Thursday, March 19, 2009

AIG bonuses should be paid

After reading up on the issue, I can't find any reason why the AIG bonuses should nto be paid, or why recipients should be punished with 90% tax rates, as Democrats in Congress are trying to push through (Is there any problem for which their preferred solution is something other than confiscating more money? Does the 14th Amendment even matter?). Or give that portion of the money back, the Republicans' silly symbolic proposal.

Powerline runs down the facts:

* All of these payments, as to AIG's troubled financial products division, are retention bonuses, not performance bonuses.
* The money is not going to anyone responsible for the implosion of AIG--those people, who were in the credit default swap area, are gone.
* These retention bonuses were promised to AIG employees who are responsible for winding down the company's financial products division. At the beginning, this division had a potential exposure of $2.7 trillion. Winding down AIG's book of business in this area was a dead-end job, and there was a great likelihood that the people responsible for the work, who knew the most about the products involved, would take jobs elsewhere.
* In late 2007 or early 2008, AIG made a deal with these employees: if they would stay at AIG until specified conditions were met, i.e., either certain business was wound down or a given period of time had elapsed, they would receive a specified retention bonus.
* As to all of the employees involved, they satisfied the terms of the bonus by wrapping up a portfolio for which they were responsible and/or staying on the job until now. As a result of the efforts of this group, AIG's financial products exposure is down from $2.7 trillion to $1.6 trillion.

As John notes, the underlying problem is the government getting involved with running an insurance company in the first place.

UPDATE 3/19/09: AIG CEO Ed Liddy, who is getting grilled by congressional morons and taking heaps of abuse in the press, makes...this is not a typo...a salary of $1 a year. Yes, that is ONE dollar a year.

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