AIG’s ‘bonus’ to critics
One argument for allowing AIG executives to keep the $65 million in bonuses they received this month would be quickly rejected if we were dealing with terrorists or common criminals. It goes like this:
The employees of AIG Financial Products basically built the economic bomb — using exotic financial derivatives — that exploded last year and caused the near collapse of the insurance giant. But more explosives may yet detonate and these geniuses are the only ones who can defuse the bombs. Therefore, they must not only remain on AIG’s payroll, but must receive handsome bonuses to persuade them to stay.
We reject that notion, as do a growing number of political leaders from both parties. Frankly, even if these folks are the most knowledgeable about the problems, we don’t believe they are the only ones capable of unraveling AIG’s problems. Certainly they don’t deserve to be rewarded for leading the company into this mess — not when the firm is now surviving on taxpayer dollars.
There is a second argument for paying the bonuses that has more merit. It is that the bonuses were actually promised a year ago, and the recipients have a legal claim to them. If the bonuses aren’t paid, the executives could sue and perhaps win more money.
Some people have suggested the AIG executives could voluntarily give up the bonuses. Others say the executives won’t sue to protect their bonuses because their names would be revealed in the lawsuits and they would be publicly denounced.
We’re not so sanguine about either of these scenarios. Executives of top financial firms have already demonstrated a remarkable ability to ignore public outcry as they continue living in grand style while their companies receive public welfare.
On Tuesday, senators in both parties declared their intention to prevent the bonuses from being paid, or to tax them at levels near 100 percent if they are. That’s fine with us. But as Congress continues its rampage against the bonuses, it ought to acknowledge its own culpability for failing to enact meaningful restrictions on the bailout money in the first place.