AIG Bonuses are Not the Real Problem: We Need to Fire the Bastards

A BUZZFLASH NEWS ANALYSIS
by Meg White

Oh, AIG. How does it feel to be the most hated company in the United States, a symbol for all that is wrong with the American economy?

It must be tough. But I guess those hefty bonuses help ease the pain. But now that the public knows about your $450 million slush fund specifically created to reward the geniuses in the financial products division that flushed away AIG's money in the first place, it may be time to reconsider your public relations.

When one stops to take the national temperature on this subject, it seems the American public is far beyond bailout fatigue. We are nearing a populist uprising, but perhaps for the wrong reasons. Some rightly remind us that the bonuses are a drop in the bucket compared to the billions in taxpayer money the embattled insurance company has received over the past few months.

Yes, we're mad, but we're also not going to take it anymore. To ensure this doesn't happen again, to avoid the existence of a moral hazard, we need to fire the bastards.

I'm not the first to suggest this (thanks, Rep. Barney Frank). But the best support for this idea comes from the head of the company himself. Excerpted from a carefully crafted and ultimately depraved letter from AIG CEO Edward Liddy to Treasury Secretary Timothy Geithner:

"Retaining key traders and risk managers is critical to our goal of repayment," Liddy wrote. "We cannot attract and retain the best and brightest talent to lead and staff the AIG businesses -- which are now being operated principally on behalf of the American taxpayers -- if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury."

There's a thinly veiled threat to both the Treasury and to taxpayers in these words. Translation: We won't pay you back until our guys get a piece. The sad truth of the matter is that we'll probably never get all our money back from AIG.

But there's also a bald-faced lie in that statement. The people working at AIG, especially those in the financial products unit, are not the "best and brightest." They are the criminally negligent bandits that helped cause the financial meltdown in the first place.

That threat, combined with that lie, make it clear that mass firings are the only true solution to the AIG crisis.

The financial products unit, run by people who made stupid investments they didn't understand fully and got involved with financial instruments they couldn't see clearly, got $55 million in retention bonuses in December and another $165 million last week out of a $450 million pool the company set up in 2008. The additional $230 million is scheduled for release later this year.

One would think the fact that the government owns nearly 80 percent of this "business" would mean the Obama Administration would have more power to void these bonus contracts. But herein lies the problem with President Barack Obama's fear of the ramifications of using the word "nationalization." By avoiding a takeover, he also skirts (what is evidently necessary) control over operations at AIG.

As of Sunday, the government line was that the only thing we can do is try to shame AIG into doing the right thing. But after a weekend of public outcry over the government's professed inability to stop the payments, Obama promised Monday to pursue every opportunity to overturn the "outrage" of these contracts.

Sen. Charles Grassley (R-IA) took it a step further, suggesting the AIG execs feel the shame literally.

I would suggest the first thing that would make me feel a little bit better toward them if they'd follow the Japanese example and come before the American people and take that deep bow and say, "I'm sorry," and then either do one of two things: resign or go commit suicide.

Now it appears AIG heads will not roll in that sense, but the company may be employing what some call a "suicide strategy."

In an interview with Truthout, Professor William K. Black, best known for his regulatory and whistleblower roles during the Savings and Loan Crisis and Keating Five scandal in the 1980s, explained how AIG uses this strategy by holding itself hostage and threatening the demise of the company if they don't get what they want.

"AIG is holding a gun to their own heads, saying 'unless you help us continue to have this incredible life in terms of bonuses, we're going to die and the taxpayers will be faced with a catastrophe,'" Professor Black said, adding "It's too bad Marxists don't believe in god. Otherwise they'd be thanking him for having sent AIG down to earth to destroy capitalism."

Black and three other experts released a statement urging the president to call AIG's bluff by breaking off the derivatives arm of AIG, the part of the business that perpetuated the crisis via risky investing in credit default swaps. Black says this action would allow AIG's financial products unit to declare bankruptcy without taking the entire insurance giant down with it.

There are other legal options for making AIG do the right thing. A Chicago Sun-Times editorial today urges reliance on the industry that was once hated almost as much as financials are now:

A legion of lawyers makes its living challenging such contracts, under a variety of legal theories, including fraud.

Walk into any civil courthouse across the country and just watch.

There is also no shortage of theories from financial analysts on how to give AIG leverage to renegotiate those contracts.

So perhaps we can save a million here or there by stopping at least some of these bonuses before the checks go out. But that won't solve the main problem of getting these clowns out of a place where they can keep taking undue risks with the American economy and taxpayer money. They should be fired, regardless of what happens with their bonus bucks.

Now I'm not one to advocate violence, nor do I make it a policy to parrot graying white males, but count me in with Frank, Grassley, and Black. Let AIG financial commit "suicide," or at least get them off my damn lawn.

A BUZZFLASH NEWS ANALYSIS

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