Insurance giant American International Group will award hundreds of millions of dollars in employee bonuses and retention pay despite a confrontation Wednesday between the chief executive and Treasury Secretary Timothy F. Geithner.
[….]“I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them,” (AIG’s leader) Liddy wrote.
It’s distasteful to stop paying the geniuses at AIG millions of dollars in bonuses the same way that it’s distasteful to enforce our laws by investigating the Bush administration, the same way it’s distasteful to ask George Will to stop lying about science, the same way it’s distasteful to criticize Jim Cramer.
All this stuff is really a matter of taste.
MS-4
When do these assholes pay for their mistakes? A fucking corporation, which only exists because of the taxpayers, is telling them to fuck off!
This is absurd.
Ruemara
I have a taste for failure not to be rewarded, particularly with my tax dollars to a private firm. When will that particular taste be rewarded? Can we class action sue these pin heads yet?
Ash Can
So AIG’s CEO is afraid he won’t be able to retain the talent necessary to get the company back on its feet and repay the government loans if he doesn’t pay out these bonuses. Maybe he needs to show proof to Geithner that the "talent" receiving these handouts were in fact not the same geniuses who got the company in this mess in the first place, do in fact know what needs to be done to get the company back on its feet, are in fact able to do it, and do in fact have better offers from stable, viable, and profitable entities that sincerely do want them to join their ranks.
In other words, this whole "bonus" bit sounds to me like a pile of bullshit the size of Madagascar.
DeadlyShoe
it seems to me that the idiots who lost trillions of dollars would have a hard time getting jobs somewhere else
Funkhauser
I don’t actually object to bonuses for the lines of business at AIG that weren’t in the credit-default-swap game. There are other lines that were profitable and not risky. They should stay, but the entire company should probably be dismantled and sold off.
As for the C-D-S wing – supposedly in the London office, per JMM – they can GDIF.
EDIT: well, per TPM, the bonuses may just be for the Londom Financial Products Division. F— em all.
Blue Raven
Let the motherfuckers burn.
That is all.
Hunter Gathers
These assholes should be thrown into a sack, have the sack hurled into a river, and the river should then be tossed into the Sun. How in the hell do you fail upwards?
TenguPhule
Will execute corrupt management for food.
Anastasius
AIG knew that this would reach the press, they know that it will cause a shitstorm in the press and they just don’t care.
What are we gonna do? Take back the bailout money that they already gave to other entities they keep secret?
They are calmly looting 100 million in plain sight, letting the taxpayers line up and stuff it directly in their pockets and there is nothing anyone will do about it.
Maus
Can we just get rid of Geithner now?
Please?
knomoney
As I sit here contemplating my future in the wake of my layoff last week it’s nice to know that the bastards who helped create this situation will be well taken care of. Gives me a real warm fuzzy.
Lupin
Simon Templar used to know how to deal with that sort of things.
Just saying.
GReynoldsCT00
I can’t believe this allowed to go on. I agree with the upthread comment, break it up and take care of the ones who were profitable and put the others in the woodchipper. Geithner seems to bel completely useless.
kid bitzer
far be it from me to defend the paying of the bonuses, but is liddy saying that it’s distasteful to *stop* paying bonuses?
i think he’s saying the opposite here,that is "i hate to say it, tim, but the contracts require us to pay bonuses, even if we find the paying distasteful. "
now, you can argue that the contracts should be ignored. you can certainly argue that liddy is crying crocodile tears.
but, just as a matter of reading comprehension, isn’t he saying that it is the paying which he finds distasteful?
Leelee for Obama
@Hunter Gathers:
You’re joking, right?
Our last President made a lifetime career out of that particular method.
He was not and is not the only one, unfortunately.
liberal
Not-entirely-OT: an excellent article (longish, at 56 pp, but very readable) discussing what got us into this mess: "Structural Causes of the Global Financial Crisis: A Critical Assessment of the ‘New Financial Architecture’". Abstract:
jo
well done
A Mom Anon
These people will not stop this shit until they are physically stopped. BTW,that does not mean violence necessarily. IMO though,violence,or at least scaring the literal shit out of some of these psychopaths is pretty much the only thing that will end this freaking crap.
