Lawmakers, Regulators, Taxpayers Unbelievably Pissed At AIG
There's no shortage of outrage directed at AIG today as the fallout from the bailed-out insurer's announcement that they intend to use $165 million in taxpayer money to pay bonuses to the very executives that ruined the company continues.
From ABC News:
"It's ridiculous," U.S. Rep. Elijah Cummings, D-Md., told "GMA," adding that he doesn't buy the notion that the government doesn't have enough control over taxpayer dollars to stop bonuses like these.
Sadly, most everyone else seems to be in agreement that the government has no power to stop AIG from going ahead with the bonuses — despite the fact that we are now its single largest shareholder. Fed Chairman Ben Bernanke told CBS' 60 Minutes that of all this meltdown nonsense it's the AIG bailout that makes him the angriest — and ABC News says that the chairman was so livid after hearing about the bonuses that he slammed the phone down.
"Let me just first say that of all the events and all of the things we've done in the last 18 months, the single one that makes me the angriest, that gives me the most angst, is the intervention with AIG. Here was a company that made all kinds of unconscionable bets. Then, when those bets went wrong, we had a situation where the failure of that company would have brought down the financial system," Bernanke said.
"You say it makes you angry?" Pelley asked.
"It makes me angry. I slammed the phone more than a few times on discussing AIG. I understand why the American people are angry. It's absolutely unfair that taxpayer dollars are going to prop up a company that made these terrible bets, that was operating out of the sight of regulators, but which we have no choice but the stabilize, or else risk enormous impact, not just in the financial system, but on the whole U.S. economy," Bernanke explained.
Ben Bernanke's Greatest Challenge [CBS]
From Outrage to the Future: Learning From the AIG Bonuses [ABCNews]
(Photo:ChristophrHiestr)
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Comments:
Wow this is incredible. Im surprised that these execs aren't hung up by thier toenails and beaten for what they have done to the country.
i didn't expect this kind of outrage after united lost 4-1 to the scousers over the weekend.
I like what Talking Points Memo said, how Treasury expressed concern about this and AIG basically told them to "blow it out their ass." That pretty much sums it up. I'm almost ready to just let AIG fail. Can we do that? No, probably not. Sigh.
I am not surprised because they are going to continue to get away with this. They should be hung...and tried...then hung again, but no one has the balls to do it.
It's such a nasty situation. AIG basically has us by the balls. They went nutty and made bad bets, and now that their bets are being called they turn around and inform us that if they fail that the entire economy fails. So what other option do we have but to pay them. And then they say, well, we legally have to pay these people their bonuses or they will quit and sue us, and then we will fail, and then the economy will fail. Again, the government is powerless to stop AIG. They are basically blackmailing us but we can't say no or the economy will collapse. They should have never been allowed to get so big ("too big to fail").
At the end of the day, why are we even surprised this is happening? Did the government really think that a bunch of banking executives were going to suddenly put the best interests of the company/government before themselves?
Well as long as Bernanke was really angry and threw a fit, then I guess I can feel better about all this. I guess it makes it all ok. Thanks, Ben Bernanke.
They always "blame the system" so no one (or no one group) can be identified for punishment. No way of recovering ill-gotten money.
Says the gov't, "We'll do better on this next time". These days you have to be a Madoff or Stanford to get any sort of punishment.
So what really happens if we let the company fail?
Greed is the worst of the so-called "Seven Deadly Sins". Greed ruins people's lives and also breeds the other deadly sins.
I hate executives and CEOs. I hate Wall Street.
Somehow the mental image of Bernanke with a pouty face just gives me a hellacious case of the chuckles.
Glad to see that Bernanke solution to the problem is to get mad! That'll do a lot of good. He's one of the reasons we are in this mess. What an idiot.
AIG the company seems to need saving, but not these assholes who seem to keep making worse and worse decisions. Saving the company doesn't mean you have to save them from anything, just put them in a room with the shareholders and keep the cameras out.
I think part of the problem is the word "bonuses" being used here. IANAL, but my understanding is that AIG is maintaining that they are responsible for these bonuses, due to contracts signed in 2008, before the bailout(s). If this is true, then they're right, and it would be entirely inappropriate for the government to come in and void the contracts. According to the report I heard on NPR this morning, Lawrence Summers was talking about how they were working to minimize these "bonuses" as much as possible, since they couldn't force AIG to forgo them altogether.
That being said, on what planet are "bonuses" a right of the employee? Isn't that actually part of their salary? The term bonus implies that it's pay above-and-beyond base salary, further implying it's for excellent performance. If it is part of the salary, earned regardless of performance, then just call it such.
OMG. Bernanke is angry and slamming phones. Good for him! Right. How about he stops pandering and actually does something about it.
Screw Gitmo, this is one of those cases for Abu Ghraib and the humiliating pictures.
I can't wait for the economic pendulum to start swinging the other way, because this is just ridiculous.
I'm not sure if I understand the situation, so correct me if I'm wrong.
