On Sunday, the New York Times reported that The American International Group (A.I.G.) will dole out around $165 million in executive bonuses. These bonuses come in the wake of A.I.G. receiving $170 billion of taxpayer money last year in order to save the company from totally collapsing.
The situation is even more odious because A.I.G. - out of all the troubled financial institutions - has received the largest sum of taxpayer dollars and has conducted its business in an especially reckless and embarrassing fashion. Furthermore, the bonuses will be paid to executives in A.I.G.’s financial products division, the same unit that “wrote trillions of dollars’ worth of credit-default swaps that protected investors from defaults on bonds backed in many cases by subprime mortgages” (Cooper, 3/16/09) and plunged the company into financial ruin.
The news has drawn widespread outrage and infuriated people on both sides of the political spectrum. Today President Obama delivered a harshly worded statement in which he called A.I.G. a “corporation that finds itself in financial distress due to recklessness and greed” (Cooper) and ordered Treasury Secretary Timothy Geithner to “pursue every single legal avenue” to block the executive bonuses.
“Under these circumstances, it’s hard to understand how derivative traders at A.I.G. warranted any bonuses at all, much less $165 million in extra pay,” President Obama continued. “How do they justify this outrage to the taxpayers who are keeping the company afloat?”
Edward M. Libby, appointed by the Federal government to oversee the progress at A.I.G., acknowledged the bad message the bonuses sent, but maintained that they were necessary. In a letter to Geithner, Libby wrote, “We cannot attract and retain the best and the brightest talent to lead and staff the A.I.G. 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." (Cooper)
Despite Obama’s call to block the bonuses, the task may prove difficult, if not legally impossible. The bonuses, covering 400 employees, and ranging from $1,000 to $6.5 million are mandated for in a contract that was written in 2008 before the banking meltdown. In fact, Obama's chief economic adviser, Lawrence Summers said over the weekend that the federal government had reviewed its legal options and concluded that it could not block the payments.
Time will tell...
[My opinion on this bonus situation aligns with the popular sentiment. I am outraged by A.I.G.’s decision to distribute these bonuses – a move I regard as a slap in the taxpayer’s face. While I understand their contractual obligations, I believe that the contract became negotiable the instant the government propped up A.I.G. and resurrected using taxpayer money. At a time when hardworking people across the country are being laid off in waves, and those who are lucky enough to be employed are struggling to make ends-meet, it is simply unjustifiable to significantly reward those people who had a legitimate role in creating this financial crisis. Just despicable. I want this crisis to be resolved as quickly as possible so the Obama administration can begin the process of transforming our economic system.]
The situation is even more odious because A.I.G. - out of all the troubled financial institutions - has received the largest sum of taxpayer dollars and has conducted its business in an especially reckless and embarrassing fashion. Furthermore, the bonuses will be paid to executives in A.I.G.’s financial products division, the same unit that “wrote trillions of dollars’ worth of credit-default swaps that protected investors from defaults on bonds backed in many cases by subprime mortgages” (Cooper, 3/16/09) and plunged the company into financial ruin.
The news has drawn widespread outrage and infuriated people on both sides of the political spectrum. Today President Obama delivered a harshly worded statement in which he called A.I.G. a “corporation that finds itself in financial distress due to recklessness and greed” (Cooper) and ordered Treasury Secretary Timothy Geithner to “pursue every single legal avenue” to block the executive bonuses.
“Under these circumstances, it’s hard to understand how derivative traders at A.I.G. warranted any bonuses at all, much less $165 million in extra pay,” President Obama continued. “How do they justify this outrage to the taxpayers who are keeping the company afloat?”
Edward M. Libby, appointed by the Federal government to oversee the progress at A.I.G., acknowledged the bad message the bonuses sent, but maintained that they were necessary. In a letter to Geithner, Libby wrote, “We cannot attract and retain the best and the brightest talent to lead and staff the A.I.G. 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." (Cooper)
Despite Obama’s call to block the bonuses, the task may prove difficult, if not legally impossible. The bonuses, covering 400 employees, and ranging from $1,000 to $6.5 million are mandated for in a contract that was written in 2008 before the banking meltdown. In fact, Obama's chief economic adviser, Lawrence Summers said over the weekend that the federal government had reviewed its legal options and concluded that it could not block the payments.
Time will tell...
[My opinion on this bonus situation aligns with the popular sentiment. I am outraged by A.I.G.’s decision to distribute these bonuses – a move I regard as a slap in the taxpayer’s face. While I understand their contractual obligations, I believe that the contract became negotiable the instant the government propped up A.I.G. and resurrected using taxpayer money. At a time when hardworking people across the country are being laid off in waves, and those who are lucky enough to be employed are struggling to make ends-meet, it is simply unjustifiable to significantly reward those people who had a legitimate role in creating this financial crisis. Just despicable. I want this crisis to be resolved as quickly as possible so the Obama administration can begin the process of transforming our economic system.]
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