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March 17th, 2009
08:00 AM ET

Hostage to AIG

Outrage and anger are the watchwords in Washington these days, and they’re directed at one company: AIG. That troubled financial firm has already received $173 billion in bailout money to keep it afloat. Now it is handing out $165 million in bonuses to some of the very people whose incompetence led to the worldwide financial crises.

The response has been swift and harsh.

“It’s hard to understand how derivative traders at AIG warranted any bonuses, much less 165 million dollars in extra pay,” the President said on Monday. “I mean, how do they justify this outrage to the taxpayers who are keeping the company afloat?”

From Capitol Hill came this from Rep. Barney Frank (D-MA): “These bonuses are going to people who screwed this up enormously.” His colleague, Rep. Carolyn Maloney (D-NY), told CNN that AIG employees “don’t deserve a bonus. They’re lucky to have a job.”

And from Main Street the reaction was just as harsh. One person told CNN: “It makes me feel disgusted.” Others called it “outrageous,” “upsetting”, and “greedy.” And another suggested that if you’re a “CEO of a company like that, you shouldn’t be able to drive a limo. You should ride...on the subway like everybody else.”

AIG’s chairman and CEO Edward Liddy, who was just appointed in September, did not take a bonus and notes that many AIG executives have agreed to work for just a token $1 salary in 2009. But he says that canceling the bonuses would have “serious legal, as well as business consequences for not paying.” Some
believe the government is in effect a hostage to AIG. It can’t let it fail because scores of major companies that depend on it would fail. And it can’t take away bonuses because these employees have contracts that legally guarantee them. Some believe the government could be sued if they tried to take away the bonuses. Others suggest that without bonuses many talented people would not work for AIG.

New York’s Attorney General Andrew Cuomo is not buying any of that. He wants a list of all AIG employees who got bonuses. And Cuomo wants to know if “any of the individuals receiving such payments were involved in the conduct that led to AIG’s demise.”


Filed under: Economy • Politics
soundoff (32 Responses)
  1. Johnny Clark

    congress are not morons they are crooks if the public had not rose up against the bonuses congress would have let them go so they could keep recieving the big money in political contributions. this is a ploy by our elected officals to crimenalize men and women who recieved money legaly through contracts signed a year ago the polititions knew about them and let them go now they want you to think these evil people tricked them if they can be tricked that easily they need to be voted out.

    March 18, 2009 at 6:16 am |
  2. Bob Dubenslosher

    You folks need to report the facts on the AIG bonus situation. Congress, as usual let the AIG idiots keep the bonus contracts in the Porkulus bill. Now the CROOK Chris Dodd is denying that he put language in the bill allowing bonuses.

    We have a bunch of MORONS in congress!

    March 18, 2009 at 6:06 am |
  3. Johnny Clark

    I think the execs should give back the bonuses after the politictions give back the million or so in cotributions they recived from aig a failing company. No one in washington should open their mouth they voted for a bill they did not read this blog should be slaming the goverment for incompentance not the people who recieved bonus that were spelled out and in the open for at least a year befor the bailout. The bailout also contained a provison for using the money for bonus but it only affects contracts after feb 11 sounds like some politions bought off by contributions.

    March 18, 2009 at 5:40 am |
  4. Doug Parris

    Why have the news shows and reporters not explained what will happen to the retirement funding of the congress and senate if AIG fails and goes into bankruptcy? I say if you follow the money ,you will find out why they do what they do.

    March 17, 2009 at 6:40 pm |
  5. Saren

    why did we bailout AIG? that's right, too big to fail.
    we need to nationalized and break it down to size, so it will never be too big to fail and our tax dollars will be safe

    March 17, 2009 at 11:59 am |
  6. nancy

    How can a faltering company justify and bonuses? Bonuses for WHAT? Their company is going under, asking for Government aide. this is just wrong. i hope something can be done to block the bonuses and get the bail-out money back!

    March 17, 2009 at 11:37 am |
  7. G.L. Johnson of Alabama

    For all the hoopla concerning contracts etc. and "the rule of law" with respect to the bonuses to be paid out by AIG there seems to be an avenue missing, possibly due to the outrage, that avenue being the "bank, provider of funding "can stipulate the priority of disbursements. Don't break the contract, however, due to the responsability of management, the payments should be allocated to come from any revenue/s left after all, ALL, other obligations are met.
    That should be the course in this matter. That would seem ot me that if they want "theirs" then they better get the company back on track so that monies are available to fulfill contractual obligation.
    Respectfully,
    Gary L. Johnson. (Disabled individual that has to live within budget.)

