AIG scandal continues: Three execs get to keep $16 million in bonuses
Filed under: American International Group, INC.
Of all the outrages to the American taxpayer in the last year, there is not one that can top the bailout of American International Group (AIG). After former Treasury Secretary Hank Paulson decided to let Lehman Brothers collapse 13 months ago in history's biggest bankruptcy ($639 billion), AIG -- with $1 trillion in assets -- was on the verge of toppling, too. Paulson saved it and we're all still paying.
How so? The threat of a downgrade of its debt repayment ability forced it to put up $14.5 billion in collateral against its Credit Default Swaps (CDSs) -- $14.5 billion that it didn't have. Rather than let AIG follow Lehman, Paulson decided to give it $85 billion for a 79.9 percent stake in the company -- a figure that eventually ballooned to $182 billion in U.S. taxpayer money.
AIG executives reacted with appropriate humility. They celebrated their good fortune with big executive parties at resorts in California -- their post-bailout stay at the St. Regis resort in Monarch Beach, CA cost $440,000 in taxpayer money -- and Phoenix. And to top it off, they reached into the taxpayers' pockets and gave the very executives who took on that CDS risk $165 million in bonuses.
But now that U.S. Special Master for Compensation Kenneth Feinberg (pictured) -- a.k.a, the Comp Cop -- is on the job, that's all in the distant and soon-to-be-forgotten past, right? No. Feinberg has already granted CEO Robert Benmosche a $10.5 million compensation package -- well above the $200,000 that the heads of other big TARP recipients will get.
And three of the executives who got those 2008 bonuses will get to keep their money -- to the tune of $4 million, $5 million and $7 million each, according to Fortune. Interestingly, the names of these executives are being kept secret. And one likely reason for the secrecy is that Feinberg fears for the safety of their families.
Is that all? No. As I posted, AIG plans to pay even bigger bonuses to those CDS-mongers in May 2010: $200 million, or 21 percent more than last year. Feinberg's response to these bonuses is fair enough: They were written into a contract and therefore AIG has to pay them -- end of story.
This raises a small question: Didn't the executives at the other seven TARP-heavy companies who are getting their pay cut by 90 percent have contracts as well? I would be very surprised if they did not, since there is probably not a public company top executive in the country who does not have an employment contract.
So why isn't Feinberg using the same logic about the inviolability of contracts for the other TARP recipients? What is so special about AIG that it can be allowed to spend $200 million of our money to reward its executives for the kind of mismanagement of risk that cost American taxpayers $182 billion?
Only the Comp Cop knows for sure.
Peter Cohan is a management consultant, Babson professor and author of eight books, including You Can't Order Change. Follow him on Twitter. He owns AIG shares.
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Reader Comments (Page 1 of 6)
10-23-2009 @ 11:02AM
cabo79 said...
The only way to end this BS is to go to term limits. You cannot have a Free Society without rules, laws, a police force to catch the bad guys and prisons to put them in. The same goes for a Free Market capitalist society, you have to have rules, regulations, a police force and prisons to put the bad guys in. Our government is not maintaining a Free Market. Too many political contributions (pay-offs), it is obvious laws are bought and sold. Folks we need to correct this, it happens over and over. Our government is paralyzed by the need for pay-offs (political contributions). We need a major change to end this professional politician form of government. We need TERM LIMITS and real campaign finance reform. How about three 4 year terms for Congressmen, two 6 year terms for Senators and keep the current limit of two 4 year terms for President. The most anyone may serve in the Congress and Senate combined would be 14 years. We need an end to the professional politician form of government.
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10-23-2009 @ 1:28PM
george said...
term limits will only make the problem worse---california is an excellent example where politicians know their time is limited and focus on what THEY can get, not what is needed for the long term betterment of the public. Many network for cushy positions as lobbyists, consultants, etc for major interests needing political favor. Others jockey for political appointments to high paying govt jobs where 'influence' brings more to their pockets. Regulations and laws were in place before all this. They were either diluted, eliminated or not enforced for the last 30 years.
10-23-2009 @ 1:02PM
USAcitzn4USA said...
Typical. It just doesn't end. LOL What you can do though, is get involved in The People's Financial Stimulus Plan. It's on a private website www . peoplesstimulusplan . weebly .com
It's simple and all who participate will benefit. It's time to take America back and make her strong again ... and it starts by making Americans financially strong ! It's your choice.
10-23-2009 @ 1:44PM
jeff said...
