An Ol' Broad's Ramblings
This really burns me up.
Troubled insurer American International Group (AIG: 0.4815, 0, 0%), which is 79.9%-owned by the federal government, will pay $165 million in retention bonuses on Sunday to those at the division that has drawn most of the heat for the company’s near-collapse.
The developments have drawn more negative attention to an insurance company that the Treasury Department and Federal Reserve have committed up to $170 billion to help stabilize itself after dangerously betting much of its future on a now-illiquid market.
Through the criticism and outrage, AIG has said it recognizes the problems with these payments, but continued to stress the need for the bonuses.
“We cannot attract and retain the best and brightest talent to lead and staff the AIG businesses which are now being operated on behalf of the American taxpayers,” AIG chairman and CEO Edward Liddy said in a letter to Treasury Secretary Timothy Geithner on Saturday.
I’m sorry? The best and the brightest? So where were these “best” and “brightest” when the whole thing was going to hell in a handbasket?
Liddy’s letter said the company has a contract with these employees to pay their bonuses and added, legally, AIG’s hands are tied — but he said he would try to decrease those payouts. We believe that there will be considerably greater flexibility to reduce contractual payments in respect of 2009, and AIG intends to use its best efforts to do so, wrote Liddy in his letter to Secretary Geithner.
Administration officials have called AIG’s bonus structure both inappropriate and unacceptable, but an Obama Administration official added the White House conducted its own analysis of the bonus contracts and agreed that they are binding.
Treasury Secretary Tim Geithner called Liddy Wednesday to push the AIG CEO to renegotiate the bonuses.
“They were entered into before the government had anything to do with AIG,” said another administration official. “We’re going to be very involved, to make sure those kinds of things aren’t happening [again] as long as they aren’t contractual.
Okay, while I understand the concept of contractual obligations, is there NOTHING that can be done when we, the taxpayers, are paying those bonuses? Isn’t the concept of a bonus to reward a job well done? I don’t think most of us in the private sector would be rewarded for throwing our company into such a tailspin that the government has to bail us out. In fact, I believe I’d be fired for such behavior. I just don’t understand how a company who is majority owned by the government can still rely on those contracts to pay millions in bonuses. On the other hand, maybe I can get a job there…