Sunday, March 15, 2009

AIG bonuses: surprised?

Bear Mountain Bull points out that the bonus babies at AIG are receiving tens of millions in new bonuses with the money coming from the firm's (to date) $170 billion taxpayer bailout.

And he's not really buying the line from AIG chairman Edward Liddy that the bonuses were agreed to in early 2008, before the firm got into "severe financial straights". Take it away, BMB:

"Right. AIG was ‘just fine’ at that time. I’m sure this trouble was all very sudden, and that none of the people receiving bonuses had anything to do with any of the decisions that got them into this mess."

Meanwhile, Larry Summers and Barney Frank are shocked and surprised (?!) at the new AIG bonus plan, calling it "outrageous". But what else would one expect in the wake of the great bailout spree of 2008-2009?

The government and the Federal Reserve have shown they will prop up all manner of failing businesses (banks, auto-makers, insurance companies, etc.) in an attempt to prevent highly visible job losses or to stave off the threat of "systemic collapse".

The firms receiving bailout money are being artificially propped up with taxpayer funds, rather than being forced into bankruptcy or restructuring (as economic logic would demand).

AIG had already shown its regard for US taxpayers by sending executives on an infamous executive spa retreat. Now the firm argues that it needs to pay out these bonuses in order to retain "top-tier talent".

I'd say more about that last one, but I think we already used up this punchline on Merrill Lynch, didn't we?