AIG has to pay it back
Tonight, the Treasury said it will make AIG repay the government the $165 million in bonuses handed out last week. In a letter to Congressional leaders, Treasury Secretary Tim Geithner said the money will be deducted from AIG's fourth bailout, which totals $30 billion. That's nice, but it better not stop there.
Giving AIG $179,835,000,000 instead of $180 billion doesn't make a whit of difference, except politically. If the government insists on getting the bonus money back, then get it back from the people who were rewarded for failing on a colossal scale. In his letter, Geithner said the government can't legally block the payments, but back to our earlier discussion about this, if there's a will, there's a way when you own 80% of the company and you saved it from ruin.
This feels like restitution without justice. If there's enough moral certainty among the people that the bonuses were wrong, and the government wants put a stop to this unethical plundering and truly influence Wall Street's culture, then take it to the courts. I don't like the distraction, but I also know how much people want fairness. Maybe I'm wrong, but I just can't imagine that AIG repaying the taxpayers with money the taxpayers were about to give AIG is good enough.
New York Attorney General Andrew Cuomo seems to want to take it further. I'll cite a couple key paragraphs from his letter to Congressman Barney Frank:
If AIG were confident in its claim that those who received these large bonuses were so vital to the orderly unwinding of the unit, one would expect them to freely provide the names and positions of those who got these bonuses. My Office will continue to seek an explanation for why each one of these individuals was so crucial to keep aboard that they were paid handsomely despite the unit's disastrous performance...
We have also now obtained the contracts under which AIG decided to make these payments. The contracts shockingly contain a provision that required most individuals' bonuses to be 100% of their 2007 bonuses. Thus, in the Spring of last year, AIG chose to lock in bonuses for 2008 at 2007 levels despite obvious signs that 2008 performance would be disastrous in comparison to the year before. My Office has thus begun to closely examine the circumstances under which the plan was created.
Tomorrow, AIG CEO Edward Liddy testifies before the House capital markets subcommittee.
I like my grilling well-done.