I read once about a place in the Pacific northwest where alot of homeless Vietnam vets live in a particular part of old growth forest. A lumber company kept spraying the area with defoliant and other toxic chemicals,knowing full well people were living there. The guys got together and found out who a couple of the helicopter pilots and their boss was. A few carefully placed phone calls letting these guys know that the vets knew where they lived ended the spraying.
They do this because none of them have gone to jail or faced a single second of consequences for the damage they inflict. And they won’t stop until someone forces them to.
zirconium
I want a job in a business that when it fails and fails big, that I get a multi million dollar bonus at taxpayer’s expense.
AGI head Liddy, what narcissistic prick.
Redhand
I don’t actually object to bonuses for the lines of business at AIG that weren’t in the credit-default-swap game. There are other lines that were profitable and not risky.
Wrong. We really are in some form of alternate reality here. Without the Feds keeping AIG alive there would be no "bonuses" (hypothetically based on earnings and profits except, I guess, on Wall Street) ) to pay. If the Administration lets this bullshit go through, the political damage will be huge.
The idea that the AIG CEO is somehow contractually "forced" to pay out these millions is utter crap. No executive comp agreement on the face of the earth is (or should be) so poorly drafted that it doesn’t take into account the Company’s financial ability to pay.
I repeat, if this goes through, the political damage to Obama will be huge.
kommrade reproductive vigor
I do not like the thought of skewering greedy bastards on pitchforks and find it difficult and distasteful to recommend that course of action. Alas…
AustinRoth
Yep, no class warfare going on here. Move along you looky-loos, nothing to see here but the attempt to dismantle capitalism and replace it with Government mandated salaries, funding and price controls.
Now, I just KNOW there is a name for an economic system where the government controls the means of capital and production, and it is just on the tip of my tongue, but for some reason I just can’t think of it.
Oh well, I will go back to reading my Marx. I am sure that will come to me eventually.
kid bitzer
oh feck off with your marxism, as my irish granny would have said.
any time the corporate titans at aig want to take the year’s profits, pay their shareholders a dividend, and then divvy up the rest for their bonuses, they may do so.
in fact, i’m willing to award each and every aig exec 100% of aig’s profits from last year. have at it, boys!
but as long as you’re bankrupts living off the govt dole, don’t come around here accusing me of marxism, youfecking welfare queen.
kid bitzer
(i.e., would have, if i’d had one).
El Cid
The name for the system in which the government controls both capital and production is neither socialism nor communism, at least, not unless "government" is defined as being the vanguard leadership of a party representing the manufacturing proletariat.
(The government in this scenario doesn’t have to do any of those things in a genuine fashion, but you are at least supposed to theoretically explain it so.)
Shorn of that old specification, you could be talking monarchy, or fascism, or plain old dictatorship of any variety.
Svensker
@AustinRoth:
I fxt it for ya.
lilly Von Schtupp
Would it be at all possible to fail Elliot Spitzer upwards and give him Geithner’s job.
The Tim Channel
Looks like shit.
Smells like shit.
Tastes like shit.
Good thing we didn’t step in it.
http://thetimchannel.com/?p=397
Enjoy.
bjacques
They should have forced AIG to reorganize in the way that airlines and other corps do when they want to get out of paying judgments and or give in to union demands, with the understanding that the bailout comes afterwards. For an instant there’s no company, no contracts, no problem.
p.a.
Now now. Are you forgetting that in the post-Reagan universe (created reality quadrant) the only contracts that aren’t really enforceable contracts are union negotiated contracts!
Redhand
Yeah, wanna bet how many Repubs demand that for this crowd.
The extent of this blackmail is underscored by the fact that it is the very group in AIG which created this disaster that is now extorting millions to help "manage" it.
This Company should have been nationalized months ago.
bcinaz
It’s also very distastefule that not one single financial genius has gone galt yet. The enormous savings in unpaid bonuses alone would reduce the size of the bailout by several billion.
