Push Back Against AIG’s ‘Best and Brightest’


Having long flattered themselves as “masters of the universe,” the creative financiers of Wall Street and London are today exposed as grifters rather than geniuses. Their proud claim that society cannot prosper without them—voiced so often whenever anyone raised subjects such as taxation or regulation—would now provoke bitter laughter instead of credulous nodding.

But they are not humbled.

Instead the old arrogance remains intact, at least on the premises of American International Group, where the flow of hundreds of millions of taxpayer dollars into bonuses continues, unimpeded so far by public outrage. These payments, made to many of the same individuals whose freebooting misconduct ruined their firm and laid waste to world markets, symbolize a system of rewards gone mad.

It should be obvious by now that the AIG traders, along with many others like them, deserved to be fired and perhaps prosecuted rather than enriched. The “too big to fail” argument for saving their firm and their sorry behinds always amounted to a kind of blackmail. The threat was stated explicitly in the remarkable letter sent last weekend by AIG chief Edward Liddy to Treasury Secretary Timothy Geithner that sought to justify the latest bonuses.

According to Liddy, the bonuses cannot be withheld because “these are legal binding obligations of AIG and there are serious legal as well as business consequences for not paying,” or so the company’s outside counsel has told him. “Given the trillion-dollar portfolio at AIG Financial Products”—the division that wrote all the toxic paper—“retaining key traders and risk managers is critical to our goal of repayment.” Attached to the letter was a “white paper” arguing that failing to pay the bonuses would touch off a chain of defaults that might sink AIG permanently and cost the taxpayers additional hundreds of billions of dollars and further damage the markets.

In other words, pay up or we’ll hurt you.

I thought, and of course I could be wrong, that a bonus was an EXTRA payment for an exceptionally good quarter, or whatever period of time. How could a bonus be contractually obligated to a failed period? Were these guys' contracts so good that it states "you must pay me millions of dollars, even if I bankrupt the world"? If so, I believe I see the initial flaw of this whole shebang.

Hm. I wonder if its like this now: you ever play poker, and after a certain point you know there's a great chance you'll lose, but because you've already bet so much, you stay in just for the principal of it, you don't want to throw that money away without seeing it through until the end? Wonder if that's what the treasury is doing now..."oh well, we've gone this far and paid this much, might as well see what happens..."

With those kinds of contracts, where was the incentive to do a good job? It didn't matter one way or the other....their money was doled out to them regardless of their job performance. The AIG rot started within those contracts because there is NOBODY on the face of the earth who is worth what these people have been paid in both salaries and bonuses over the course of the last few years.