Fire AIG CEO, recoup bonuses, end banks' bailout - they will survive!
Filed under: Company News
Who is running the U.S.? Is it Treasury Secretary Tim Geithner or American International Group (AIG) CEO Ed Liddy? Geithner knew about the $165 million in AIG bonuses to reward the people who put AIG at death's door and waited to tell President Obama. And Liddy has been blundering through one scandal after another -- from the corporate blowouts at resorts in California and Phoenix to this latest bonus outrage.
But the anger surrounding the AIG bonus situation is a political sideshow. As I told USA Today on Tuesday and posted about here a couple of weeks ago, the real issue is that Hank Paulson used $12.9 billion in taxpayer money to bail himself out -- as a major Goldman Sachs (GS) shareholder -- and installed Ed Liddy, a Goldman board member, to keep secret the fact that Goldman and a slew of European banks got $105 billion in taxpayer money -- 636 times more than the bonuses -- to compensate the banks for their bad bets.
Not only that, but it turns out that those banks' losses, while big, are not so big that the banks could not have afforded to take their lumps. In other words, the argument that the world would end unless AIG got bailed out is beginning to look like the same vacuous argument that got us into Iraq (anyone seen those weapons of mass destruction?). Moreover, the rise in the stock market since the disclosure of the names of those banks who got the $105 billion suggests that the argument that such disclosure would cause a loss of confidence in the financial system is a waste of air.
It's time to fire Liddy, recoup those AIG bonuses and put an end to using taxpayer money to bail out Goldman and the European banks for their bad bets. If an objective analyst can demonstrate conclusively that the financial system is really at risk if we don't bail out AIG, then let's consider the best options to protect the system. But I think we should be skeptical of the Armageddon arguments that the previous administration used to get us here -- particularly now that it's clear how self-serving and deceptive that claim was.
Meanwhile, I am not sure how many more times Geithner can embarrass the president before he hits the road.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing. He owns AIG shares and has no financial interest in the other securities mentioned.
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Reader Comments (Page 1 of 11)
3-18-2009 @ 10:36AM
Beth Joy said...
Dismantle AIG
Reply
3-18-2009 @ 12:54PM
Michael Williams said...
That is alot of B S how can thay take bail out money & use some of it for Bouns to the higher ups mean while there ares 10 of thosen unmployed that need money to servive & thay are stugeling to do that Cut the C _ _ P
3-18-2009 @ 11:26AM
R Morton said...
I think the government officials who arranged to give the money to AIG without knowing how the money was to be used should be fired. They are not competent enough to give out other peoples money.
Reply
3-18-2009 @ 10:35PM
dennis said...
agreed! if we go ask for a loan, we are asked a millioin questions including where the money is going! why did the government give and then ask after the fact. whose zoomin who??? its about time the citizens of USA started to stop taking the crap from these people as if we are the stupid ones. if they dont get their ducks in a row, there is going to be one hell of an uprising between the hard working honest citizens and the thieves at our doors.
3-18-2009 @ 12:01PM
Karen said...
Thank you for your article and I agree with you whole heartly on this matter. But not only do I think Liddy needs to be fired but also every executive in that company, if they got a bonus they should be fired.
Reply
3-18-2009 @ 11:08AM
V. Johnson said...
Mr. Cohen is mostly right. Behind so much of this is an inept leader in Mr. Geithner who is blundering the economic policies and has little or no management skills. To appoint Mr. Liddy with his poor past performance in other ventures is evidence of poor judgement. The "President" has no standing in criticizing the past as he is outstripping others in bad judgement on many fronts in his early presidency. I had hoped he would do well, but he has lost my confidence in his ability to lead this country. Most leaders are judged on what they should have known and the action they took to avert such disasters.
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3-18-2009 @ 11:41AM
Shannon said...
The president has only been office 2 months. I think it is a little to soon to make evaluations of his ability to lead this country. It took 8 years for us to see the mess Bush put us in so how about at least giving this president at least 6 months!!!
3-18-2009 @ 9:43PM
cori said...
I do not and will not understand people in the U.S. We put up with 8 years of bad administration, and we can't give Obama 100 day's even. Come on ....
3-20-2009 @ 10:30AM
Frank said...
