AIG: Contractually Obligated to Spit in Face of Taxpayers
Insurer pays big bucks to retain "talent."
Reports of the $165 million in bonuses shelled out to executives (the ones the New York Times said were "at the very heart of AIG's worldwide conflagration") are eliciting fresh cries of outrage from the public.
Lawmakers, intent on demonstrating their aggressive stewardship of taxpayer money, are up in arms about bonus payments AIG is making to retain top executive "talent." Barney Frank, chairman of the House Financial Committee, questioned the wisdom of the bailout, saying "clearly there was a mistake from the beginning."
AIG's chief executive Edward Liddy, for his part, argues the payments are not only a legal obligation but essential to retaining key employees -- in his words, "the best and brightest talent" -- and maximizing the value of business units it aims to unload in an effort to repay taxpayers.
The Wall Street Journal reports $450 billion has been paid to employees of the company's Financial Products unit, the group responsible for much of the trading losses that torpedoed AIG in the first place. In addition, more than $700 million in bonuses and retention payments are being paid to another roughly 10,000 employees.
Liddy, the CEO, said he found the arrangements "distasteful," but that they were set up before he took the job last year. In defense of the payments, he argued, "Honoring contractual commitments is at the heart of what we do in the insurance business."
Meanwhile, the company and its government shareholders are facing increasing pressure as we learn just where our $170 billion in bailout money has gone. Trading counterparts have reaped big payments on credit default swaps gone bad: Goldman Sachs (GS) got almost $13 billion, Deutsche Bank (DB) received around $12 billion, and tens of billions more was doled out to trading clients and other banks.
As AIG executives and regulators struggle to untangle the truly nightmarish mess that was once the largest insurance company in the world, the public will demand further retribution against those it holds responsible.
No matter that some, like Liddy, weren't even there when the troubles started. Others, like Congressman Frank, Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke are being tasked with the cleanup of a mess they were very much complicit in creating.
Perhaps elected and non-elected government officials alike will acknowledge their role in this mess by refusing both salaries and lobbyist money from the financial sector until the problems are sorted out.
Hey, a guy can dream, right?
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