    March 17, 2009 at 11:23 am |
  8. Debbie F.

    I thought bonuses were based on performance. If you can get a million dollar bonus for bad decisions, I want that job. At my job, all bonuses were cut out this year and we didn't tank the economy. This is outrageous. If you make bad decisions and lose money for your employer you should be fired, not rewarded.

    March 17, 2009 at 9:38 am |
  9. jim defoe

    AIG EXECS JUST LIKE BIG THREE AND WALL STREET AND CONGRESS. THEY LIVE IN A DIFFERENT WORLD WHERE
    THEY BELIEVE THEIR JUSTIFIED AND DESERVING OF SPECIAL TREATMENT BY RIGHT OF THEIR SUPER EGOS ,BRAINS , FAMILY
    GENES, AND WE WILL ALWAYS HAVE THE POOR (RPUBLICAN BY WORD) HIPPROCRTICAL INDIVIDUALS ALL
    JIM

    March 17, 2009 at 9:23 am |
  10. hilda

    What's good for Wall St. is not necessarily good for Main St. For years, massive layoffs resulted in a higher stock average. Yesterday's AIG news did the same for its stock. The wing Mr. Madoff is in, in the Manhattan Correctional Center should be reserved for the rest of the Wall St. gang, since what they have been, and are still doing, is equal to his misdeeds.

    March 17, 2009 at 9:21 am |
  11. mike johnston

    I hope AIG feels equally obligated to repay the bailout money!!!!!!

    March 17, 2009 at 9:19 am |
  12. Chris

    I don't understand, with all the recently unemployed people in the financial industry, WHY does AIG want to keep the personnel that put us in this situation. I feel they should just fire them and replace with new. New ones couldn't do as bad a job as the current ones and would cost them a lot less money to retain. This process works for the foreign car manufacturers WHY not the banking industry.

    March 17, 2009 at 9:08 am |
  13. pam

    If the argument for getting the bonuses is that these employees are tainted for working at AIG and may not get another job then the payout of the bonus should be based on receipt of a resignation letter. If you quit then you can have the bonus but we certainly do not want these same individiuals/criminals receiving outrages pay, outrages bonus and still keep their job for doing a lousy job. Where else can this type of behavior continue? If it exist, please let me know where i can find one of these great jobs.

    March 17, 2009 at 9:07 am |
  14. Frank Bond

    I have a signed contract where I work... I'm an Independent Contractor for The St. Petersburg Times. If I perform poorly my contract will be breached... I can be terminated with just two words: "You're Fired"

    Contracts, in my opinion, are NOT worth the paper they're printed on.

    Professional ball players change their contracts at all times, on demand.

    In my opinion, the traders at AIG who received, or are going to receive a performance bonus should their contracts modified and all monies returned to our government.

    Is not AIG now owned by the U.S.?

    Fire the traders for poor performance and their superiors for allowing this outrage.

    Where would the bonus pool money come from if there were bailout?

    March 17, 2009 at 8:54 am |
  15. G

    I am hearing all this "outrage" over all these bonuses being paid to AIG and I agree. However these are contracts signed, sealed and delivered to the best of my knowledge.

    What I want to know is where is the outrage against the politicians who allowed this money to go out without any strings attached. Allowing our hard earned taxs to go to over seas banks who made a bet and lost.

    Many people were against the TARP to begin with because there was so little over sight but all these "outraged" politician followed like little lambs to the slaughter.

    The first people who should be in the firing line to lose there jobs and salarys are these very same politicians.

    March 17, 2009 at 8:52 am |
  16. vincent h ghelli

    I would say that if AIG feels obligated by contract to pay bonuses, not only are the top exec's incompetant, so are the board members and staff lawers. And how would those contracts have fared if the taxpayers had not stepped in?

    March 17, 2009 at 8:52 am |
  17. Eddie J

    Bailout for AIG ? Disgusting, especially when IRS sent me 2 letters stating my $300.00 economic stimulus check for 2008 would be mailed in about 4 weeks. A third letter received in January 2009 stated in part, "Federal Law mandates all stimulus checks must be mailed before Dec 31, 2008. Since we were unable to process your check, you will not receive one." I'm a 72 year old U.S. citizen and could use the $300.00.

    March 17, 2009 at 8:45 am |
  18. JK Caruso

    "There's a sucker born every minute,” referred to thousands of "fools" that paid money to see a fake giant in the P.T. Barnum Circus. Today’s fake giant is: Congressional Bailout and Wall Street Ponzi…the sucker born every minute, the US taxpayer!

