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In Enthusiastic and Sincere Praise of AIG Bonuses

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President Obama and much of the country are outraged over AIG paying some $165 million in bonuses to their executives, considering that they've just posted the greatest quarterly loss of any corporation in history (something like $65 billion) and that the US government has handed them somewhere closing in on $200 billion dollars in bailouts. Plus, there'll likely be that much again.

"How do they justify this outrage to the taxpayers who are keeping the company afloat?" said President Obama. This violates "fundamental values" — as if a crooked demagogue Chicago politician would know a fundamental value if it bit him in his Hyde Park butt.

There's a pretty clear and irrefutable answer to the president's question: contractual obligation. Never having actually run a business, such things appear to mean little or nothing to Obama. Note the "cram down" rule he's trying to put through Congress to let judges arbitrarily rewrite mortgage contracts, for example. We won't have an economy at all if contracts are not legally binding documents but just suggestions that we might follow if they don't make anyone mad.

But he can't do a damned thing about it cause these executives have CONTRACTS. Those are legally binding obligations, and the company can't just decide not to pay them because it'll look bad if they do. If I were an executive that had a $500K bonus coming to me, I sure as hell wouldn't give it up just because it makes some people mad.

There's a strong general public sentiment against executive bonuses to companies getting government bailouts, but that's bad business going forward. If you've got a company that's in trouble, then they especially need the top talent. If you limit your company to paying execs a minimal wage, you ain't going to get the best and brightest you will desperately need to sort out the mess — though I grant you that this money obviously hasn't gone to any competent people at AIG specifically.

Then there's Senator Charles Grassley, who suggested that these executives should consider killing themselves to save face, like the Japanese. Really now — does Grassley have any room to talk?  I don't know that we couldn't do without the AIG executives who've screwed the pooch, but I'm quite certain that the country would be better off if most of the Congress — definitely including Grassley — jumped off the top of the Washington monument to atone for their sins. They've screwed the pooch way more than even AIG — and they're the ones ponying up the money to keep AIG in business so that a bunch of European banks don't get screwed.

After all, if the Congress and the president weren't handing out the cash to AIG, the public wouldn't have any reason to be mad. The mad ones would be the AIG stockholders whose paper would be worthless — as it should be. They're the ones who picked the board and let them do stupid things that have destroyed the company.

By the way, you might note that using bailout money to pay bonuses like this was explicitly authorized in Obama's original stimulus bill, over the specific and repeated objection of house Republicans.

On consideration, I applaud the payment of hundreds of millions of dollars in bonuses to AIG executives. That's a drop in the bucket against at least 1000 times that much the feds have already given even to just this one company, but besides honoring contracts this serves a much larger public good. From the Washington Post story, "President Obama's apparent inability to block executive bonuses at insurance giant AIG has dealt a sharp blow to his young administration and is threatening to derail both public and congressional support for his ambitious political agenda."

If a lousy couple of hundred million bucks is all it takes to decisively turn the public against the whole bailout business, it'll be the best spent money in a long time. Besides running up huge, ridiculous government deficits, these bailouts are destroying the whole idea of the basic market economy on which our prosperity depends.

This seems like rather an obvious point. Banks, insurance companies, automakers, mortgage holders and every other kind of business have to be allowed to fail if they screw up, or you destroy the whole system. In an often used because beautiful and righteous phrase, it's the "creative destruction" of capitalism.

So I say, AIG execs should get their bonuses. They should in fact double their bonuses for next year, and use some of that bailout money to throw themselves a big ticker tape parade. Of course, they'd probably have to ride the parade in bullet proof popemobile type vehicles.

If that little chunk of change is enough to turn the public away from Obama's socialist agenda, and stop him from throwing trillions upon trillions more dollars down a commie rat hole, it'll be the best bargain the taxpayers have ever had.

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  • Baronius

    We should have a fund-raiser. If 14,850,000 principled conservatives kick in $10 each, we could reimburse the AIG executives for the tax payments. I’d contribute.

  • http://blogcritics.org Clarence Yu

    It isn’t just the AIG executives. I’ll bet there are so many others just buried in the mix. I’d agree that this is being done to drive attention away from Obama’s “socialist” agenda—by the way, I’d call it a more “liberal” agenda.

