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Surprise! AIG Gives Out Bonuses Despite Taking Billions in Bailout Money

If you think that getting $170 billion in taxpayer bailout money would embarass the AIG from giving millions in bonuses, think again: the beleagured financial company is going forward with plans for $165 million of bonuses and employee retention pays ... with the government's grudging approval:

A.I.G. had set up a special bonus pool for the financial products unit early in 2008, before the company’s near collapse, when problems stemming from the mortgage crisis were becoming clear and there were concerns that some of the best-informed derivatives specialists might leave. It locked in a total amount, $450 million, for the financial products unit and prepared to pay it in a series of installments, to encourage people to stay.

Only part of the payments had been made by last fall, when A.I.G. nearly collapsed. In documents provided to the Treasury, A.I.G. said it was required to pay about $165 million in bonuses on or before Sunday. That is in addition to $55 million in December.


(Photo: threecee [Flickr])

Previously on Neatorama: Posts tagged Economic Crisis

Of course a bailout is never going to work. It does nothing to fix anything for the long term. They could get all they money they want but it will not fix the problems they are having now. If a business is not working it needs to do it the capitalist way. Go bankrupt and rebuild from the ground up. If you do not survive you do not survive. Unless these business rework their systems from the ground up a bailout will do nothing but maybe let them survive for a little while longer. They will just come back for more and more handout money.
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$170 billion in bailout money. $210 million in contractual bonuses since the bailout. That comes to 0.12%. I think they did the right thing.

Now, if they use the bailout money to give new bonuses to executives before that money is paid back, then I will be mad.
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Josh. dang, I hoped I wouldn't take the bait, but I just have to respond.

You are fundamentally misunderstanding what the bailout money is for. It's not meant to solve long term problems, it's meant to keep us out of something as bad as or possibly worse than the great depression.

I'll try and make it simple for you: If these companies (banks in particular, but any companies that also have banks as investors such as AIG) do fail everyone will loose money.

Banks, right now, own too many bad assets: bad investments, and houses dropping in value. The failing assets have dropped so much in value that the seed money (capital) of many banks is essentially gone, and now the losses the banks are facing are cutting into the money they owe to you, I, and our employers in the form of savings and checking accounts.

So, say we gave the banks no money. Lets also assume that this economy is going to get worse and the banks have to sell their toxic assets at current market value. The money they have might not be enough to pay us back, Josh. The FDIC and Government would have to step in anyway to bail banks out then! But at that point the largest lenders in the world would fail, probably bringing most business to a halt and leaving huge amounts of the population out of work. The capitalist system would be in a lot of danger then...

The bailout is a band-aid, sure. But it's one we need. Once we fork all this money out (and I'm not happy about it either) then we can make sure none of these companies can get "too big to fail" again, and send every one of those clowns to prison.
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AIG is damaging reputation of the whole insurance industry...Actual system of management-shareholders cooperation is non functional. Managers are can be good in booming times, but once there is crisis, they will try to bite as quickly and as much as possible out of the company value. But what new system implement? To give them shares instead of money? It's working a bit better as a motivation, but not always, especially now, when AIG shares have extremely low value...
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Bailout money was meant to 'save' whatever contract AIG was supposed to honor, including those with its own employees. It is not about the quality of the contracts... Well at first, of course... Anyway, I'm sure that auditing AIG's account would bring tons of errors/abuses in expenses as in every company or administration. Just ask any auditor.
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It's a question of what is more "right." Should the CEOs and managers take the bonuses, or should they donate their bonuses to charity? Charities are getting hit hardest. And these guys walk away with 500K bonuses? Evil.
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AIG has contractual agreements with their employees that go something like this:

If "A" happens then we will pay you "X" dollars in bonus money.

They (AIG) are contractually (legally) obligated to fulfill the terms of these contracts.

Now that we, the taxpayers own approx 80% or so of AIG, we own their obligations as well.

If AIG fails to meet the requirements of their contracts then the employees can sue AIG (and the US taxpayer) for failing to fulfill the obligation.

It's interesting that the Dems don't want to cancel the UAW contracts that are sinking the auto industry while, at the same time, wanting to cancel the AIG contracts.

This situation is another prime example of why it was never, ever a good idea for the fed gov't to put money into a private company.
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