Basically, AIG's biggest problem is that they sold insurance for companies that everyone thought was fail-proof that obviously weren't, so people want to cash in on that insurance. Since AIG owes hundreds of billions, if not trillions, on insurance policies that people want to cash out since these companies failed, if AIG goes under all the money that these companies spent on this fake insurance is basically up in smoke and the money they were hoping to cash out based on these failures never comes, correct?
So how is this any different than let's say, my car insurance not covering me because of an act of God? I've paid probably about 10k in car insurance and I haven't cashed in one penny of it. Let's say a flood hit my area and my car was swept away, but since the entire city is decimated, my insurance company can't afford to pay out and I'm fucked. Kind of what happens in FL on a routine basis. Can't the government just enact some sort of law that says "if you bought AIG fake insurance, sorry but AIG is out of business now, but you can write off every penny you spent on that insurance on your taxes as a loss?" Or perhaps even better, make it a 1:1 write-off, so that if you spend $1,000,000 on fake insurance and owe $2,000,000 in taxes, you now just owe $1,000,000 instead of just the tax rate on what you paid?
I just think it's absurd that we need to keep floating AIG on basically apocalypse insurance. Imagine if I provided alien invasion insurance and I say "if every man, woman and child gives me $10, I'll insure your assets from alien destruction". Well, if an alien invasion hits, it's safe to say the destruction would be in the tens of trillions, so rather than saying "we need to make sure chris_l alien insurance can cover losses that are outright impossible to cover", why don't we just zero it out?
@lalaland13: Can we break up their assets and sell them off to competitors though? There has to be some solution. At the very least the largest shareholder should be able to bring about a vote to remove the current leadership.
I'm of the opinion that instead of propping up failing monstrosities that are "too big to fail", we should have been setting up a situation where smaller competitors could have taken their place. Split up their assets and create a system where smaller banks can team up and take over these accounts and activities that are too large for any one of them to handle alone.
I feel bad for the waiters and waitresses working the lunch spots frequented by AIG employees. Such terrible dry mouth.
If Nat. Enquirer or one of those crap magazines wants to make a name for itself, it needs to stop harassing octomom and Jennifer Aniston and get INSANELY intrusive in the lives of some of these executives. Remember what the 2000 election did for Jon Stewart? This could be as good.
@rockstarjoe: Your comment got me to thinking ... perhaps we should restructure our federal monopoly laws to make them more useful for this day and age.
Companies are indeed being allowed to become "too big to fail", by one means or another (questionable mergers, issuance of toxic paper without mergers, etc).
Under a revised definition of anti-monopoly measures, the government could begin making companies who become, "too big to fail", break up into smaller independent and competing units ... just like they (WE) did with Standard Oil, etc.
Here's my honest and, probably, naive question for our legislators: How exactly do banks become 'too big to fail,' and how can we prevent that from happening in the first place?
It is a bill of attainder if Congress passes a law saying no companies receiving bailout funds can pay bonuses (or bonuses to types of executives X, Y, and Z, or just that AIG can't pay bonuses)? 'Cause if that's the new law, I don't think they can be sued for breach of contract ....
"It's ridiculous," U.S. Rep. Elijah Cummings, D-Md., told "GMA," adding that he doesn't buy the notion that the government doesn't have enough control over taxpayer dollars to stop bonuses like these.
No, what's ridiculous Mr. Cummings (D-MA) is that there was a bailout in the first place.
The problem with AIG, from what I understand, is that it owes a lot of money to a lot of people. If we let AIG fail, and they declare bankruptcy, then all those people are going to be shit out of luck, because AIG won't have to pay them back.
That in turn means a lot more business failing, and a lot more people losing jobs. More job loss means more people applying for unemployment assistance. All of this things are a huge drag on an already shaky economy.
However, what they're doing now is basically fraud. They are defrauding the government of hundreds of millions of dollars. The biggest problem with the whole bonus situation is that the people giving out the bonuses are also the people receiving them. Everybody in that bunch pretty much wrote their own contract, and then they signed it. That's why they are so "powerless" to stop this from happening. They wanna get paid.
Proof that there's such a thing as "Too-Big Business".
I've heard that certain people who are due these bonuses have turned them down. Couldn't the portion of the government that's acting as the majority shareholder just fire those that opt to take the bonus? It's money we'd be paying out anyway, but at least we weed out those with the "mine, mine, mine" attitude that's more than likely responsible for this mess as well as sending a message to other institutions how we feel about said "bonuses".
@pecan 3.14159265: Plenty of room at Gitmo, they moved all the POWs out last week. Now there will be lots of room for the real terrorists!
@yoxim:
But what companies sustain their existence based on what is fundamentally a Las Vegas-style bet? Are there honestly manufacturing companies in the midwest that would be closed tomorrow if their bet that Bear Stearns is going to fail wasn't paid out? Are there mitigating circumstances, like how some insurance doesn't cover an act of God?
I understand that employees have contracts that need to be followed.
But enough is enough.
