The Real Answer To Bonuses At AIG

17 Mar, 2009 by John Hawkins

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Everyone is upset that AIG took bailout money, but yet, is still giving out bonuses that they are apparently legally obligated to pay out.

The President of the United States is admitting that he’s trying to find a way to circumvent the law in order to block the bonuses,

White House press secretary Robert Gibbs, peppered with questions about why the president had not done more to block the bonuses at a company that has received $170 billion in taxpayer funds, struggled for an answer yesterday afternoon. He explained that government lawyers are “looking through contracts to see what can be done to wrest these bonuses from their recipients.”

Obama himself sought to channel the public’s sense of disbelief yesterday. “How do they justify this outrage to the taxpayers who are keeping the company afloat?” he said, declaring the bonuses an “outrage” that violate “fundamental values.”

Republican Senator Charles Grassley went further,

The rhetoric grew so heated yesterday that Sen. Charles E. Grassley (R-Iowa) suggested in a radio interview that AIG executives ought to “follow the Japanese model . . . resign, or go commit suicide.” An aide later explained he does not actually want executives to kill themselves.

So, what’s the solution to this? Should we tell the government not to interfere in the market place? Should we try to get those bonuses back?

I have a better idea and it echoes comments made by John Boehner in a release he sent out yesterday,

For months, Republicans have repeatedly asked both the Bush and Obama administrations a very important question: what is the government’s exit strategy from this sweeping involvement in private business? We have done so because taxpayers are not receiving an adequate accounting from either the Treasury or the management of the companies that received taxpayer funds. Unfortunately, we have not yet seen such a plan. The latest revelation about AIG executives receiving millions in bonuses while taxpayers continue to bail out the company with hundreds of billions of dollars is outrageous and the clearest example yet of why an exit strategy is essential. The Administration should pursue all means of recovering these bonus payments and present Congress – and, more importantly, taxpayers – an exit plan as soon as possible.

Exactly. It’s easy to forget in this big back and forth over these bonuses that the taxpayers have pumped $173 billion dollars of our money into that company. We’re worried about 160 million dollars? Okay, well what about the other 172 billion, 840 million dollars?

Barack Obama is out there publicly telling people that, “This is a corporation that finds itself in financial distress due to recklessness and greed.” Well, if he believes that’s so, then it prompts an obvious question: Why are we giving these “reckless” and “greedy” people 173 billion dollars of our money? How about we take the money back and let AIG worry about AIG instead of us worrying about AIG?

If we’re not going to do that, how about we at least a set a date for an exit strategy? If Barack Obama can set a timeline to get us out of Iraq, why can’t he set a timeline to get us out of AIG and these other corporations that have been bailed out with taxpayer money?

Update #1: Incidentally, while everyone is focused on those 160 million dollars in bonus payments, the The Wall Street Journal notes that 120 BILLION — not million — dollars of the AIG bailout money has been shipped overseas,

Taxpayers have already put up $173 billion, or more than a thousand times the amount of those bonuses, to fund the government’s AIG “rescue.” This federal takeover, never approved by AIG shareholders, uses the firm as a conduit to bail out other institutions. After months of government stonewalling, on Sunday night AIG officially acknowledged where most of the taxpayer funds have been going.

Since September 16, AIG has sent $120 billion in cash, collateral and other payouts to banks, municipal governments and other derivative counterparties around the world. This includes at least $20 billion to European banks. The list also includes American charity cases like Goldman Sachs, which received at least $13 billion. This comes after months of claims by Goldman that all of its AIG bets were adequately hedged and that it needed no “bailout.” Why take $13 billion then? This needless cover-up is one reason Americans are getting angrier as they wonder if Washington is lying to them about these bailouts.

Welcome to the global New Deal, everyone! Under Obama, we’ve now moved on from bailing out failing American companies to bailing out planet Earth. What could possibly go wrong?