Wednesday, March 18, 2009

AIG: Americans Investing in Graft

There's the ridiculous and the absurd. Then there's AIG. AIG paid $165 million in bonuses last week to select employees. How can a company that needed $170 billion in bailouts (taxpayer money) possibly justify bonuses of any amount? Perhaps they had budgeted for a $200 billion bailout and are now rewarding themselves for their $30 billion outperformance.

To add to the absurdity, these payments have been deemed retention bonuses. 73 individuals were given retention bonuses in excess of $1 million. 11 of these individuals are no longer with the firm! You read that correctly. 11 individuals who were given bonuses that were designed to keep them at the firm are no longer with the firm. Apparently, they only had to be retained through 5:00 p.m. on the day the bonus was announced. Perhaps this was a stroke of genius, and these people were actually paid to leave before they could do billions more in damage.

The leadership at AIG seems to be unaware that if the U.S. taxpayer hadn't stepped in to bail the company out, AIG would no longer exist. A company that doesn't exist is quite unlikely to pay your salary, let alone a bonus.

By all accounts, some of the people receiving the bonus were involved in the poor decisions that nearly brought the global financial system to a halt. It boggles the mind that people who should have long ago been fired are now receiving retention bonuses. What about those whose hands are clean? We're in the deepest recession since the Great Depression with a finance industry that's firing thousands of very experienced and intelligent people every month. I imagine many of those people would be happy to go to work for AIG with no bonus and less pay than the people currently at AIG.

The argument that the people responsible for creating the mess at AIG are now needed because only they can unwind the mess borders on insanity. These people were either idiots or crooks. Do we really need idiots, crooks, or idiotic crooks managing anything more sophisticated than a gumball machine?

Flash: It just crossed the tape that AIG CEO Edward Liddy is "asking" executives to return half of the bonus money. He's half right.

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