    March 17, 2009 at 8:43 am |
  19. John Ortiz

    There needs to be more clarity on the AIG "bonuses". I've never seen bonuses paid for poor performance. If in fact that is what has been done at AIG, then I believe the government should simply take over AIG and fire all it's executives. If these so called bonuses are simply a routine part of the individuals compensation package, then I think the reporting needs to provide more specifics.

    March 17, 2009 at 8:39 am |
  20. martin

    I am confused, what happened to congress in all this mess? They wrote the laws governing these institutions and supposedly had oversite, so why are you not holding congress as guilty as AIG. Our congress also voted themselves a pay raise, not a word about that, how 'bout they give it back.

    March 17, 2009 at 8:39 am |
  21. AltaKocker

    Is the million $ bonuses issue taking attention away from the issue that we are using billions of $ of taxpayer $ to bail out the foreign banks and Goldman-Sachs by laundering the $ thru AIG?

    March 17, 2009 at 8:37 am |
  22. Rohan

    I don't buy the AIG CEO's argument that reducing compensation will drive away talent from this industry. Even with the bad economy, the average salary across the financial services industry remains quite high, higher than the average salaries in other industries. And with layoffs happening left and right, I'm quite positive that those lucky to be employed within the financial services industry are not looking to quit their jobs over some pay cut.

    We need to call the CEO's bluff.

    March 17, 2009 at 8:34 am |
  23. Cathy

    What about those companies, who hang the possibility of termination over your head because they know that work, is not available for those of us who are over 50? Those employee’s who have given over 10 years and are now told that their tenure or experience is no longer necessary or viable? The pressure is over whelming and sickening.

    March 17, 2009 at 8:33 am |
  24. Elisa C

    I'm a loyal viewer of the morning show and today's top story has my blood boiling. I am tired of AIG saying our hands are tied.-No they're not!!!! These "bonuses" are nothing but another display of pure, unadulterated GREED!!!!!! It is an example of Wallstreets continual display of entitlement. This company is laughing, and laughing loudly at all of the American taxpayers.

    This company does not care about the current crisis and is only conserned with lining their pockets and getting even when the getting is not good! AIG and other companies like it will never change their ways as long as we continue to do nothing more than give them exacting what they want.....money....even if its at the common Joe's expense.

    March 17, 2009 at 8:32 am |
  25. Jeff O

    I watched CNN's AMfix this mornign. How much bailout money did AIG leave on Jill Schlessinger's dresser? This woman has no shame or decency!

    I mean, come on! It's one thing to work Wallstreet, it's another to do it on your back!

    March 17, 2009 at 8:30 am |
  26. Marcus

    No more bonus banter! We need to fix the banking situation and the housing problems. The AIG Insurance company is needed, but it's Financial Products division should be resolved and and then dissolved. But the whole conversation about bonuses is a distraction.

    March 17, 2009 at 8:29 am |
  27. Kathy O

    I am so mad I forgot to make my point. If AIG has created a threat to national security by their horrible actions, can't they be prosecuted for that? One man's comment given on air is that they committed treason. Well, haven't they? The fact that they can argue they didn't know it was a threat to security is moot. I could see problems arising in the economy when so many ads were on about getting a home-equity loan. I pulled my money out of AIG 4 years ago when Mr. Spitzer threw a few of them in prison. If I knew AIG was in trouble that long ago, I'm sure AIG knew it was in trouble. Gitmo will be empty soon – hey, let's put it back in use or hang them at high noon – just get them out of there. We effectively own AIG. Let's fire them.

    March 17, 2009 at 8:26 am |
  28. max

    Why can't they be taxed 80% the peoples share???

    March 17, 2009 at 8:26 am |
  29. Jean-Edouard

    Those CEOs should be trial as criminals.

    March 17, 2009 at 8:25 am |
  30. mike johnston

    we have never addressed the real causes of this mess. Here is an iReport I did on that subject: http://www.ireport.com/docs/DOC-150804

    March 17, 2009 at 8:22 am |
  31. W. Burgess

    Use the IRS. Audit everyone getting the bonus money.

    March 17, 2009 at 8:22 am |
  32. Kathy O

    If there's no money for troops, isn't AIG's trashing of the economy a threat to national security. If we own 80%, why can't we fire these guys. Is there any hope that down the road the government can stop letting entities get too big to fail?

    March 17, 2009 at 8:20 am |