any stiputaions for the handout. Pin the blame on the Feds...not on AIG.
There are people that are losing their jobs and homes because of the actions of these assholes!
"Best and brightest" what does this say about what big business looks for in top people who's actions can make or break their company? Companies really need to rethink their criteria for identifying the "best and brightest".
These people deserve nothing. Well maybe a subpoena to come in and answer some questions.
While AIG might be obligated by pre-existing contract to pay the bonuses, could the gov't not also let it be known that any exec accepting the payment will get a brand new, shiny seven-year IRS audit as a bonus-bonus, along with a promise to be added to any forthcoming criminal indictments that may emerge?
And, WTF Cat will now haunt my dreams. Thanks, Carey.
It seems the market itself is a very fearful one. The government from past experiences goes with the method that is less likely to produce more variables. Letting AIG fail would increase the number of variables that is affecting the economy and the government itself is historically unwilling to take a complicated path.
Simply put, they are going to have to let something fail, sit back and watch what happens. Sure AIG might be huge, but there is nothing to say it can't be broken down and allow the useless divisions to fail.
The stock market itself is a reactionary joke. If the government announced tomorrow that they will just let AIG fail, the stock market will suddenly plummet for no other reason than an announcement. That reaction would have nothing to do with actual effect on the economy, but instead of perceived effect. Yes, the same people who were involved with this mess to begin with and couldn't predict that the economy would tank, still influence the market today.
In the end, you can't save everything. GM is going to likely tank, they cannot be bailed out indefinitely. It might sting a little, but there isn't going to be some huge collapse. Right now, the government is pouring more money into the black hole that is AIG with no realistic turnaround. Allowing AIG to fail might hurt like when you are resetting a bone, but it is a necessary step for the path to healing.
The government has made a big mistake in the first place with the "bailouts". They figured they could just throw money at a money problem and everything would be ok, instead of actually fixing what caused the problem to begin with. The worst thought here is simply, how much is it going to cost for them to learn their lesson? 1 trillion? 10 trillion? 100 trillion? We may never know.
No, no, no! We have to pay to keep these execs at AIG. Otherwise, they'll move on to other companies and screw up the ones that aren't completely failing now. Then, we'll all be really fucked.
It is great and all to talk about how our money saved them and how we should just let them fail.....
However, you have to realize that AIG is not a bank in terms of going and depositing money and getting free toaster for a new account. AIG is an insurance company above all and with all of the property and medical and life insurances that they have written, it would be monumentally disastrous to allow them to fail. Do they deserve bailout? Yes. Do they deserve to have bonuses? No!
Well, kudos to Mr. Liddy and the five others who had the good sense to turn down the bonuses. As to the rest of them, I like Barrister76's idea-100% tax on earnings.
Good to hear some of them declined the bonus. It makes me mad that hard working people like myself have to willingly NOT ask for a very well deserved raise because of the way the economy is right now. Meanwhile, you have company's using bailout money to dish out massive bonuses...
Someone needs to step-in NOW and stop this travesty!!
I get a good salary and a pretty sweet bonus structure. My bonus structure is 100% dependent on how well we do. Wellfleet Fail = No bonus. Wellfleet Win = Bonus. I don't see a scenario where Epic Fail = Sweet bonus. Contract or not, why are these people being rewarded for massive failure at their job? Isn't that encouraging more fails?
It's the scale of the franchise that's making this all seem so ridiculous. But if this was a medium-sized partnership that just got a loan from the local bank; the bank would happily support one one-thousandth of the loan value being used as retention bonuses for key individuals, wouldn't it?? Now, let's see how many use those retention bonuses to buy stock...
If these idiots did care about our fellow citizens and the well being of their own company, they would sacrifice for the sake of the American taxpayer and the corporation. If the executive "high-talent" staff of AIG can't look past their stupid paycheck, then maybe the board should take a look at their talent pool. If they hire individuals to run the company that "jump ship" if they don't get extra monetary compensation, then we are all screwed. Have some balls, don't pay 165 million taxpayer dollars, and weed out the leeches. With all the educational talent in this country, we should always be able to find somebody to fit the executive profile. Especially now with the unemployment rate at the way it is. Anyone with scruples or any glimpse of a virtuous soul, gives their heart to the companies they work for so they can survive. AIG is fucked up.
2 words for you Mr. Liddy...
Fuck...You...
lol, I just got through writing a blog about this very topic, based off the same NYT article.
Seriously: If AIG had been allowed to go under, who would have paid their bonuses? No one, right? Because you can't enforce a contract on a party that doesn't exist. Well shit, what I'm saying is that essentially, AIG DOESN'T exist anymore. the Gov't exists, and they put the letters AIG on the side of a building. These guys happen to work of this same building.
The contracts should be void, because AIG as they knew it - before they killed it - no longer exists.
They are worried the executives will go find other jobs if they don't get huge bonuses? Where are these other jobs they speak of?
Last I checked, there were no other jobs available. The company I work for is taking full advantage of this fact, doubling workloads and taunting "What are you going to do, find another job somewhere else? HA HA HA!"
this is ridiculous, these guys cry to the government and convince them the financial stability of the entire planet rests in their hands, then hand out *our billions of dollars* to some of the people responsible for this depression in the first place.
in the words of Jon Stewart: FUCK YOU
WILL THE BUTTHURT NEVER END?
The bonuses will go to the AIGs Financial Products Division . You mean to bonuses to the same crap that not only caused this mess but failed to stand up and point out this isn't going to work ? .
Sounds like hush money .
