A few excerpts from George Stephanopoulos' interview yesterday with President Obama's top economics adviser Lawrence Summers on the subject of insurance giant American International Group's plan to award senior executives hundreds of millions of dollars in bonuses and retention pay:
"There are a lot of terrible things that have happened in the last 18 months, but what's happened at AIG is the most outrageous," said Summers, chairman of the White House National Economic Council. "What that company did, the way it was not regulated, the way no one was watching, what's proved necessary, it is outrageous," Summers said.Like it or not AIG has the US taxpayer over a barrel.. our congress gave them a boatload of cash before we read the fine print.. AIG played us well. The AIG CEOs' letter seems to be a reactionary response to Geithner's phone call.. I am sure that he would have done nothing before the call.. maybe this personal approach is just what these folks need? Maybe President Obama needs to make the next phone call? Maybe we all need to give him a call and express our outrage?
In a phone call Wednesday to AIG CEO Edward Liddy, Treasury Secretary Timothy Geithner said it was unacceptable for the company to give out tens of millions of dollars in bonuses for senior executives after the government committed $170-billion to keep the struggling company afloat -- far more government bailout money than has been awarded to any other firm.
In a letter to Geithner Saturday, AIG's chairman and CEO agreed to restructure some of the payments. But Liddy wrote, "quite frankly, AIG’s hands are tied," arguing the firm would risk a lawsuit if it scrapped the bonuses.
Liddy also wrote the government's demands could affect AIG's ability to retain "the best and brightest talent to lead and staff the AIG businesses" if "employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury."
I'm a little confused by the outrage being expressed towards AIG's bonus payments. If they have contractual obligations, what choice do they have? When I was on an incentive based compensation plan, I contracted every year with the company signing up for my expected payment for the job I was going to do. The employees are entitled to the compensation they contracted for. Going forward, AIG can ratchet that down, IMO. But, if they have contractual obligations for the prior year, they have meet them, IMO.
ReplyDeletePeace,
Brian
I hear you Brian.. I am so comforted that the 165 mil in bonuses is all legal. Really.. what is this contract garbage all about? How crazy is it to bonus employees/contractors of such a failed institution? What moron negotiated that contract?
ReplyDeleteMaybe our congress should have put restrictions on the billions we gave them? Maybe they have made the case for a govt takeover of AIG? Lets take em over and fire everyone?
Just venting this morning..
Bob,
ReplyDeleteI don't understand "incentives" that pay when the company is in the toilet. The contracts negotiated were obviously stupid contracts. Any bonus I was ever paid was based on performance.
However, what has been negotiated has been negotiated. I don't think that, after the fact, AIG can pull the bonuses they contracted for. Yes. Maybe Congress should have looked at the compensation packages before they approved the money and made the bailout conditional on AIG being able to renegotiate the bonuses. In extraordinary circumstances, you do extraordinary things. AIG could have said, we'll pay you your bonuses. But, if you want your bonuses, X% of you will be let go, or we have to cut your future compensation going forward.
I don't like seeing my tax dollars going to some guy's "bonus" any more than anyone else does. But, a contract is a contract. And the employees worked their year with the expectation that they would be compensated a certain amount for it. You don't contract for a job, have the work done, then cut the pay for the job.
Peace,
Brian
Those folks must have one hechuva union.. maybe they got into the weasel union :)
ReplyDeleteThe bonus payout excesses at AIG are just the tip of the iceberg of what is happening with the other Wall Street bailouts including Bank of America. Working productive Americans are bailing out the same crooks that destroyed our economy along with 45% of the wealth in the world and now the American taxpayers and our children will be forced to live a far lower standard of living with reduced prosperity and opportunities due to this but only we pay the price.
ReplyDeleteWashington has bailed out the banks, Wall Street & their Washington special interests and much of the cost is added to the national debt to by paid by this and future generations while real estate and investments continue to fall. Find out what a growing repudiate the debt movement could mean for treasuries, the dollar, gold and the stock market and how this is a better alternative than Washington’s plans to monetize the debt in future years and tax and destroy our remaining wealth by depreciating the dollar.
The Campaign to Cancel the Washington National Debt By 12/21/2012 Constitutional Amendment is starting now in the U.S. See: http://www.facebook.com/group.php?gid=67594690498&ref=ts
Such knowledge is "above my pay grade," but some I heard this morning seemed to think that the company could have broken these contracts without being held legally accountable.
ReplyDeleteCertainly poses an interesting ethical dilemma.
I joined the Facebook group anonymous.. are you Ron Holland?
ReplyDeleteI agree with Brian, while it is unpopular... a contract is a contract, and government interference with that is setting a horrible precedent. Not only that it may be unconstitutional for them to do so.
ReplyDeleteThe problem was bailing them out. Should have considered these things before doing that.
Free Market capitalism at its finest. Isn't it a wonderful country we live in that people can be so successful? Ahhh the American Dream!
ReplyDeleteBailing out failing companies with taxpayer money. Yes, free market capitalism at its finest.
ReplyDelete