A.I.G. to Pay $100 Million in Bonuses After Huge Bailout

On behalf of us taxpayers Tim Geitner bought us the fake Blazing Saddles town. When we finally have a close look are are going to find out that AIG has nothing left.

 

<blockquote>Senator Ron Wyden said on Tuesday that the furor surrounding AIG's bonus payments could have been avoided had the Obama White House and members of Congress simply backed legislation that he and Sen. Olympia Snowe introduced more than a month ago.

In an interview with the Huffington Post, the Oregon Democrat noted that during the crafting of the stimulus package, he and his Republican colleague from Maine introduced a provision that would have forced bailout recipients to cap their bonuses at $100,000. Any amount paid above that would have been taxed at 35 percent. The language made it through the Senate, but during conference committee with the House, it was inexplicably removed. </blockquote>http://www.huffingtonpost.com/2009/03/17/wyden-my-bill-could-have_n_176084.html

He and Snowe are reintroducing their original provision as standalone legislation.

 

You'd do it for Randolph Scott.

 

http://www.washingtonpost.com/wp-dyn/content/article/2009/02/20/AR2009022003304_pf.html

Good background article on the unit of AIG that received most of bonuses. It makes it fairly clear that the pending obligation of said bonuses was well known by the Govt officials prior to now.

 

Where exactly does that story do that?

 

This is the height of stupidity. You run a freaking company into the ground to the point where the government has to bail you out and someone is getting a BONUS?

What the hell for? Certainly not sound management.

I applaud the first executive to stand up, go on TV and decline his bonus. Or donate it to some non-partisan charitable organization that feeds starving children in Sudan or someplace. That would earn far more goodwill than any bonus could ever be worth.

 

Um, isn't that like blackmail? Pay us or else? Criminal.

 

Right here:

"As the collateral calls kept coming, the Federal Reserve Bank of New York announced in November it would create a separate company, dubbed Maiden Lane III, to help alleviate AIG's cash crunch caused by the credit-default swaps written by Financial Products. By buying up the underlying mortgage-related securities, the government freed Financial Products to terminate billions of dollars in credit-default swap contracts that had plagued AIG's balance sheet. So far, the government has poured more than $60 billion into the effort.

Pasciucco meets weekly with Federal Reserve employees, "making sure they're fully briefed on what we're doing and what our plans are," he said. In addition, four workstations on the firm's trading floor are reserved for Federal Reserve staff members who regularly visit Wilton. The Fed team sits in on steering committee meetings and must grant a waiver whenever the firm wants to make debt payments."


Key word being "Federal Reserve of NY - Tim Geitner come on down.

 

How would that have fixed anything.... they would get taxed at about 35 percent anyway on income over 100K. What detail am I missing?

 

A friend of mine has a sister who is a potential bonus recipient and he let it slip to me that the bonus way of paying people somehow lightens the recipient's tax hit on the money.

Granted, I have found no supporting evidence to back this up, but it is always about the money. I am not buying "holding on to talent" for one second.

If they wanted to hold onto talent, they could word a contract so that an employee is paid 50% of their salary 2-3 days before the end of the fiscal year. That would motivate you to stay. If you quit before this final day, you lose your huge payday.

There has to be something taxwise tied into the term "bonus." There is no reason for them to call this a bonus. At least none that I can see.

 

Sorry, but, as noted on another thread, I just can't get that worked up over all this.

No, it's not fair. But so what? All this bailout stuff, in general, is about trying to stabilze and/or slightly improve the economy. Everything else is just details.

I think this kind of explains how I feel:

http://business.theatlantic.com/2009/03/management_by_headline.php

. . .There are all kinds of counts tossed around about what total bonuses are. The highest number I've seen credibly reported is $1.2 billion. Let's assume this is correct. This would imply that AIG's weight-average comp structure is about 80% base / 20% variable. I don't know if this is optimal, but this doesn't seem inherently crazy to me. Do you really want zero comp at risk for people operating this company in its current state?

Or is it that many people hate the fact that senior employees of AIG Financial Products (i.e., "the same people who almost destroyed the world financial system") are being paid $100 million in retention bonuses to make sure they stay to unwind these positions? I don't like this any more than anybody else. But as a taxpayer, which is to say, partial owner of AIG, I'm not looking for cosmic justice, I want my equity to retain some value. The aggregate size of AIGFP positions appears to be on the order of $100 billion dollars. $100 million is 0.1% of $100 billion. I don't know if the incremental value that having these guys around to do the unwinding is worth more or less than that, but, again, it's not an inherently crazy idea either.

 

I agree with what you say. They are closing down that unit and they need experienced people to stay and unwind the positions that were taken.

It would have been a lot more palatable if the country was made aware of these pending bonuses of front along with clear explanation of the reasoning?


Hey "and " is that Tim Geitner in your avatar?