  • http://www.morethings.com/log Al Barger

    Clarence, I’m sure you’re right. There are undoubtedly all kinds of lovely things like these AIG bonuses being covered by bailout money and the stimulus bill.

    But “socialist” is the right word. In this context, “liberal” would just be a euphemism.

  • http://www.joannehuspek.wordpress.com Joanne Huspek

    I don’t know. I think he’s still in the honeymoon period. But don’t worry, the rest of the country will catch up someday.

  • http://screambucket.wordpress.com/ Aetius Romulous

    Isn’t anybody worried that while we all hamstring the government with this pointless dithering, absolutely nothing is being done in a coordinated fashion to address the real problem of international liquidity?

    This is truly a problem measured in hours. Every clock tick moves the whole earth closer to catastrophe. Nothing is being done, and when it is, only through sporadic bouts of Washington politicking.

    Focus on the problem people, none of this trite nonsense will matter a lick three months from now – except perhaps for the hand wringing and finger pointing over why we missed the boat.

    It speaks volumes that The Fed moved so suddenly and dramatically yesterday…it knows there is no time to waste, and so much has been wasted so far.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Welcome to the club, Aetius. Ideology is sweeter than cool, balanced reasoning.

  • http://blogcritics.org/writer/dan_miller Dan(Miller)

    The Congresscritters, who passed the “stimulus package” last month, having neither read nor understood it, are now hearing from the folks back home. It is unfortunate that they did not have such an opportunity before they passed it.

    Congressional Democrats took aim at the Obama administration Wednesday, blaming the president’s economic team for creating a loophole that allowed AIG to pay its employees millions of dollars in bonuses and then not doing enough to stop the bonuses when it could.

    And their warp-speed effort to get the money back made it clear that congressional Democrats don’t think the White House is moving fast enough to solve the problem now.

    Today’s bill was passed by the House 328-93. It would apparently require that most of the bonuses paid to employees of AIG and other companies receiving at least five billion dollars in stimulus funds be taxed at 90%. Two hundred and forty-three Democrats and eighty-five Republicans voted in favor of the bill.

    Senator Dodd, who agreed at the last minute and apparently without consulting his colleagues on the Hill, to include the stealth provision allowing the bonuses to be paid with Stimulus funds, is worried:“The public confidence in our ability is being adversely affected — not just mildly, but seriously. . . .”His concern is understandable, and he should be worried. What he should be worried about, however, is his blind acquiescence in stimulus language he did not understand because there was lots of pressure to get something done; right now. No matter what.

    Now, the Congress is doing substantially the same thing again.

    When in danger and in doubt
    Run in circles, scream and shout.

    Dan(Miller)

  • bliffle

    Sounds like it would have been best just to let failing companies fail last year. IIRC that was the path favored by most ordinary citizens when all this stuff started. The decision to support failing banks was foisted on us by the ‘experts’ in government. Sounds like they were wrong.

    Then the government ‘experts’ decided that the company ‘experts’ should get their big unearned bonuses.

    Do you think the ‘experts’ are conspiring together?

  • Clavos

    bliffle #8:

    Excellent comment.

    Dead on.

  • Baronius

    Interesting vote. You’ve got to figure that the Republicans who voted against that bill are obstructionists and/or people who are completely uninfluenced by polls. Six Democrats voted against it. Most of them are in their first or second term in right-leaning districts. However, Democrat Victor Snyder (Ark-2) voted against it, and he’s a consistent liberal. He didn’t like the lack of deliberation. Good on ya, Vic.

  • http://www.morethings.com/log Al Barger

    Bliffle- Let me take this rare opportunity to say that I completely agree with you.

    I’m getting the sense that on a lot of this bailout stuff, the left and the right are thinking alike in opposition and suspicion. It’s like people seeing bigger pictures (even very different ones) look at this differently than non-ideological ie no-ideas-having “moderates” who see no principles.

    I can tell you that speaking as a right wingnut, I think that the entire bailout and crazy interventions from the guvment are outrageous and counterproductive. The Dow was at 10-11K as we hit the credit crunch in September.

    Rather than letting the natural forces of the market and bankruptcy law work things out, we’ve just thrown more and more money away and created chaos and confusion with constantly changing rules, with another dive every time the feds do anything. So instead of taking the hits last fall and starting our way back out by spring, we’ve lost another third of the value of the Dow.

