Now the AIG scandal is getting out of hand. Yesterday Iowa Sen. Charles Grassley suggested AIG executives should take a Japanese approach toward accepting responsibility for AIG’s collapse by resigning or killing themselves.
First off, you only need to go back and read my past AIG articles to know I was against giving them bailout money to begin with. I also stated at each disbursement that it wouldn’t be the last. However, as critical as I am of AIG I find Sen. Grassley’s comments appalling. For starters, let’s keep a couple things in mind.
1. Poor management is not a crime – Don’t get me wrong, I think AIG was poorly run but that does not make it criminal activity. Should key people in AIG be fired? Absolutely. Is poorly running a company a criminal offense? Not unless just about every manager you have ever worked with is ready to serve time for stupidity.
2. Whose fault is it AIG has money to burn? – Surely AIG would not have had the ability to pay bonuses if they went out of business. Now that the American Tax payers own almost 80% of AIG, money appears to be no object.
3. Look, shiny beads! – Makes for a nice change of focus doesn’t it? Instead of being upset with Bush (or now Obama) for giving all this money to companies without any real restrictions or monitoring plans, we can now focus all our anger at a specific company (AIG) and their employees.
4. Throw the baby out with the bath water – The AIG bonus structure will get messy. Many of those receiving the bonuses are apparently front line people who have performance related contracts. Some of the bonuses are as low as $1,000. In the realm of already giving AIG $170 Billion maybe some of them should be paid.
The biggest thing we need to focus on right now is we have invested money in AIG (whether you wanted to or not). What is the best way, going forward, to protect that investment? Don’t pay any money to any workers? Fire everyone? Or, if you are like Sen. Grassley call for suicide? Come on people, we have to move forward and rebuild the company (so we can get paid back).
Should executives get bonuses? No. Should front line performance/commission people get paid? Probably, so long as it was based on delivering positive numbers to the company.
As for Sen. Grassley…I would save the theatrics for your own campaign and I certainly hope your constituents are 100% happy with you; or they just may take your advice on how to solve the problem of you in office.
Fine, I suppose this is where you look for some witty insights to my mind. A "bio" of sorts. Here is the deal... I ride motorcycles, smoke cigars, golf, kayak, fly, race my car through the mountains, write (a lot), and travel extensively. I am almost old enough not to care what other people think about me...almost. ~Godfadr
I definitely agree. Sure, it isn’t a crime to run a company badly, unless the executives are channeling much of the businesses earnings (and then government bailout money) to their own personal Swiss bank accounts. Which is why I do think Obama should order an investigation on the bonuses. Every company receiving that much bailout should be investigated before the money is even disbursed to make sure taxpayers aren’t being made into fools. There is absolutely nothing wrong with firing the top executives in a company that is going under. They have proven themselves inadequate for the job and should be replaced. They should only go to jail if they were involved in criminal activity (such as money laundering, or other financial scandal) thus criminal investigation should be administered in such situations. It would be interesting to see who received the bonuses, as the media has been making it out as though the top executives just paid themselves. Isn’t a bonus just a reward for doing well?
I agree Rachel – they should be investigated!
I also think a couple things need to happen.
One, what type of bonuses are these? For example, if it is just some “hey, thanks for being here” then I think those go away immediately.
However, this is where the danger is, what if some of the bonuses are to employees that did well? What if they booked business for AIG or their division made a profit? Should they not still get their compensation as the contract read? They made money. Is it their fault the people above them might have been idiots? I have no problem with bonuses tied to PERFORMANCE.
(Another example was Bank of America. They did get bailout money but then got a lot of flack for having booths and box at the Super Bowl. The booths were for writing up new credit card accounts around the stadium – which they did. The box was for entertaining some higher ups that could send them business.
I am not against any spending so long as it brings in more money for the company. You certainly can’t expect Bank of America to pull all the their ads and expect them to make money. You have to let a business operate).
Back to AIG…
Additionally, we need to see where the money is going and why. Heck, we own 80% of AIG now, don’t we have the right?!
GF, in case you missed it, the bonuses, the bulk of them anyway, are going to the very same people who created this financial disaster.
These bonuses are nothing more than “retaining talent” bonuses. NOT performance based, but contractual……which makes me wonder what kind of legal team AIG has that they would agree to such bonuses even IF those people bankrupt the company.
It is the unit of people who created and made the bad deals.
IF these people are supposed to be such financial geniuses, explain to me how they could make such a mess except deliberately.
And sorry, the taxpayers did NOT give any bailout money to anyone. WE have been against it all from the start………….it is Congress doing the giving and forcing US and future generations to bear the burden.
While the remark is uncalled for and disgusting……………..I’ve reached a point where I feel the same way! And I won’t apologize for it. These leeches and cheats need to go!
Godfather Added: Thanks for the thoughts Lynda, I certainly understand your frustration. I did catch the bit on the bonuses. From what has been reveled anyway, the bulk of the money goes to execs but the distribution (pure number) is a bit wider. It should be interesting to see who is on the list!
Care for a view from Hong Kong?
Directors committing suicide via seppuku or hara kiri, is nothing new and is regarded as honourable – the ultimate voluntary act of penance. Whilst one is not condoning it, neither is one condoning the inflammatory remarks of the politician.
The fact that they needed to be reminded to kill themselves, is an indication of just how thick skinned the boys at AIG are.
Truth be told, the bonuses sucked out not only by AIG, but Merrill Lynch and others, evoke a visceral reaction in the face of massive global wealth erosion. Much of that “wealth” was highly leveraged corporate and personal debt – which left only real debt that needed to be paid for.
Whilst it’s not a crime to be a stupid Director, it is a crime to be a criminally negligent one. AIG’s risk taking on exponentially growing Credit Default Swaps was unbridled and driven by the greed of the insurance premiums they were receiving. The happy and bizarre assumption was that so long as the insurance risk was spread systemically, the system would be stronger. Instead it created a daisy chain in which the entire system collapsed.
Essentially, AIG was insuring risk on a scale that it knew it could never pay. There are some juicy criminal words for that.
How has Obama handled AIG? Badly. He’s sung the song of outrage. Had he drawn a distinction between genuine performance-related bonuses to lower level front line staff; (which is OK) vs Directors guaranteed bonuses, (which is not OK,) he might have sounded Presidential.
Godfather Added: Thanks S.A. – Great Points!