Not having to pay one more dollar in bonus money to anybody riding in the clown car is a pretty good reason to nationalize AIG. BofA and Citi.
El Cid
@p.a.: Why would the same executive compensation contracts be applicable, enforceable contracts when AIG is put into bankruptcy?
Oh, that’s right, we’re refusing to do that, we’re only nationalizing their losses & debts and they still get to pretend they’re a real corporation!
Beej
Just a suggestion, but wouldn’t it make sense at this point to demand repayment of the TARP money? If they can’t give it back in, oh say, 24 hours, the top executives go to jail for contempt of Congress. Bet they’d manage to come up with it.
jcricket
Bingo. When the FDIC seized WaMu, and gave it to JPMorgan (basically), all sorts of obligations like bonus contracts just went "poof". This is just one reason actual nationalization is preferable to this form of drip, drip, drip government intervention.
But I swear the top 5% operates under different rules than you and I. If they do "well" they get an awesome bonus that exceeds the salary you or I will earn in our lifetime. If they do "ok", it’s pretty much the same. If they fuck up, they get a bonus equal to about half our lifetime earnings. And if they really, really fuck up, they get a golden parachute about the same size as the "ok" bonus. It’s all win, no matter what happens. OK, maybe they don’t have a job when they fuck up (maybe), but they’ve earned enough in 5 years to last a lifetime (see Milkin, Michael – who despite going to jail, is still a billionaire).
AustinRoth
Hey, now that Obama has admitted that he was wrong about the seriousness of the ‘economic crisis’, isn’t time to accuse him of lying to the American public, ala George Bush, to get his War for BigPork Stimulus bill passed?
After all, just like with Bush, there were economists warning that he was being selective in who he listened to on the seriousness of the economic problems. And certainly the Left was very, very clear during the Bush Administration that to do that is to lie and mislead the public!
BTW – can I interest anyone in some ‘Obama lied, the economy died’ merchandise?
Rick Taylor
I thought he meant that it was distasteful to pay out the bonuses, but they had to because of contractual obligations? Regardless, he does argue later they need bonuses to continue to attract talent. Bottom line for me though is they should have shut down this branch of AIG ages ago, and spun off the rest into a legitimate self sufficient insurance company.
pmult
Seems like Congress should be able to pass some sort of tax ‘noose’ instead of loophole for these sorts of things–something along the lines of AIG bonues get taxed at 99%. They certainly can write things into the tax code that apply to very small groups of people.
I also wish someone would call these guys on referring to these architects of disaster as the ‘best and the brightest talent.’
jcricket
Like these?
Ottoman Turkish Empire Settlement Payments
Compensation for false imprisonment
I love the tax code.
blahblah
I want these assholes in jail. Creative talent my ass. From the CEO and CFO on down to the VP level, a fucking 8’x5′ cell. No bullshit soft plea bargains either. Match each of them up with a big Dwayne cell mate, whose cock is bigger than Dirk Diggler’s.
I’d argue for executions, but I think disgorging them of all ill-gotten gains and then tossing them in a ‘pound you in the ass’ federal prison might be a worse punishment. And I want to see these assholes punished in a way that’s worse than death.
Mnemosyne
I’m fascinated to discover that protesting the fact that my hard-earned tax dollars are being given away to corporate "financial wizards" in the form of bonuses is now regarded as "Marxism." I guess in a true capitalist society, I would happily hand over my tax money to random corporations just because they claim to need it more than I do.
Marxism: I do not think that word means what you think it means.
JenJen
I can only imagine that Cokie Roberts would agree with AIG’s Liddy that this is, indeed, distasteful. Sally Quinn will probably weigh in with her concurrence shortly.
What is not distasteful, of course, is meddling with contracts that union workers, such as those at the UAW, have. That’s fine. Nothing wrong with that at all.
jonas
I don’t have a problem with the people at AIG’s legitimate insurance arm getting bonuses. That business is still profitable and had nothing to do with the crisis that put AIG for all practical purposes into government recievership. But nearly $220 million is going to the so-called Financial Products division which created all the crazy credit default swaps that brought about the crisis. That’s bullshit and Congress had better stop it.
