By Maura Kelly, Comment Is Free
Posted on March 18, 2009, Printed on March 19, 2009
http://www.alternet.org/story/131939/
You don't have to be a financial expert to appreciate the irony in the letter that Edward Liddy, the government-appointed chairman of AIG, sent to Treasury secretary Timothy Geithner on Saturday.
To explain why bonuses of $165 million were needed to keep the top guys at the insurance giant, Liddy wrote: "I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them." And yet, he said, "We cannot attract and retain the best and the brightest talent to lead and staff the AIG businesses -- which are now being operated principally on behalf of American taxpayers -- if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury."
The best and the brightest, huh? We are talking about the dudes at AIG's financial products division, which helped effect the sub-prime mortgage crisis and to nearly level the global economy too. (Until February 2008, the division was headed up by Joseph Cassano, named by CNN as one of the "Ten Most Wanted Culprits" of the financial collapse.) And yet there are some of Cassano's remaining colleagues, receiving individual bonuses as large as $6.5 million.
AIG defended its action by saying the bonuses were promised last year, in contracts, and cannot be legally voided at this point. Lawyers at the Treasury department have agreed that the company would likely face lawsuits if it tried to refuse the bonuses. Fair enough, I suppose. But considering that AIG agreed to reduce its 2009 bonuses for the unit by 30% after being pressured by Liddy, I have to wonder if there isn't a lot more wiggle room. That dude who is getting $6.5 million, for instance: surely he'd stay on for a measly $5 million? Especially considering there can't be too many more jobs waiting for him out there in the financial world he helped to nearly destroy.
Moreover, if AIG had been allowed to fail, would it still have been legally obligated to pay these bonuses? And why didn't the government foresee that this might happen and insist on a bonus cap as a condition of AIG's bailout? Surely the company would have had to accept. That the government didn't take such a simple measure to prevent this kind of gross abuse seems wildly short-sighted, and unbelievably daft.
But I don't think it's the government that's primarily to blame here. I do believe they bailed out AIG with the best intentions -- knowing they'd have to face angry voters (and the unforgiving annals of history) if the economic disaster got even worse. It's those "best and brightest" over at AIG who are really to blame. It's a shame that those jerks don't have to answer to anything -- not even (if their continued greed is any indication) their consciences. But what they're doing -- cheating honest taxpayers out of their money -- isn't all that far removed from what Bernie Madoff did.
There is some consolation, however, in the words of President Obama, who called the AIG bonuses an "outrage" and instructed Geithner to "pursue every single legal avenue to block these bonuses and make the American taxpayers whole." We can always hope that happens. Too bad there's not much we can do if it doesn't.
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