A tidal wave of public outrage over bonus payments swamped American International Group yesterday. Hired guards stood watch outside the suburban Connecticut offices of AIG Financial Products, the division whose exotic derivatives brought the insurance giant to the brink of collapse last year. Inside, death threats and angry letters flooded e-mail inboxes. Irate callers lit up the phone lines. Senior managers submitted their resignations. Some employees didn't show up at all.
"It's a mob effect," one senior executive said. "It's putting people's lives in danger."
Politicians and the public spent yesterday demanding that AIG rescind payouts that they said rewarded recklessness and greed at a company being bailed out with $170 billion in taxpayer funds. But company officials contend that the uproar is scaring away the very employees who understand AIG Financial Products' complex trades and who are trying to dismantle the division before it further endangers the world's economy.
"It's going to blow up," said a senior Financial Products manager, who spoke on condition of anonymity because he was not authorized to speak for the company. "I have a horrible, horrible, horrible feeling that this is going to end badly." ........
Well, I think the difference with AIG and the auto companies is that AIG has its tentacles and its loan and obligations in so many places, so many other financial institutions, so many countries, that there's really a threat to the world economy.
That's why it's being rescued, not because there is a virtue or goodness among the dealers and the bankers among them. And that doesn't apply to the auto companies.
But look, this is not so much an economic issue as a psychological and a political issue. Economically, if you add up all the bonuses, it's less than 1/10 of one percent of the bailout to AIG alone, so it's lunch money.
Psychologically, it's important because there's outrage in the country, and, as Mort indicated, unless there's an appeasement in the anger in the population who are going to have to support the next bailout, which is going to be a trillion dollars, the money won't be made available, Congress will deny it.
So that's why you get the president heaping opprobrium on these miscreants who made the bad deals and now are getting the bonuses.
I'm all in favor of keeping this heaping opprobrium. I would deny them the bonuses if possible. I would be for an exemplary hanging or two. Have it in Times Square, invite Madame Defarge. You borrow a guillotine from the French and we could have a party.
If that's what it takes to maintain popular support, let's do it. But it's not going to change anything economically.
AIG ought to be firing these chumps and daring them to sue; not supporting their pay bonuses and acting as if they can't do anything about it.
scaring away the very employees who understand AIG Financial Products' complex trades
Its they don't want everyone else to know how royally the f*cked up.
Based upon the performance of Obama's team, how much confidence do you have in them to fix this.
Quote:Its they don't want everyone else to know how royally the f*cked up.
I'm curious too as to how contractual bonus' work. Wouldn't they be based on preformance? It doesn't seem that these employees rate any kind of bonus.
The American people have $165 billion invested in AIG. We don't have the money, so we are going to have to borrow it. From who? Well, perhaps from China! Maybe China will buy the treasury notes issued to back up this newly printed currency. So ... who do you want to pay this money back? How about your children and grandchildren? That would be just swell, wouldn't it? AIG fails, the $165 billion is shot to hell, and there's nobody around to pay it back except for future generations of Americans through increased taxes.
There is another option. Why don't we let AIG pay it back? Why don't we stand back and let AIG take reasonable steps to turn its fortunes around and once again become a profitable financial powerhouse? Certainly you see no problem with that! The question, of course, is just how do they do that? They do it with management expertise, that's how. They do it by retaining the best minds they can and putting those minds to work on solving AIG's problems. There is no shortage of competition for the type of business minds that can change the fortunes of AIG. There are other companies out there who could use that help .. and who aren't under Barney Frank's thumb. Maybe it's just me, but I don't see the efficacy in allowing the best financial minds out there to gravitate toward companies that haven't received TARP funds while the companies that have borrowed so heavily from the taxpayers make do with second-rate executive talent. So how do the companies with the bailout funds keep the executive talent that will likely lead them to profitability? Well, they pay them! That's how. They live up to their contractual obligations. If they don't pay them, someone else will.
The issue here is not that AIG paid bonuses ... bonuses that amounted to less than 1/10th of one percent of the bailout money it received. The issue should be to whom those bonuses were paid. If they were paid to the perps who put AIG into this mess - and that's supposing the mess was caused by AIG execs and not by the federal government essentially forcing AIG investors and subsidiaries into making and buying hideously bad mortgages - then we have a problem. If the bonuses were paid to people who are working hard to solve AIG's problems and achieving some success, then no problem.
Let's take this angle. When was the last time you looked at the retirement plans for members of Congress? Some of these congressmen created the Community Reinvestment Act monster that coerced banks and lending institutions into making many of these subprime mortgages. These congressmen urged Fannie and Freddie to reduce their credit guidelines so that these quasi-government agencies to buy most of those bad loans. These congressmen and senators are going to retire with fat retirement funds that are completely safe while tens of millions in the private sector will retire with retirement funds decimated by this economic meltdown. Much of the problem was caused by the Barney Franks in Washington .. why aren't they paying the price like the rest of us?
New York Attorney General Cuomo wants a list of people who got those AIG bonuses. What? Now we have crimes being committed here? The attorney general is going to investigate people who receive payments pursuant to a contract? Cuomo - clearly playing to the political message here -- says that "we owe it to the taxpayers to take every possible action to stop unwarranted bonus payments to those who caused the AIG meltdown in the first place." Cuomo is going to investigate who received the bonuses and who developed the bonus plans.
What in the hell is going on around here? Are we going to adopt a standard where contracts are only enforceable if they're popular with political class and the public? If that contract is unpopular what are we going to do? Sic the attorney general after the parties if they live up to its terms? Do you know where this is going to go? Well, what if you were some sort of a financial genius, and AIG or some other institution receiving bailout funds wanted to hire you to help turn them around. You're going to think: "Hmmm ... sounds like a nice opportunity. I can help those people and make some pretty good change in the process .. but do I want to be the subject of a criminal investigation by the attorney general if I accept a bonus? Do I want the president calling me greedy and telling the congress to pull out all of the stops to take the money I have earned back? I think not. I'm going to stay right where I am."
A lot of what we're seeing here is the anti-capitalist, pro-government left seeing an opportunity to demonize the private sector. The same politicians who are so adept at getting the public whipped into a frenzy over these bonuses seem somehow unable to gin up any degree of outrage over taxpayer money being spent on lobster sex and tattoo removal. At least there's a chance AIG is going to pay the money back. Let's see if some gang-banger gone straight offers up the money spent to remove his tats.
I, for one, am a lot more curious as to what Barney Frank's lover was up to at Fannie Mae while he was busy protecting that institution from President George Bush's attempts at reform, than I am in sending the New York Attorney general on a witch hunt for executives who received bonus payments pursuant to a contract.