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AIG “Robs the Bank”

By Larry Doyle on March 16, 2009 at 9:35 AM in American Consumers, Bank Bailouts, Current Affairs, Economy, Insurance Policies & Industry, Sense on Cents (Larry Doyle blog), Wall Street

When an entity has an 80% equity stake in a company, one may think that nothing of substance could happen there without that majority shareholder’s consent. Well, how is it that the black hole known as AIG to Pay $450 Million in Bonuses.

We may see some arm waving and loud pronouncements from Congress about investigations, but the question still begs as to how this happened. The government took this majority stake in AIG last September. Are we to believe government representatives were both unaware of potential contractual payments and that they did not approve them? How could the government approve payments within a division that brought the global markets to its knees?

Perhaps we should revisit the theme of my piece, How Wall Street Bought Washington. Embedded in that piece, we can see the insurance industry lavished $220 million in campaign contributions and $1.1 billion in lobbying dollars on Washington over the last decade. AIG was one of the primary sources of that money.

Follow the money!!

LD

***Cross-posted from my blog, Sense on Cents. Come by and visit!

  • alibe

    I have a sneaky feeling this AIG bonus brouhaha is a contrived thing to get the “people” all enraged so 0bama or Geithner will understand the outrage and “do something” to stop the bonuses and show how effective 0bama or Geithner are. And how great they are in protecting us from the big bad AIG. Is this another dog and pony show for our benefit. It is too convienent for them to solve “this problem”. Am I too cynical? Or, can one ever be cynical enough? One can’t keep up!

    • obamastolemyboyfriend

      Well, they might want Geithner to get all of the Finance positions fully staffed beforehand. They can never be effective long term if the guy is doing everything himself. This should be a priority. What are they thinking? It would be like a company’s CEO having to do everything, answer the phone, process all orders, wrap and ship everything and do all the bookkeeping, etc.!

      Barck Hussein Obama = The Worst President ever!!

    • oowawa

      Is this a setup so Mr. O can come to rescue the taxpayers? Well Alibe, you ask if you’re being “too cynical.” Looks to me like you’re right on. This is in this morning’s news on Market Watch:

      WASHINGTON (MarketWatch) — President Barack Obama said Monday he’ll try to block bonuses being paid to traders at American International Group Inc., which has received $173 billion in federal bailout money.
      “This is a corporation that finds itself in financial distress due to recklessness and greed,” Obama said in the White House. “How do they justify this outrage to the taxpayers who are keeping the company afloat?”
      The president added he’s asked Treasury Secretary Timothy Geithner to use the leverage the government has, from the multistage bailout of the giant insurer, “to pursue every legal avenue to block these bonuses and make the American taxpayers whole.”

    • beebop

      have a sneaky feeling this AIG bonus brouhaha is a contrived thing to get the “people” all enraged

      You betcha … the horses are long since gone and the doors are hanging on the hinges.

  • Elliott

    If these employment contracts cannot be broken, the public needs to know how they were negotiated. Was the fact that the investments were already headed south in 2007 factored into this? Was “creative” accounting used to make the compensation packages larger or to hide ruinous losses? Who approved this at AIG and what did they base it upon and do they take everything on face value? If any misrepresentation or fraud was involved the contracts can be nullified. Congress is too stupid and lazy to ask these questions but a good USDA and a grand jury could figure this out toute de suite.

    • Baba Rum Raisin

      If you and I were running a business and were bought out (or sold a controlling interest in) that enterprise and paid enough to go fishing, among the first actions taken by the New Owners would be the cancellation of all employment contracts (“Don’t like it? SUE us!”), elimination of matching 401-K contributions, termination of the Office Coffee and Doughnuts and a variety of other quasi-terrorist actions that the new Management Team learned in “One Minute Manager,” all designed to make the retained employees fearful of losing their rice bowls.

      All that’s necessary is for the US Gov’t to say, “No bonuses. Sue us. And, BTW, we have a LOT of JD’s sitting around with their thumbs up their asses, not doing much anyway, so get out YOUR checkbook, hire yourself a lawyer and Have At It.”