    Three or four more goddam schemes for the guvment to fix things, and there won’t be a stock market left to fix.

  • bliffle

    Seems to me that government characters and businessmen have submerged their differences in favor of their joint interest in Corporate Statism. That way they can smoothly agree on how best to fleece the peasants.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    I hope that ain’t so, bliffle. Because then we’re really dead ducks.

  • Clavos

    Well, at least the dead ducks can be fed to the peasants.

    Soylent Green, anyone?

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    There you go. Nothing goes to waste. It’s a food chain.

  • http://blogcritics.org/writer/dan_miller Dan(Miller)

    According to the Connecticut Attorney General, the bonuses paid by AIG amounted to $53 million (32.12%) more than the $165 million reported earlier:

    documents turned over to his office by American International Group Inc. shows the company paid out $218 million in bonuses, higher than the $165 million previously disclosed.

    Attorney General Richard Blumenthal’s office received the documents late Friday after issuing a subpoena.

    Blumenthal says the documents show that 73 people received at least $1 million apiece, and five of those got bonuses of more than $4 million. The financially ailing insurance giant has been under fire for giving bonuses after receiving more than $182.5 billion in federal bailout money.

    AIG spokesman Mark Herr declined to comment Saturday.

    This will, obviously, cause more turbulence than if the fifty-three million dollar higher figure had been known even a few days ago. The words uttered long ago, “modified limited hangout” come to mind.

    Dan(Miller)

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    The following is the link to Dan’s story.

    It may get ugly as “activists are expected to rally at AIG’s Wilton office on Saturday to protest the bonuses, [and] a busload are also touring some AIG executives’ homes in Connecticut, organizers said.”

    “Class warfare” in America? Who would have thought? It will give our resident Marxists all the boost they need.

  • http://blogcritics.org/writer/dan_miller Dan(Miller)

    Thanks for fixing my screw up, Roger. I had intended to link a story on Fox, but the link you provided is identical.

    Dan(Miller)

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Well, the link I tried, Dan, was to the article itself. Fortunately, I saw the news story on Yahoo news.

    Roger

  • http://handyfilm.blogspot.com handyguy

    Re: Bliffle’s snarky assessment of government bailouts, and the [rare] concurrence of Clavos et al with him:

    I’m more interested in what works than in posturing ‘right’ or ‘left.’

    If bailouts ultimately get the crippled/frozen banking/credit system moving again, then the phony moral/ethical analysis of details and methods will fade into oblivion where it belongs.

    If the financial system remains paralyzed, all the moral outrage in the world will be made meaningless in comparison to the expanding misery.

    No one ever claimed the bank rescue would take only a few weeks or months. It could be starting to work already and the Know-Nothings could still succeed in shouting it down, sabotaging the whole effort.

    The market crash after Lehman Brothers was allowed to fail spooked the Feds into ‘saving’ AIG. The AIG bailout has since then been so caricatured that it’s hard to know what’s real and what’s not.

    But from Liddy’s testimony the other day [in between self-congratulatory expressions of outrage by each and every Congressperson on the subcommittee], indications are that the company has already made significant progress winding down the bad part of the business and is preparing to try to sell off [or just give to the government] the parts that still operate at a profit.

    Now the sideshow of the bonuses may have turned AIG into such a toxic brand name that the previous plan to sell off its parts may be very seriously undermined.

    Thus: “Bailouts don’t work” — a self-fulfilling prophecy.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Handy,

    I don’t think you need to be on the defensive. Even if the AIG case is a screw-up, it doesn’t necessarily have to mean that all bailouts are. But your trying to defend AIG comes awfully close to apologetic attitudes and stance which, when coming from the other side, you yourself find contemptible. So if you try to be a little more reasoned here, I’m certain you’ll be able to advance your cause much better.

    Roger

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Handy,

    The following is a rather misguided enterprise by Republican attack groups vs Hillary:

    “Hillary” : the movie.

    It doesn’t exactly fit on this thread, but what the hell. There’s also a link to the movie itself.

  • Clavos

    handy #20:

    You’re right. We should all just sit back and let the government experts fix the boo-boos, take care of us, and quit worrying, just like these folks.

