More Bonuses for AIG Executives

Once again one of the biggest players in the global economic meltdown and largest recipient of bailout funds, American International Group (AIG) headquartered in New York City will be paying bonuses to top executives at AIG -FP in July, according to administration documents.

AIG Financial Products (AIG-FP) brought the insurance giant to the brink of collapse last year with its outlandish derivatives sales but continues to reward the same executives and traders with bonuses paid for, basically, by taxpayer funded bailout money.

In a July 10 article in The Washington Post, staff writers say AIG is asking for administration support for this next $2.4 million bonus payout. However, according to AIG this July bonus payout isn't new at all but is part of their continuing bonus plan developed in 2008 and, therefore, not subject to approval by Kenneth Feinberg, the Obama administration "pay czar". AIG's reason for submitting the bonus payouts plan to Feinberg is because "officials at AIG and within the government see them as a land mine."

Earlier this year AIG paid $165 million in bonuses to top executives which caused public furor over such use of the $185.2 billion bailout funds made available to AIG. Adding insult to injury, AIG CEO Edward Liddy in testimony to House Financial Services Committee admitted the March bonuses were paid on Sunday, a non-business day, at Midnight, March 15, then defended the action by stating there was "...no intent to do anything under the stealth of night...".

The current bonuses are a small drop in the bucket when compared to the reported $1.2 billion AIG might pay to all its employees in 2009, but Liddy wants Feinberg's blessing for the payout to divert any public outcry away from AIG and back at the Obama administration.

Taxing AIG bonuses

The U.S. House of representatives managed to pass a bill that would have taxed at 90% of bonuses awarded by corporations receiving more than $5 billion in Troubled Asset Relief Program (TARP). In an online editorial James Taranto of the New York Times speculated if the tax is approved then the recipients of any of these bonuses would, after Medicare FICA, state, and local taxes, pay back more than 100% of the bonus in taxes.

Although the measure passed the House with a large majority of 328 to 93, the Senate took no action on the measure. The Senate did, however, present its own bill for a 70% tax on the bonuses.

GM and AIG employees treated differently

AIG CEO Edward Liddy maintains that these bonuses are issues based on contracts made with AIG employees prior to the economic meltdown. There are fears that if the Obama administration moves to block the payments many executives will either leave AIG for other employment as happened at Goldman Sachs. If this were to happen AIG might be left without experienced executives necessary to run AIG. Another fear is that the executives who don't receive the promised bonuses will sue AIG and possibly the government.

Some leaders in industry and government question the disparity of treatment for AIG employees and the employees of bankrupt auto giants GM and Chrysler as well as workers in other American industries. Employees in the company most responsible for most of the economic crisis that led to the problems in U. S. industry are set to receive nearly $1.2 billion in additional compensation while workers at companies such as GM are forced to surrender their contractual rights and lose not only bonuses but health care and retirement benefits as well as basic wage packages.

Sources:

http://www.washingtonpost.com/wpdyn/content/article/2009/07/09/AR2009070902702.html?hpid=topnews

http://emac.blogs.foxbusiness.com/2009/03/17/american-inconscionable-group/

http://www.businessinsider.com/anger-and-panic-at-goldman-sachs-over-90-tax-2009-3

http://www.mahalo.com/aig-bonuses

http://online.wsj.com/article/SB123757098072897381.html

http://emac.blogs.foxbusiness.com/2009/03/16/781/