      So these jamokes at AIG are immune to this because…?

      They went to Yale?

      Inquiring minds want to know.

    • Patience

      Ditto Elliot. A good attorney could surely find a way to deem these bonus contracts null and void, if the will to do so truly existed. But I’m cynical enough to believe the POTUS hopes to get some of that bonus money back in the form of campaign contributions, believing beneficiaries won’t bite the hand that feeds them.

      • lilytoo

        Indeed. If they were simply called ” pensions,” instead of bonuses, a way would be found to tear them up in about 3 seconds. See how easy it is?

        • Baba Rum Raisin

          Worked for OJ!

          Oh, wait. OJ’s on vacation at Indian SPrings, isn’t he?

  • fiscalliberal

    I sent the following to my Senators and Congressman today.
    ————————————————
    March 16, 2009

    Today’s headlines are about Chairman Bernanke saying we need political will to revive the financial system and AIG (taxpayer owned) is paying Retention Bonuses for people in their Financial Services division who brought the company down.

    Please be advised that this tax payer is outraged and believes the AIG people who made their company fail should be fired. More over, the Federal Reserve and Treasury do not speak with credibility in manageing this fiasco.

    If nothing else the person at AIG who is giving the bonuses should be fired for getting his company in the postion for this to happen.

    It appears that anything goes with taxpayer money and congress is just letting it happen
    The time for outrage is over. It is time to make heads roll for these insane financial actions. Congress needs to act
    —————————————————
    Took about 10 minutes with the standard federal forms for e-mail. Simply google your senators and congeressman. The option dirct to their email comes up in google

    Some how we need to let them know that we are out there and watching.

    • http://www.senseoncents.com LD

      I commend you!!

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  • Peggy Sue

    The Ben Bernacke statement last night was incredible, a complete reversal of everything we’ve been hearing. The recession will end by late this year and we can expect growth and recovery in 2010. The key, Bernacke added, is stabilization of the banking industry.

    Wonder if he’s talked to Geithner? Wonder if any of these guys are talking to one another? Of course, he may not be able to get ahold of Geithner because I understand no one’s picking up the phones at Treasury. Skeleton staff.

    Where is the semblence of clarity? If the administration thinks this crosstalk is inspiring confidence, they’re dead wrong. Has it always been this bad? Or am I just paying more attention these days.

    The AIG matter is an outrage. The American public owns what: 80% of this company and no one knew about the contractual agreements? Or is this another example of no one reading the material? Either it’s outright fraud or total incompetence, neither of which is making me or any of my neighbors and friends happy. People are losing their jobs, their retirement savings and sense of security and we’re suppose to “go with the flow.”

    The administration better get these people on the same page or the recent tax “tea parties” will become very, very nasty. It’s absolutely mind boggling.

    • obamastolemyboyfriend

      But of course they don’t say how this will happen or why.

      Funny, I keep coming back to the fact that the Obama says the stimulus will creat or save 3.5 million jobs. Ok, but we’ve lost 4.5 million jobs since December. Barrakula apparently thinks that we can’t do math. I’m not very good at math to be honest, but I can see the numbers don’t look good.

      Also, I would think the biggest thing would be to creat jobs because of 8.1% unemployment and 14% underemployment (hour and salary cuts), how is this fixed by year end? If people have jobs, they will give business to the banks and the banks should flourish.

      I hope Obama and his stooges will buy a vowel first. Jobs, jobs, jobs, equal people spending and paying taxes. Hello! If I’m not bringing money in, I sure am not paying taxes or buying anything and stimulating the economy. Much better to have millions of citizens doing it than the Government. The Government can’t replenish their money if many of us aren’t working.

      We’re surrounded by idiots!

      • Baba Rum Raisin

        I am disappointed that the Masters of the Universe (Not!) lacked the civil honor to open the windows of their sybaritic palaces and jump out.

        Perhaps it’s because they knew that The Fix was in.

