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The AIG Bonuses: Shock Maybe, But No Surprise

By Michael Scherer | @michaelscherer | March 16, 2009 | +

The Treasury Department found out last week that there would be another bonus payment to the traders in AIG’s financial products division, according to the White House. But the existence of the contracts that led to those bonuses should not have caught the Treasury, the White House or the American public by surprise. Back in January, Bloomberg News reported that the payouts were in the pipeline:

American International Group Inc., the insurer saved from collapse by government money after losses on credit-default swaps, offered about $450 million in retention pay to employees of the unit that sold the derivatives, according to two people familiar with the situation.

About 400 workers at the financial products unit may get the money in two installments, said the people, who declined to be named because details of the payments were confidential. The business was responsible for about $34 billion in writedowns since 2007 as the market value of swaps AIG sold to banks plunged amid the subprime mortgage market collapse.

It is a fine piece of journalism, well worth the read.

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  • pippapippa

    Without the actual contracts, how do we know that they say this? And anyway, there’s no contract smart lawyers, the IRS, and the bankruptcy court can’t abrogate with perfect legality. Just post the actual language of this supposed contract, and let a few lawyers– I bet there are some right here– explain to us how they would get around those clauses. This willingness just to 1) accept AIG’s word for it, and 2) surrender, doesn’t sound very smart.

    How about publishing the names of those who get the bonuses? It must be public record– publically traded organization, not to mention, uh, it’s mostly owned by the government now. If these guys think they are due these bonuses, well, let them stand up proudly and say who they are.

  • michaelscherer

    It’s not public record who got the bonuses. But the New York AG Cuomo is subpoenaing that information.

  • stuartzechman

    How did this slip by my radar?
    .
    Is Politico “driving” my conversation, too?
    .
    This is a fantastic wake-up call to those of us who are still being distracted by shiny objects being waved in front of us, Michael Scherer. We engaged news consumers need to take responsibility for failing to notice this one two months ago.
    .
    This post of yours begs the question, however:
    .
    What gigantic fraud or failure are we engaged news consumers missing whilst being occupied by this distraction?

  • spob

    Guys, the fed knew about this a while ago: http://www.washingtonpost.com/wp-dyn/content/article/2009/03/16/AR2009031602961.html?hpid=topnews

    So what the hell is Obama doing now? Is it really the president’s position that state wage laws aren’t to be followed, for contracts to be broken? What? And does he really think the American people are that dumb?

    If i were one of these guys and I didnt get paid, I’d say screw it and sue Obama and Geithner

  • http://privcorr.blogspot.com/ wvng

    Drum has an interesting piece onthe havoc these clowns could create if they left AIG ina huff: Revenge of the Spurred. Worth a read.
    .
    Can you spell “extortion?”

  • Ivy_B

    MS, I note you didn’t link to your story on TIME – Obama’s AIG Outrage: All Talk, No Action. (Perhaps you did yesterday; I was out of town all day.) When I read it I thought the snotty tone was really inappropriate. The first few paragraphs mock Obama based on your physic readings and it isn’t until paragraph six that you have the integrity to note –
    .
    And President Obama, despite his popularity and moral indignation, has few tools to stop them. The Treasury Department has already concluded that the bonuses in question, which were first made public in late January, cannot be rescinded because they resulted from airtight contracts that had been signed in April of 2008.
    .
    And let’s see, who was President in April of 2008? And who was the Treasury Secretary? And when did Obama take office – January 20th? And here it is March 17th and he hasn’t fixed every single thing? Time for impeachment calls.

  • arbitrarystring

    Is it really the president’s position that state wage laws aren’t to be followed, for contracts to be broken?
    .
    No it’s not, which is why there probably won’t be anything he can do to stop them from being paid out. Hopefully it’s something that will be addressed the next time AIG (or anyone else) comes begging for more money.

  • Art Pepper

    If it’s good enough for the auto workers it should be good enough for the financial sector.
    .
    Oh wait – the auto workers just make stuff. Stupid them.

  • towandavt

    Oh please! All this outrage is 8 years too late. Where was the outrage from the Congress and The Press when Glass Stegall was repealed and the lawmakers blessed these new financial instruments by “notwithstanding” state laws against gambling. (Go read it in the FFY2000 budget bill.) More important, derivates were the root of a major financial debacle in Asia in the early 1990′s and caused the collapse of Orange County California’s finances. That one, by the way, is in all the public administration case studies about how not to finance government or anything else for that matter!

    This was a known, predictable disaster…the press enabled it by being lap dogs to the Republican Congress, the Bush administration and the alleged “financial titans.”

    We knew about this stuff in the provinces…where were the rest of you? And still the masters of the universe get their payday and the Obama administration is to blame? Say what? Econ 101 should be required for holding public office or being a journalist!

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