Deborah
I wondered this way back in the fall (summer?) when AIG went on their spa vacation–how is it possible that they are receiving bailout money and there are no strings, such that someone in Treasury could nix the spa vacation and fire the executives who thought it a good idea? Or at the very minimum the latter? This just makes no sense to me.
As noted previously on this site, "The public backlash would be so great no one would take a bailout and then pay bonuses" is very obviously not a valid line of reasoning.
And following up on Ashcan’s point above: Go ahead, AIG executives. We double dog dare you, in the present economy, to say "no bonus? just my base pay? I QUIT and will take my mad money skillz to another financial industry giant." We’re waiting. Let’s see that massive walkout.
Deborah
Marxism: I do not think that word means what you think it means.
Line of the thread. Socializing AIG’s losses and underwriting their bonuses is now considered hardcore capitalism; attaching strings to a massive investment (akin to purchasing a serious share of the company) is not recognizable as capitalism? If a private company were bailing out AIG I doubt they’d have a "here’s the cash, you know what to do" attitude.
kay
I was so naive. Let’s see. The top 5% negotiate 2 year employment contracts, based on, essentially, prevailing wage. They’re paid a base rate, plus a bonus, but the bonus has a floor, and it’s tied not to merit or profits, but to a term in a contract. It goes up, but it never goes lower than the contract rate. When the company announces they may not get the "bonus" guaranteed in the contract the workers fall back on the contract term, and 1. threaten a lawsuit and 2. threaten to walk off the job.
There’s a name for this. I recognize it. It’s the pay structure of the Ford stamping plant in the next county over from mine. Except, the UAW contract covers the blue collar workers. This executive union contract is more generous than a UAW contract, actually. Auto workers lose the bonus and fall back to base wage when the company doesn’t turn a profit.
I’d like to see something. I’d like to see what kind of shape AIG and Citi and the rest would be in if we could lower labor costs for the top 5%. I can pull out the Big Three labor costs as a percentage of revenue with 5 minutes on Google. I’d like to do an analysis on how the guaranteed pay scale for the top 5% in these ( and some other) companies impacts the bottom line and future viability of these companies. I don’t know that we can afford to guarantee current wage scales for these workers. They may have to recognize that they’re simply not competitive.
kay
"We are a country of law. There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system," Summers said.
AIG knows all about contracts. They’re an insurance company. They employ an entire team dedicated to slow-pay or no-pay on the terms of the insurance contracts they write. It’s the whole deal. The slower they pay, the longer they hold onto the money you paid them for insurance. It’s what they DO, for goodness sakes.
If there’s anything an insurance company knows how to do, it’s how to breach a contract. I wonder what happened? Did AIG fire all the lawyers in the insurance division? Bring them over, and let them look at these employment contracts. They know how not to pay a claim. It’s their job.
KRK
I agree with kid bitzer’s and Rick Taylor’s reading comprehension here: what Liddy is purporting to find "distasteful and difficult" is the payment of the bonuses, not the argument that they shouldn’t be paid. But yeah, empty and all for show (see also Cramer, Jim).
kay raises the key objection to Liddy’s statement. Insurance companies are world champions at dodging their contractual obligations. Finding a way out of these bonus arrangements ought to be minor league effort for them.
Elie
Lilly @ 27 — Hmmm — maybe not a bad idea
I have been a pretty strong defender of team Obama — particularly Geithner but I am starting to waver a bit — not completely finished yet but I AM starting to wonder when if not Geithner, the Obama team (Summers et al.) are going to do some real business with these folks.
I do not expect to witness a real down home lickin for these dudes at AIG and the like — it would feel great but there may be reasons why that doesnt make sense. Still I do not want to hear that whiny bullshit from Summers about abrogating contracts. WTF! And these folks — thieves and liars deserve to have anything honored?!!
