You've probably heard by now: AIG (NYSE:AIG) -- fresh off of $170 billion of bailouts -- will be paying $450 million in bonuses to certain employees. Lucky them.
We've been here before, and we typically get nowhere. Bonus brouhaha has stumbled over the notion that those not involved in a firm's undoing -- such as a municipal bond underwriter at Goldman Sachs (NYSE:GS) or a wealth advisor at Bank of America (NYSE:BAC) -- shouldn't be penalized for their wayward coworkers' adventures.
Well, these bonuses are an entirely different story. They're going to members of the financial products division that's almost solely responsible for Big A's demise. For the most part, these are not people who earned their pay by any stretch of the imagination. In the words of President Obama this afternoon: “Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses ... How do they justify this outrage to the taxpayers who are keeping the company afloat?"
And the money must be paid, story goes, because they're legal, contractual obligations that have to be met, lest lawsuits argue otherwise. Larry Summers -- President Obama's top economic advisor -- chimed in, saying, "We are a country of law. There are contracts. The government cannot just abrogate contracts."
Fair enough. But I can't be the only one fascinated that the same people with the authority to commit $10.16 trillion of taxpayer funds don't have the authority to alter an employment contract. The Treasury can flip a company's capital structure on its head, ring-fence guarantee any asset it wants, and give a blank check to whomever it deems fit. But holding back bonuses at a company it owns 80% of? Whoa … way out of its pay grade.
And, no, that doesn't make me a berserk Socialist who wants the Fed to control businesses with an iron first. It makes me someone who sees AIG for what it is -- a bankrupt company on life support that should be treated like all bankrupt companies, where contracts are often null and void. Just like convicted felons, some rights get revoked when you misbehave. That's how life works. No, that's how capitalism works.
Besides, ever since taxpayers became the de facto owner of all things unsuccessful, we've been light-years away from what's normal, moral, and probably even legal. You can say reneging employment contracts is breaking the rules, but let's be real here: We haven't been playing by anyone's definition of "the rules" since last September. AIG bulldozed every normal procedure of how capitalism works, but insists we revert to business as usual when it comes to paying bonuses to employees who single-handedly buried taxpayers in a black hole. I find that quite hypocritical.
But, hey, AIG is still a shareholder-owned company that deserves to be run by its owners. Since 80% of its owners are you, the taxpayers, I thought we should take a poll to see how you feel about the $450 million of bonuses allotted to the brilliance of its financial products division.
We'll call this an informal proxy vote. Take a minute to vote in the poll below. You can also share your thoughts in the comments section farther down this page.
This story has been updated to reflect President Obama’s comments.
