It appears that at the beginning of 2008, before any rescue money, A.I.G. established incentive bonuses based on performance goals for its executives (very standard in business). These are binding contracts (the U.S. Constitution specifically states that the government cannot abrogate contracts). Apparently, some business units at A.I.G. were profitable and met the goals established so legally they had to pay the bonuses.
It was just the jerks (and the CEO who let them) that insured the mortgage deritives big time that brought the company down.
6:48 PM, March 16, 2009
Internal Monologue is officially calling for Timothy Geithner to resign and be replaced by someone who will place the interests of the country above the interests of the executives of companies that this country has effectively bought (at significantly above market rates, I might add). This AIG bonus stuff is the last straw for me. Josh Marshall: Secretary Geithner found out about the bonuses. He told AIG CEO Edward Liddy it wouldn't fly. And Liddy, in a curiously imperial letter, tells Geithner that much as he is pained by the situation -- to blow it out his ass. Which he apparently proceeded to do. There's really no other way to describe it.
[...]
Few exchanges have so captured the disconnect that makes this situation so politically explosive. We're collectively taking our country's future in our hands, spending vast sums of money to keep these companies from suffering the consequences of their own folly and (in many cases) criminality. And in return we're receiving cavalier dictates about pay-outs and bonuses from executives who by any reasonable measure work for us -- dictates we promptly accede to. There's a beggars can't be choosers problem there. And the disconnect is so mighty that it fuels the impression that the whole enterprise is not what it seems, not what we've been told, that in addition to picking up the tab we're being played for fools. Obama, you better get on the case here. You're guy Geithner is making a hash of it.
Robert Reich: This sordid story of government helplessness in the face of massive taxpayer commitments illustrates better than anything to date why the government should take over any institution that's "too big to fail" and which has cost taxpayers dearly. Such institutions are no longer within the capitalist system because they are no longer accountable to the market. To whom should they be accountable? As long as taxpayers effectively own a large portion of them, they should be accountable to the government.
But if our very own Secretary of the Treasury doesn't even learn of the bonuses until months after AIG has decided to pay them, and cannot make stick his decision that they should not be paid, AIG is not even accountable to the government. That means AIG's executives -- using $170 billion of our money, so far -- are accountable to no one.
posted by Zachary Drake at 8:32 AM on Mar 16, 2009
"Pitchforks and torches for AIG"
1 Comment -
I am outraged as well.
It appears that at the beginning of 2008, before any rescue money, A.I.G. established incentive bonuses based on performance goals for its executives (very standard in business). These are binding contracts (the U.S. Constitution specifically states that the government cannot abrogate contracts). Apparently, some business units at A.I.G. were profitable and met the goals established so legally they had to pay the bonuses.
It was just the jerks (and the CEO who let them) that insured the mortgage deritives big time that brought the company down.
6:48 PM, March 16, 2009