  • http://handyfilm.blogspot.com handyguy

    Of course, that’s not what I said, Clavos. But blowing up the solutions before we know whether they’re working gives new meaning to that old cliche, cutting off your nose to spite your face.

  • http://handyfilm.blogspot.com handyguy

    But your trying to defend AIG comes awfully close to apologetic attitudes and stance which, when coming from the other side, you yourself find contemptible.

    Sorry, Roger, but this is not very perceptive of you. In fact, it is nonsense. This has little or nothing to do with the left/right arguments that so frequently populate this space.

    I just think the populist dust-storm about AIG is media-fueled and wrongheaded. That does not mean I think AIG is angelic or that the ridiculous bonuses were a great idea.

    But the disproportionate reaction to them, often by people who are not very well informed, is causing more harm than good. The collateral damage could include much of the remaining bank rescue plan.

    And if Clavos et al say, good riddance to those plans, they’d better be ready for the [calamitous] consequences.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    I know, Handy, that the storm is being manufactured. But stop defending them, for Christ’s sake. It’s getting stale. You start sounding like a fucking recorder.

  • http://handyfilm.blogspot.com handyguy

    All right, I’ll say it once more:

    I’m. Not. Defending. AIG.

    Is that clear enough?

    I’m expressing concern about the consequences of the current media-storm — consequences much larger than the scandal around a specific company.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Fuck that. They do it to generate sales in the failing newspaper industries. And the reps do it to discredit Obama. We all know that.

    What else can the conservatives do but moan and groan for the next eight years. They’ve been reduced to Rush Limbaugh types – lots of hot air and no substance.

    I’d rather just let it go. We’ve got a country and a nation to save. All else is bullshit and distraction.

  • Clavos

    We’ve got a country and a nation to save.

    Which is which?

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Both, Clavos. They’re interchangeable.

  • Clavos

    And therefore redundant, Roger.

    Which was my point…

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Form of expression, Clav. Can’t resist my literary impulse, in spite of your “blah, blah, blah” editorial advice.

  • Clavos

    Redundancy that’s nonsensical is not a desirable literary attribute, Roger.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    You go your way, I’ll go mine.

  • Clavos

    Sure, Roger you don’t have to be a good writer if you don’t want to.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Clavos,

    I take everything you say here with a grain of salt. Remember, it’s only a virtual reality. I was you who said it, not I.

  • Jordan Richardson

    Alright guys, put your penises away. Take it easy.

  • Clavos

    That’s fine, Roger, you never will learn how to write well, anyway — you’re too impressed with yourself.

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    I’ll take your comments seriously, my friend, once I’m convinced you have my interest at heart.

    Not until.

  • Clavos

    You go, boy!

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    Your own words, Clav.
    It’s virtual reality, nothing more.

  • bliffle

    Clearly, the tax bill introduced in congress is a Bill Of Attainder, which even the atrophied legal sensibilities of the various assembled congresscritters must realize will be rejected with guffaws by the courts. Therefore, it is nothing but posturing.

    How cynical of them. But then I suppose they have accurately calibrated the gullibility of the US voter.

  • http://blogcritics.org/writer/dan_miller Dan(Miller)

    Bliffle,

    Although I agree that the whole thing is posturing, I am less confident than you appear to be that the thing* is a bill of attainder. There haven’t been a lot of cases involving that sort of thing, and as I understand the situation it could go either way; it will probably be held to be OK. I have no idea what changes the Senate will make, or what the conference committee will do.

    In any event, I would prefer to see the funds used for bonuses recouped from the companies paying them, instead of from the recipients.

    What the whole mess has done is show, even our rather dense congresscritters, I hope, that passage of an humongous bill such as the stimulus package, without studying or even reading it, is stupid. They appear to have relied all too heavily on their betters in the administration, are now suffering some of the consequences, and are pointing fingers in every direction except at themselves.

    If the next major piece of legislation coming down from on high is passed under similar circumstances, and a newsworthy flaw is found, the anger currently on display will, and should be, exceeded by an order or two of magnitude.

    I hope it doesn’t come to that.

    Dan(Miller)

  • REMF(MCH)

    “We’ve got a country and a nation to save.”
    “Which is which?”

    The country is Iraq, and the nation is Red Sox.

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