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AIG bonuses: Right thing to do?

American International Group plans Wednesday to pay another round of employee bonuses, worth about $100 million, said several people familiar with the matter, a year after similar payments at the bailed-out insurance giant infuriated many Americans and inflamed Washington. Read the full article "AIG plans to pay $100 million in another round of bonuses."

By Jodi Westrick  |  February 3, 2010; 9:58 AM ET  | Category:  National Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   StumbleUpon   Technorati  
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These bonuses are NOT legal. They are at least subject to government oversight. Consider, most of the money AIG, CITI, Bank of America, all of those Wall Street companies play with are public funds - public employee retirement accounts, deposits from public accounts, federal funds either in the form of bailouts or money made available to them by one or another government agency. These are not private investments, they are public funds, and, thus, these companies are subject to government oversight for those bonuses and what they do with those monies. A simple executive order denying the bonuses would be both legal and entirely appropriate, and not just for AIG, but for every Wall Street firm handling any public funds. At the very least, our President, in signing such an executive order, would expose the members of Congress and courts that side with these predators against us, so that we could plan on appropriate actions for getting rid of them. I, for one, would LOVE to run a populist campaign against a sitting member of Congress that openly sided with AIG, China and India, Wall Street, against the interests of the public. It would be a massacre! Stocks go up when unemployment rises. Stocks fall when unemployment falls. Stocks go up when jobs are outsourced, when a new weapons system in sold to China that will certainly be used against us in the future. Wall Street, New York, is populated with treasonous scum and it is in the nations best interest to regulate and oversee everything they do.

Posted by: mibrooks27 | February 3, 2010 11:13 AM

If you want the banks to lend and want the system to start working again the bankers are gonna get theirs you may not like it but they will. If we keep punishing them the system will stay clogged up.It is not all the bankers fault everyone took adavantage of situation for their own good people knew what they were borrowing and spending ....

Posted by: lildg54 | February 3, 2010 11:38 AM

They should all be hunted down like rabid dogs and be dispatched as one would do to a rabid dog.

Posted by: joseph_charles | February 3, 2010 12:12 PM

It is the SIZE of the bonuses that is in question, a modest bonus for a hard worker who has not contributed to the crash is in order. Huge bonuses for those who got us in trouble are obscenities.

Posted by: gzlib | February 3, 2010 12:31 PM

LILDG54 - With all due respect, that is not how the system works. These bonuses, the usury, the outlandish credit card scams, the foreign investments in preference to small business loans in the U.S., the whole rotten structure is brand spanking new. It began under Clinton, was the brainchild of Rubin and Summers and Gramm, and has been foisted off on us as a "necessary evil". Well, it ain't! Other than the U.K. , with an economy that is also tanking, and a small collection of third world countries, no one has a banking and investment system even remotely as out of control as ours. This isn't capitalism, it is a run amuck criminal enterprise that just begs for controls, management and oversight before it wrecks the country. At the very least, consider that the current economic havoc, the American Depression, was *exported* by AIG, those Wall Street banks, and our investors. They ran a series of Ponzi schemes and scams that defrauded the entire world out of trillions of dollars. The STILL run those same criminal enterprises. They have done more harm than any organization since Hitler's Nazi Party. Not to put to fine a point on it, but these guys are INTERNATIONAL CRIMINALS. What we should be doing is arresting them and holding them over for an international tribunal that will try this entire collection of criminals for crimes against humanity.

Posted by: mibrooks27 | February 3, 2010 12:32 PM

It initially occured to me that legislation to tax the bonuses out of receipients would surely garner bipartisan support in congress. But, on second thought, that would mean the GOP would have to say yes to something. And that is not going to happen.

Posted by: jbryson2 | February 3, 2010 12:37 PM

How the hell do I know and how the hell do you know?

Posted by: dandb3 | February 3, 2010 12:53 PM

If the Wall Street bankers could see themselves as the public does, they would run screaming into the street and slit their own throats at the horror of it all.

Bonuses for what? Ruining the US economy? Taking AIG over the edge? These are not bonuses, these people are looting their corporation and the taxpayers will pay for it.

Posted by: Chagasman | February 3, 2010 12:53 PM

Where else are all these so-called irreplaceable employees going to go if they don't get their bonuses? Is there a hiring frenzy going on, or just maybe these employees are pulling a big bluff?

Posted by: st50taw | February 3, 2010 1:02 PM

The only fair way for these 'people' to receive their bonuses would be in a public arena full of the citizens who have lost their jobs, homes, health care. Let them explain why they deserve the BONUS money

Posted by: DIMMY | February 3, 2010 1:03 PM

Americans who lost money on account of AIG shenanigans should be getting bonuses, not the rats at the insurance company.