I understand that it would not work for the government to just run roughshod over the business sector — but these pricks are on the public dole! We own their shit and I think we should be able to tighten them up a little.
BTW — for a guy with such a reputation for arrogance and nastiness, I would expect Summers not to whine so easily. He certainly must know that we want heads on pikes, not to give them a fingernail treatment and massage. Stop with that whiny shit, team Obama and start sending some cold reality to these fuckers.
Martin
90% tax rate on combined income and capital gains over $250K for all employees of companies that have received federal bailout funds.
Easy. Contacts can still be honored. Profitable companies can still pay executives what they want.
El Cid
@Martin: Brilliant. Never once thought of that. Awesome.
BlizzardOfOz
@AustinRoth,
You would have my sympathy, except that you pretend never to have heard of Keynsian economics. The Obama administration is completely disgusting at this point, but if you want allies on our side, you have to stop being a moron.
JenJen
@AustinRoth:
Go for it!
Mark S.
I’d be very interested to see these contracts. Are they performance based contracts? What could these assholes have possibly performed that would merit bonuses?
If they are just "bonuses that we give out no matter what that for some reason we don’t like calling salaries," then I’m not sure there is really any contract there; i.e. there’s no consideration.
My solution is to pay these assholes in AIG stock.
Martin
They can’t. The company isn’t worth the value of the bonuses – and the government owns 80% of even that piddly amount.
kay
@Martin:
I giggled when AIG claimed they couldn’t dodge a contract. The threat of (egads!) A LAWSUIT just stopped an insurance company in their tracks! That has to be a first in recorded history. Just the mention of an employee lawsuit and AIG had to comply? Would that insurance giants were so frightened of lawsuits when it comes to payment on claims! AIG want us to believe that all I have to do is wave my insurance contract around and AIG pays up! Why, I might threaten a lawsuit!
Millions of Americans know that’s bullshit. They contract with insurance companies, and occasionally try to get a claim paid. AIG knows how to handle a contract claim.
d0n Camillo
It’s almost like they are daring us to break out the torches, pitchforks and pikes. I don’t think AIG and Geithner are fully aware of the shitstorm that is coming their way now that this news has leaked out.
JenJen
Did we say $170 million? Oh, our bad, we meant $450 million.
TPM – WSJ: AIG to Pay $450 Million in Bonuses
Redhand
My sentiments exactly.
This news hit over the weekend. Just wait till tomorrow’s news cycle gets ahold of it.
As to AIG dodging insurance contract obligations, during their salad days under Hank Greenberg AIG was infamous as the shittiest insurance claims organization ever. Their focus was entirely their investment portfolio, and claims was viewed as a second-class loss center. When you bought an insurance policy from AIG, you weren’t getting insurance, you were buying the right to sue them for coverage.
I honestly don’t understand why Geithner dosen’t say to that cocksucker Liddy: "Look Asshole, you don’t understand. You pay these bonuses, and we’ll immediately nationalize your company and fire your ass." That’s the only kind of hit-them-where-they-live message these motherf*ckers understand.
AustinRoth
Blizzard – I am very well versed with Keynesian economics; I simply reject it in favor of The Austrian School. I am not sure what in my post would lead you to believe I am unaware of Keynes’ work, though. That seems a bit of a leap.
As for my second post, jeeze, can’t anybody here take a joke? :)
Mnemosyne
The funny part is, they probably tried to release the news over the weekend so people will have forgotten about it by Monday.
Yeah. It’s not gonna work, guys. In fact, all you’ve done is give people two extra days to get pissed off on their own before you can try and spin it for the media. And claiming that you have no choice to pay out the money or else they’ll sue will just piss people off more — what, you think no one noticed when you arbitrarily denied claims and only paid up after a few rounds in court?
Maybe Liddy took out a double indemnity policy on AIG and the only way he can collect is if an angry mob burns their headquarters to the ground. It makes about as much sense as anything else.
Mnemosyne
At this point, that’s like rejecting evolution in favor of intelligent design.