11

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.

Log in to post11 Comments

Pages

Come on, David. It most certainly is Geithner's fault that this didn't come to light until now. I'm not saying he should be fired, but if this is going to be his modus operandi, he should be and will be.

Yes, the contracts were signed under a different CEO and Treasury. That's not the point. In the meantime, the gov't has assumed an 80% stake in AIG. Two weeks ago, Geithner announced a fourth bailout round for the company.

His people should've been conducting due diligence to see what mines might be lying in wait. If he had brought these bonus contracts to the public's attention a few weeks ago, and said AIG has these contracts, they were written in late 2007, these payments are coming, here's what we're going to do (like your suggestion of having employees sign new ones)- I think reasonable people could accept that approach.

The public's anger stems from the Treasury screaming about these payments after they were already mailed out.

Pages

With Generous Support From...