The employees with those contracts need to either (1) rewrite their contract, or (2) fire them. (Their new contract can include bonuses once (if) the company is back on it's feet & all debts are repaid. There were enough people laid off that there are plenty of "smart" people who will work for AIG without bonuses in their contracts.
The problem here is not a lack of governmental control over corporate spending. The problem is that the government got their grubby little hands on this in the first place.
I don't buy the contracts argument one bit. Almost every contract has a mitigating circumstances clause in it somewhere. I can't see what is more of a mitigating circumstance than a financial holocaust.
In other news, I won't be clicking through to Consumerist again until I see a post in my RSS feed saying the "reply" problem with the commenting system is fixed.
As a Canadian looking across the border I must profess, I feel for my American neighbors. You folks are being dragged further and further through the gutter and, from our point of view, it doesn't look to be improving nearly fast enough. Sure, a 5 day rally is great, but c'mon how does it compare to month after month of slides?
I've watched pretty closely Bernake's stance on AIG. The fact of the matter is, the man did not want to bail out AIG, its documented and readily accessible information, but alas what other options were available to him? Let the company go down the pipes, taking down countless other institutions along the way? I'm sure we all recall the market reaction to Bear Sterns. So, I suppose the man must be credited for choosing the lesser of the two evils. Yes, he saved the market (ok, but didn't put the nail in the coffin), but he also empowered a ruthless, ungrateful, beast that is AIG.
At this point, I belive the government must act and act quickly, if for no other reason than to assure taxpayers that this bailout doesn't come in the form of a handout, but rather as part of a stimulas package that is designed to strengthen the economy. Not weaken it by supporting the same fools that put your economy in the mess that its in today...
Just my two cents :)
Can't the government just loan them $165 million less? Make these arsemonkeys think a little bit before they decide to take that which they don't deserve?
The contracts may prevent the company from paying out the bonuses, but they don't prevent people from refusing to take them. That's what I'm looking for as a taxpayer, AIG. Stand up and show me some guts.
I still don't understand how you can get a bonus if the company is doing bad and/or if you did a bad job.
No bonus should EVER be contractually obligated to an employee. They have to earn it and the company has to have enough financial room to pay them without jeopardizing the company's health.
Bonuses are exactly that, bonuses. They are nice to have when you get them and few things outside of a raise makes employee morale jump through the roof, but do not expect them and count them as your regular salary until they are in your bank account.
Whoever wrote that contract at AIG to award bonuses to any employee without regards to company or employee performance should be shot.
@chucklebuck: Prevent the company from NOT paying out the bonuses, that is
Which is worse, the company that gives out the bonuses on taxpayer's money, or the government that gave them the money in the first place?
It's simple. Publish the name, address, phone numbers, and location of their kids schools for anyone who still wants their bonus payment. Those who choose to give up the bonus will not have their names and info published.
Rhayader: Care to elaborate? If you read other posts, you'll see that unfortunately, it's true, AIG is a "can't fail" institution. If they go under, they can't pay out claims and all the other policies they write will get downgraded. That means that all the banks and other financial institutions have riskier investments. This means that they have to hold on to more money to get/maintain proper capitalization. This means they stop lending. This means the economy grinds to a halt. There are some suggestions of a "structured fail" or "nationalization" as options, and they should be explored. However, simply throwing out some mantra that Beck (Glen Beck- just Beck would be more amusing), Limbaugh, or Hannity throws out doesn't explain your reasoning.
Contact Edward M. Liddy, Chairman and Chief Executive Officer, American International Group, Inc.: boardofdirectors@aig.com
@12-Inch Idongivafuck Sandwich: seconded. Bankruptcy was created for a reason: to weed out corruption.
Since these "bonuses" were essentially guaranteed legally, how about going after individual execs that accept these bonuses for gross negligence for their actions prior to the bailout. The utter incompetence is completely obvious....
Fark them.
Name the Names!
The other option is to nationalize, even though most find that a dirty word. But come on something needs to be done to stop the rampant corruption and greed in corporate America. So lets nationalize then proceed to break the businesses into small pieces. We would never be in the situation if corporations were not allowed to monopolize their industries. And repeat the whole process with Citi and BofA.
@rockstarjoe: i get what you're trying to say, but no one ever has the us gov't "by the balls". what other option do we have? i can think of a few:
-investigations
-indictments
-audits
where's j. edgar when you need him?
@ARP: I think there are more fundamental issues at hand than economic prosperity. Governmental interference in private business is anti-capitalistic. Simple as that. I think that temporarily avoiding a shit-storm is not justification enough to pervert our basic principles. In other words, forget about the fluctuations of the damn stock market and focus on what our government should and should not be doing.
Just for the record, I hate the "pundits" you mentioned. I am not a moralist neo-con jerkoff. I am just a libertarian free marketer.
I'm thinking they should just tax those bonuses at 100%.
Also, since the Us Gov't is the majority investor in AIG now, where are the seats on the board? In a public company, couldn't the majority shareholder block those bonuses? We should have been prepared to walk in and take control from day one, instead of just cutting them checks.
Can the top AIG execs go to prison already? I mean, if there's any room at Gitmo...