Just read V. Johnsons comments on how the president has disappointed him so far. With full respect to him, Lets just have some compassion for the man who is taking over the country in a time where NOBODY knows the real way to fix the predicament our nation is in. It is very easy get caught up in all the outrage but this man is working day and night to try and fix the mess our last president and his party left us in. he's gotta get a few points for being upfront from long before day one that this recession is a bad one and it will take a while to get us out and all of us are going to have to make some sacrifices. God knows we paid dearly with the last one. We put him there to fix this, now let him do his job!
3-18-2009 @ 11:08AM
Leonard Kaminsky said...
I believe that the money used for the bail out should not be used or bonuses and the CEO should be fired....
Reply
3-18-2009 @ 11:10AM
TERRY said...
FIRE HIM AND GET OUR MONEY BACK
Reply
3-18-2009 @ 12:10PM
terrytoo said...
not only fire him , prosecute the entire organization for theft of the american poeples money.. he kinda makes madoff look like a saint
3-18-2009 @ 12:36PM
Ron said...
Absolutely right. I have not heard anyone talking about "fiduciary duty" in any public conversations. Here is the definition: The fiduciary duty is a legal relationship of confidence or trust between two or more parties, most commonly a fiduciary or trustee and a principal or beneficiary. ...
en.wikipedia.org/wiki/Fiduciary_Duty
This principle has been in place in our financial system probably since Alexander Hamilton's time, excepting the 20's. AIG had a risk group that would have thrown a red flag up, but it was disbanded (so stated by a prior CEO). I believe that this principle has made the USA the pre-eminent financial country on earth. Acts that created these toxic assets should be considered treasonous. AIG should be dismembered and the pieces auctioned off within 30 days. Let the financial wizards put a price on these assets through the auction process, and let's stop talking about them.
3-18-2009 @ 1:20PM
ken said...
fire the bum the crook has plenty of our money
3-18-2009 @ 5:41PM
Fabricio said...
-18-2009 @ 11:10AM
TERRY said...
FIRE HIM AND GET OUR MONEY BACK
Reply:
Fire also those who REFUSE to return the Money!
3-18-2009 @ 10:29PM
carin said...
Fire him? The man does not draw a salary from AIG, not one penny. He is a voluntary CEO that inherited a mess. Did you watch the hearing today?
3-18-2009 @ 11:21AM
Tim said...
This is an example of high level corporate executives thinking they are allowed to do whatever they think they can get away with. Future bailout funds should be withheld until these bonuses are repaid.
And, YES, Ed Liddy and Tim Geitner should both be fired.
Reply
3-18-2009 @ 12:11PM
Linda said...
Yes Geithner and Liddy need to be fired. Geithner because he has proven he can not do the job, he is not alert enough to catch things like this. Before we gave AIG one thin dime this is something that should have been checked and eliminated. LIddy because he could have put a stop to the bonuses. So what sue AIG for your bonus and see what a Judge hase to say.
Liddy claims he is working for $1 annually, I have to wonder what his expense account looks like.
What about the 2 different "junckets" that AIG exects. took after getting bail out money.
Make AIG pay back every dime that they have been given to them in all bail out moneys and let them fall flat on their faces.
I wonder who is keeping an eye on GM and Chrysler?
3-18-2009 @ 11:17AM
Patrick said...
"But I think we should be skeptical of the Armageddon arguments that the previous administration used to get us here"
The Armageddon argument was used last month by this administration when they wanted to give more money to AIG after they lost another 61 billion dollars. Where is Chris Dodd's name in your indignation. I agree with you, Geithner and Liddy need to go. But they also need to be investigated and charges field for their failures as well as all of those indispensable executives and Frank, Dodd, Paulson, and anyone else who helped to create or cover-up this mess.
Reply
3-18-2009 @ 7:42PM
Walter said...
Yes liddy should be fired and if the bonus can;t be returned due to legal obligations. Congress should immediately inact a laws that all recipients of bonuses in 2008 from companies which got Govt Bailout has to 90% of the bonus to the IRS. The next question when did Geithner become aware of the payout and when did he inform the president? If there was any delay in geithners' action he should should be fired also. He did not pay his taxes which delayed his appointment, now this debacko.Is it the fox watching the hen house? I hope the president ask him to step down