The AIG bonus story just keeps getting better
Ordinarily I hesitate to give New York Atty. Gen. Andrew Cuomo any extra publicity. I mean, he gets more than enough of it already. But Tuesday afternoon he released a letter to Rep. Barney Frank (D-Mass.) about the recent American International Group bonuses that is so chock-full of tasty info morsels, I just have to give the man his due. (Optional reading: Tom Petruno's blog post on the letter, and The Times editorial on the bonus controversy. You should also look for an Op-Ed article on this subject Wednesday by columnist Tim Rutten.)
I'll leave to others the parts of Cuomo's missive that were designed to incite class warfare (e.g., "last week, AIG made 73 millionaires in the unit which lost so much money that it brought the firm to its knees"). I was more interested to learn that, according to the documents Cuomo's team collected, AIG agreed in its employment contracts to provide at least as large a bonus in 2008 as it did in 2007 to members of the ruinous Financial Products unit. Now that's what I call paying for performance! Twice. (Or maybe more often; who knows how long that provision has been in the contracts.) The letter also revealed that 11 of the 73 employees who received "retention" bonuses of $1 million or more were no longer, um, retained. They'd already left the company. The same was undoubtedly true for many of the other 300-some who received bonuses of less than $1 million. Finally, Cuomo noted that AIG had renegotiated the contracts with Financial Products employees, persuading them to accept essentially no salary in 2009 in exchange for receiving their bonuses. So much for being locked into a deal signed prior to the government's takeover.
I'm usually sympathetic to the argument that cracking down on bonuses and salaries can drive off the most talented revenue generators at troubled firms. But not in this case. AIG shouldn't be paying retention bonuses in its Financial Products unit because it shouldn't have a Financial Products unit. That subsidiary blew up the company. Like a surgeon excising a tumor, the government should be separating that particular venture from AIG's healthy and well-capitalized conventional insurance businesses, then making it go away.
Credit: AP Photo / Mark Lennihan
And thus we have the most powerful argument against the bailouts, all of them.
These vermin, who are driving AIG, the US Government, the US taxpayer, and indeed the world into utter financial ruin, need to go bankrupt, their assets stripped, their liabilities repudiated, their managers fired, their profits disgorged, they need to be driven into the street by their landlords, and many of them prosecuted criminally and put into prison, and made into paraiahs.
And all of this would have happened, except that the government declared them "too big to fail", and gave them massive amounts of taxpayer money. The government thus sent them the clear signal;"you're doing just fine boys, keep up the good work".
Therefore no one who supports bailouts has any right to complain about this. From the perspective of the bailed-out, they are heroes, who saved the company! The bailouts are immoral, perverse, and ruinous, and as long as the government persists in them, we will continue on this path to utter financial, fiscal, economic, and moral ruin.
No criminal should be shielded from the consequences of his irresponsibility. The bailouts perversely reward that irresponsibility.
Posted by: LibertyVini | March 18, 2009 at 03:52 AM
The plaintively worded NY Times Op-Ed by Jake DeSantis (3/25/09), an ex-AIG executive V.P, transparently attempts to justify the unjustifiable. Continuation of excessive executive compensation and gigantic bonuses at a taxpayer supported financial institution in the face of the indisputable greed and incompetence of its executives is unconscionable under any rule of law. Whether directly or indirectly involved, DeSantis as a corporate officer, was undoubtedly aware of the extraordinary risk posed to AIG and its counterparties by its lucrative sale of credit derivatives and had a legal obligation to raise alarm at this danger. Instead, DeSantis chose to remain mute and continue raking in very large bonuses despite AIG’s impending insolvency.
The compelling truth is that the endgame of unregulated “free market” capitalism has become reduced to the impoverished American taxpayer compulsorily subsidizing the wealthy and privileged executives of “Wall Street” firms receiving hundreds of billions in “corporate welfare” (e.g., Goldman, Morgan, Citi, AIG, etc.). The denizens of the Wall Street – Washington “bubble” amazingly fail to fully comprehend the scope of the popular outrage inspired by this sad but simple truth. Under these circumstances, if I were this fellow DeSantis, I would not want to show my face in public let alone publicly engage in a spoiled infantile tantrum over criticism of an unconscionable bonus for abject failure and incompetence.
Posted by: joseph lanni | March 26, 2009 at 06:55 PM