Posted by: BlueTwo1 | February 3, 2010 1:08 PM

The names of every person at AIG to receive a bonus over $15k should be published along with their place of residence. They wouldn't have the guts to pick up their checks if they were outed.

Posted by: bem4 | February 3, 2010 1:14 PM

these bonuses were agreed upon in contract before aig received any goverment bailout...
if it's covered by a contract aig must honor than they should pay it...

Posted by: DwightCollins | February 3, 2010 1:23 PM

why don't we punish the dems in the house and senate who didn't catch the crisis or who stood by and did nothing...

Posted by: DwightCollins | February 3, 2010 1:24 PM

Hey Dwight Collins,

Since you want to "punish the dems in the house and senate who didn't catch the crisis" should I assume you are are replutocan ADVOCATING FOR MORE GOVERNMENT intervention? so funny when you folks get caught in your own hypocrisy! you can't have it both ways.

Posted by: boomerbaby54 | February 3, 2010 1:36 PM

Bonuses are for doing a good job. Nothing more needs to be said.

Posted by: rlj1 | February 3, 2010 1:38 PM

so size DOES matter. pay must be related to measurable work effort - not scheme ability

Posted by: stephendavid2002 | February 3, 2010 1:45 PM

I think that until all taxpayer funds are paid back by ALL of the organizations that received them, bonuses should be limited to a reasonable amount relative to a person's normal salary.

I have a problem with the fact that organizations that caused the problem in the first place, are benefitting while the people who suffered the fallout of their bad decisions, are still suffering.

Reasonable bonuses for a job well done are OK. Excessive bonuses are not.

How to define excessive is difficult, but I know it when I see it.

Many times or perhaps in all cases, the bonus is relative to the benefit received by the organization, and it is very frustrating to see the organizations responsible for a problem, recover before the rest of the population has recovered.

Posted by: RichRable | February 3, 2010 1:54 PM

Ah, excuse me DWIGHTCOLLINS, "..agreed upon in contract..". And these would be like the same contracts that Wall Street banks and investors have been walking away from whenever it suits their purpose? I mean, the investors, a lot of them the same AIG people receiving your contractual bonuses, walked away from an 11,000 unit residential complex in Manhattan. And, what about estate giant Tishman Speyer recently defaulted on $4.4 billion in debt that it had used to buy the two apartment developments in Manhattan, handing the properties back to the lenders? Look, contracts are meaningless rubbish, pure and utter fiction in todays "new economic order". Get used to it! No one but a complete moron is going to honor an upside down real estate loan, a credit card debt that is due to usurious and artificially imposed interest charges, or anything like the cover these crooks provided themselves with their "bogus contracts for bonuses". The peasants have found their pitchforks and they're pounding down the castle gates!

Posted by: mibrooks27 | February 3, 2010 2:13 PM

The fact is that AIG was badly mismanaged and one section of it bought the whole company down. The Bush administration was forced to rescue the company at a huge cost to prevent further collapses in related companies and AIG now needs to be broken up and sold off.

Had AIG been allowed to go bankrupt originally they would now be in receivership and most of the people there would be working elsewhere. It's time to wind down AIG in an orderly manner - if these executives are worth the kind of money that they claim then they will have no problem getting jobs elsewhere or setting up a buyout to resurrect those parts of AIG that have some value.

"Too big to fail" and paying "managers" who fail to perform are seen far more often in socialistic economies than well functioning capitalistic economies.

Posted by: eac123 | February 3, 2010 2:34 PM

If AIG had contracts with these people to pay them bonuses, they should honor those contracts, but not with *our* money!

Let's be honest here, this is bald-faced greed. AIG's European and Asian counterparts make a fraction of what these guys do. Hell, toss these bums out and hire those guys. They can't possibly do worse.

Posted by: psienesis | February 3, 2010 3:01 PM

I had a conversation yesterday with a friend who's been unemployed since last Summer, not his fault, and had to decide whether to turn his truck back to the repo man so he can afford to move to a cheaper apartment to stay afloat a little longer. His misery stems from what those guys did to the economy, so no, they don't deserve bonuses, let them work at salary and be glad they still have a job. And if you don't think this anecdote is relevant, then you don't get it about what a society is and how we're all interconnected...

Posted by: razzl | February 3, 2010 3:03 PM

It's interesting to hear how the bonuses are necessary to keep a "free market" or even "capitalist" system operating, but there seems a certain reluctance to admit that Adam Smith wouldn't recognize this as a market system.