Well, if I were the feds, I'd take all the money they were paying out as bonuses and subtract that from the bailout money. Better yet, I'd take all the bailout money away and let the fail. If they lose their "talent" to other companies by not paying bonuses, it serves them right. Remember, this is survival mode, so they shouldn't get to pick and choose! I have no doubt they'll be able to find replacements for those folks who go looking for employment elsewhere.
For 20 years, these companies were screaming "Get the government out of our private business!" Live by the sword, die by the sword, I say.
We should have let AIG fail.
The only place these people should be moving to is PRISON.
WHY ARE THEY NOT IN PRISON???? WHY IS GIVING THESE PEOPLE MONEY EVEN A THOUGHT??????
What part of "contractually obligated" is so hard to understand? These are contracts that were written pre-meltdown and are still valid. AIG also wrote a ton of various insurance contracts around the same time, probably some to Lehman and Citi; should they refuse to pay those too?
@chuckv: Agreed - had we let the company go belly up, they wouldn't be getting any bonuses. Now that we've bailed them out... they are rewarded for fucking up the company?
Can we have a new election now???
@mrsultana...
You cannot be serious? Basically your idea is to feed the fat person because they are fat?
What really saddens and pisses me off here is the EPIC FAIL that this is considering the campaign that PRESIDENT OBAMA ran just a few months ago. He promised us he would be bringing executives to justice, however, he nor the people he has hired to help save the public from greed fueled banks and restore our economy EVEN HAVE THE FORTITUDE NOR ABILITY to stop millions and millions of dollars from going to executives FROM A COMPANY THAT THE UNITED STATES OF AMERICA OWNS AN 79% SHARE OF! OBAMA AND HIS ADMINISTRATION OWN THIS COMPANY TOGETHER WITH THE US TAXPAYERS and they can't even stand up to a unethical practices of a company they freakin own? Amazing. Just let that set the example for how they are going to "bring to justice" companies they don't own.
FALSE PROMISES
@Pylon: Glad you asked. These might be contracts that have existed previous to the meltdown, but AIG can still refuse to pay. The execs then sue, and we have a nice court fight to determine who get what money. If AIG was truly interested in not paying the bonuses, I'll bet they can use the case as leverage to pay less, or perhaps find some terminology and contract law to escape completely.
But instead they are throwing up their hands, because they are "bound." Well let me tell you, there's no such thing as "bound." People can, and often should, break contracts all the time if it makes economic sense. I'm certain AIG has in the course of their life. Why not now is a question that we should be asking.
@Trai_Dep: I'm sure these people hired accountants other than Enron's, and will pass an audit. Also, I'm sure their contract is like the one the jet company had w/Citibank. Break it, and you have to pay a heavy penalty, so it might cost us less, but it will cost us.
@SteelersAreGo:
Breaking a contract is only economically efficient if the legal fees and ultimate settlements are less than the cost of just paying. Compund that with the reputational damage (as far as recruiting later on) and the equation isn't so simple. Further, I don't think it's appropriate for the federal govt to encourage breaking contracts.
its a sad day when news like this is not as shocking as it should be?
Ok complaints are easy to make, but there is two side to the thing.
For example. Last November I too a job as CEO of small business. I took it at around 50% of my old salary, and had to close my consultant practice as well.
I did that because the company has great growth potential, and I'm putting my money where my mouth is, since I am the one in charge of seeing this potential actualize.
The salary is acceptable to me in the end because of the various milestone bonuses. No bonus, and I end up unable to pay my financial responsibilities.
No - I wish, but I am not making millions here.
Still, many of the folks at whom you point fingers are just hard workin stiffs, with student loans, mortgage and baseball team membership for the kids to pay.
When they took the job, they also took in account the promises of bonuses made on certain milestones, most of which will obviously NOT be achieved under current economic circumstances. So they are already taking a pay cut there.
Is YOUR employer entitled to cut your salary, as described in your labor agreement or contract, be verbal of written, if it hits hard time and accepts subsidies?
Even what you call large bonuses - says 10K. 100K - is only large subjectively. If the standard salary for that job is 200K, and your base is 100K plus bonus to a potential of 275K (if all goes well), you took a gamble in your contract, an non-assured premium greater that an assured base, but you still expect to make something akin to market, not half...
So that's what I think for *most* bonuses. However million $ bonuses for senior management that run a company in the ground by showing so little foresight? Shareholders should be asking for their money back - if consumer laws on expectation of performance on a purchase would apply.
And - with government investments, added to what we already own via retirement funds and pension plans, we are ALL shareholders now.
It's shit like this that brings people out into the streets throwing bricks.
AIG must die....the "brightest and Best Execs" can start to figure out which end of a shovel to use!!
What ever happened to survival of he fittest? Or accountability? or even responsibility?
@Pylon83: I would argue Chapter 11 of the Bankruptcy Code is the federal govt's sanction of, at least, contract modification. In any event considering how deeply the constituents are against further payments for bonuses, I think the governmental role as an extension of the people's will makes their advocacy permissible.
As for reputational damages it's true AIG takes a hit there; Clearly under the present plan it looks like AIG takes care of their own. But for court costs and the rest, I would predict (but do not know) that the execs and board go into a private room and hash a settlement out pretty darn quick. I think even token resistance will create a more palatable end result.
are they joking???
why is the gov't following thru with the payouts if its going to be wasted on these greedy people who are responsible for effing up the economy to begin with??
Wow there is some major corruption going on somewhere, because what lawmaker in their right mind would give them a bailout while fully knowing what its going to be used for???
INSANE!!! Im sooooooo glad im not an american!!!