        Perhaps it’s because the windows in office towers no longer open.

        Yeah! That’s the Ticket! Let’s blame it on Mies van der Rohe and Philip Johnson!

        If the banking industry fell upon its collective ass, Capital would gin up new banks overnight.

        After all, isn’t that what Capitalism and the Free Market are all about?

        • NoBamaNoWay

          heh.

      • NoBamaNoWay

        word, OSMB; unless there are going to be TONS of GOOD jobs by year end, nothing is going to change. the fools who run this country still think that the rest of us can just “eat cake.” throwing money at bankers will not do shit to turn this economy around.

  • HARP

    Nobody seems to mention that TARP was written with no oversight by Barney Frank and the Dummycrats.

  • termo

    I agree with “alibe” that much of this AIG bonus outrage is contrived.

    The government was either complicit with these bonuses or the government is too incompetent to manage a business. Either one is a reason not to have government bailouts of companies.

    I have another issue regarding these bonuses which is not being addressed. Apparently about 50% of this bonus money is for the top 40 executives.

    That means another 50% is for average workers in AIG who are middle class. These are people have done a good job all year and are in no way responsible for AIG’s failure. These people also rely on those annual bonuses to pay for their kid’s education, or a car, or repair to their home.

    The ONLY people who should be targeted about this bonus situation are the most senior executives who were responsible for corporate direction and actions.

    Unfortunately there are no grown ups in DC and certainly Captain Clueless does not know what a bonus is having never received one himself.

    • alibe

      Captain Clueless only knows the “pay to play” type bonus that Chicago understands all too well. 0bama has received the bonus that is otherwise known as a bribe, as a payback, as a kickback, as extortion, as an inducement.

  • bart

    Would it be too much to say our democracy has slipped into oligarchy?

    • NoBamaNoWay

      it’s been there for a while, actually. our “democracy” is really just an illusion maintained by the aristocracy to placate the masses.

  • anon

    There is no question that the “news” of the AIG bonuses is contrived. This was reported back in September of last year but the story hits the broadcast news cycle incessantly only now, 6 months later? What are we currently being distracted from by the outrage over AIG bonuses now?

    Reported on September 29, 2008
    http://www.bloomberg.com/apps/news?pid=20601087&sid=aTzTYtlNHSG8&refer=home

    Reported on January 29, 2009
    http://www.freerepublic.com/focus/f-news/2174289/posts

  • brodie

    Aw, hell- I think the whole “financial crisis” is a manufactured construct. I simply don’t believe it is real. Piss on all of ‘em.

  • LAUREN

    Rumor has it that Obama is going to tell AIG they can’t give the money for bonuses and try and take the money back from them. Like it or not, those employee bonuses were in their contract. Does this mean the govt. can do anything they want when it comes to binding contracts? I bet this one will go to the Supreme Court.

  • http://noquarter foxyladi14

    he will probably change his mind tomorrow.stay tuned..

    • Peggy Sue

      Yeah, I think this is all theater. Faux outrage from the administration that will go exactly nowhere. It’s a Passion Play.

      I’m feeling a migraine coming on! Jeeze.

  • Diana

    I don’t know if this question has been asked or not. I fully admit I am not up to date on the economy and all it’s working.

    But something about this whole AIG thing and our government doesn’t feel right. With both Democrats and Republicans. I read somewhere that the reason they “had to” bail them out is I believe it was 30% of American’s have their retirement accounts with AIG.

    To me it seems like it would have made more sense to say OK we’ll absorb that 30% and set up a new account with a responsible company. Then invest the stimulus in those accounts. Now you’re on your own to make it or fail. Instead it seems like to me we’ve given them all this money to send to other countries which they have billions upon billions of our tax dollars. Party. And bonus’s. We’re just giving them good money for toxic money that is never going to show any returns. They’re going to go belly up and we’re going to still have to come up with the retirement for that 30%. All they’ve shown is losses even with all the money they’ve been given.

    Or do I have this wrong?