This isn't "socialism", but it's also not a free market. No, the U.S. should not be responsible for bonuses, or indeed the exodus of financial technicians, unless those people leaving would contribute to the decline of national economic value (in real terms), or true economic instability. While I may not like Bill Gates' software, he created wealth.

Market economics precedes capitalism, generally as mercantilism. A "free" market still was subject to manipulation, the tragedy of the commons, etc. Originally, capitalism was an innovative idea spreading ownership and making more funds available to the capital-intensive (slightly different meanings of capital in the two terms) Industrial Revolution. Industrialization would have been unlikely without the invention of stock markets.

But, for many decades, the value of stock was based on "fundamentals", or the value of goods and services of a company, its goodwill (an accounting term), and other factors with a direct relationship to the creation of new wealth in the general economy.

Arguably in the 1960s and 1970s, we started seeing, in conglomerates, leveraged buyouts, and other operations by the financial community, incentives that came from the shifting of wealth rather than the creation of wealth. I certainly don't want to oversimplify; there were many factors, not associated with any one party, in tax and regulatory changes, some with legitimately unforeseen consequences.

Still, there were safeguards going back to the lessons of the Great Depression, such as the Glass-Steagall Act that restricted banks from excessive speculation with depositor funds. A very major change came with the Gramm–Leach–Bliley Act of 1999, essentially repealing Glass-Steagall and allowing financial institutions to comingle speculative and safer funds. As this comingling progressed, and the financial industry encouraged short-term financial instrument value rather than wealth creation, the bonuses went to increasingly to financial people divorced from strengthening an economy. Greenmail didn't help, and was a disincentive to research and development.

So, if not paying bonuses causes financial traders to leave AIG and other firms, and go overseas, I tend to say good riddance. I am absolutely fine with tax-advantaged bonuses when they both meet corporate goals and contribute to the overall U.S. economy. When they simply support the investors, it's the investors' risk.

I'm not even objecting to well-managed new financial instruments that contribute to the safety of the economy. A credit default swap isn't an inherently bad idea, as long as the swaps remain carefully balanced. Lack of regulation of these instruments, however, allowed financial companies to take unwarranted risks with other peoples' money. When their bonuses come from moving wealth around rather than creating it, the economists (I am not one in real life or television) call it "moral hazard" -- an incentive to unsafe behavior.

Posted by: HCBerkowitz | February 3, 2010 3:17 PM

Sure, pay the bonuses, then tax then at 95%.

Posted by: maus92 | February 3, 2010 3:43 PM

This is what we need -- and we need it now.

Posted by: fiveman3 | February 3, 2010 3:48 PM

When Bear Stearns, AIG, and Lehman brothers were failing, free market theories had a chance to be tested, but the backers didn't want to find out.

They didn't let their theory play out.

Because they don't believe it either.


if the people at AIG want to leave, let them leave.

See if they can get hired anywhere else.

Posted by: vigor | February 3, 2010 3:56 PM

AIG was 'rescued' by Socialist Republicans.

Why didn't we let it fail if we believe in 'Free Market Capitalism'?

When profits are good, they keep them.
When they lose money, the taxpayer coughs it up.

Susie, there is no Free Market.

Posted by: vigor | February 3, 2010 4:06 PM

Bonuses are fine, that's Capitalism. Bailout are not, that's socialism. And it's socialism that started us down the slippery slope back in 08.

Posted by: wmboyd | February 3, 2010 4:58 PM

Bonuses? No capitalistic problem with it - as long as The People get their money back first.

Posted by: clandestinetomcat | February 3, 2010 5:06 PM

AIG lost money, so no one at AIG gets bonuses. Fair enough.

Federal and state governments have HUGE budget deficits. On the same logic, all state and local employees should be forced to take a pay cut. Any takers?

Posted by: conversableeconomist | February 3, 2010 5:12 PM

We should cut your pay 17%. You make too much and it's unfair to the people who make less. If you don't like it, go get a job somewhere else and we'll cut your pay there too.

Posted by: mikeandchris34 | February 3, 2010 5:17 PM

These empty suits don't deserve to have jobs, let alone bonuses. And AIG claims they owe the bonuses because of a previous contract? I've got news for them: In Montgomery County, the teachers agreed to give back their contracted raises to protect other people's jobs.

Let's quit doing business with these jerks and see whether they really are too big to fail.

Posted by: jlhare1 | February 3, 2010 6:30 PM

It is time for Americans to take law into their own hands and make sure that AIG's employee's pay for the arrogance of the the management of AIG. Enough is enough!

Posted by: rparker00 | February 3, 2010 10:00 PM

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