AIG doesn't have to worry about a thing. They insure Congress' pension plan so there's no way Congress will let them fail. Boy Barney Frank, Chris Dobbs, Timmy Geithner, Charlie Rangle, and all the other crooked TAX CHEATS will make sure of that.
10-23-2009 @ 6:08PM
Mike said...
God damn them all! Please God?
10-23-2009 @ 11:08AM
89must said...
didnt matter that i had a contract future raises taken away and performance bonus taken away
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10-23-2009 @ 11:44AM
moe said...
If that is thr truth and they did take that away from you.IT IS ABOUT TIME. Amen to this.
10-23-2009 @ 1:42PM
Artie said...
This BS with AIG is insufferable!! Good thing the names of the executives receiving those extravagant bonuses at the taxpayers expensehaven't been given out. I'd like to personally wring their collective necks and throw them all in jail. These guys need to be punished NOT rewarded. The stuff these guys have been getting away with and continue to get away with is beyond appalling. It's just sick. This is one more example of the continuing saga of the death of common sense in this country as well as a continuing examples of how Wall Street greed, unless reined in, will destroy this country's monetary system as well as the country itself one day. . Go hide in your anonymity you smug AIG low life pieces of sh*t. I wish you all a case of anthrax for what you guys have perpertrated on the rest of the taxpaying country. F.U.
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10-23-2009 @ 11:19AM
Joe D said...
This is not CAPITALISM it is Communism Capitalism where the players get all the rewards and once their is a problem the "wizards of Wall St" want a bail out. OK bail them out but the big boys get out of the business and suffer. Plus do not let them infect the next generation by becoming Professors at Sloan Harvard Business Wharton ETC
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10-23-2009 @ 6:11PM
Paul Katz said...
Those people should be going to jail, and not receiving raises of any sort!!!!!!
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10-23-2009 @ 11:36AM
jeanine said...
How is it that when the average blue-collar worker fails at his/her job......(contract or not).....that person is FIRED for poor work performance.....but yet when these CEO's FAIL they get rewarded with bonuses and trips. I, for one, have a very hard time understanding the logics behind "they had a contract" and how said contract will allow for failures to be paid out and not be deemed reasons for termination. And shouldn't the company who signed these bogus contracts be solely responsible for upholding them and NOT the taxpayers who can barely manage to put food on the table with constant pay/benefit cuts?!
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10-23-2009 @ 11:53AM
patrick said...
The fact that something like this is being allowed is the reason for all our woes. The government allowed this and we elected the government..it is therefore our responsibility to rectify it..
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10-23-2009 @ 2:33PM
laura said...
Patrick: The government is US. We have to send a message to all politicians by voting them out of office. Unfortunately we forget how the government was intended: A GOVERNMENT OF THE PEOPLE, BY THE PEOPLE AND FOR THE PEOPLE.
10-23-2009 @ 11:56AM
scotty said...
This is so much B.S!!!! we're paying for them to have frickin jobs-and they 4,7,8 million dollar bonuses? i need to link this to FOX NETWORK at least they will say something about it. leave it to this adminastration"with it's transparancies" to let this crap happen-going down the sinkhole!!!
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10-23-2009 @ 1:19PM
leatherman1457 said...
you want to link this to faux news so that faux con say that the admin is going after millionaires and trying to take there money when in reality it is our money. fair and balanced my arse. faux news if a foriegn owned station that is trying to change the political landscape here in America by lies and distortions and you agree with that ? if the Democratic had a foreign owned tv station that was trying to change the politics of this country with lies and distortions you republicons would littery burn the station down and drag out the people in the station and lynch them. how dare you say you are American. your republicon idealogyis closer to al qudia and taliban than it is to American idealogy
10-23-2009 @ 4:37PM
pb said...
This BEGAN with Bush and his 'not one spending guidelines' to these banks..give me a break all of you!!
All of these institutions used their Tarp money to buy out the banks that were left to fail and the people be damned! Now Citibank is having a problem..ahhhhhhhhhh AFTER they bought out other banks!! Don't know about you all, but they cancelled my equity line DURING construction so I couldn't have an appraisal and now I've got 30K on credit cards (thanks A.H.'s) LET EM FAIL NEXT TIME!!! Use your community credit unions or banks..f the big guys. The next company these exect's go to won't be giving them any bonus contracts if they fail , will they? The fat cats feel ENTITILED...look at Bernie-baby!
10-23-2009 @ 4:26PM
billfish said...
why should i pay taxes when it is used to perpetuate corruption?
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10-23-2009 @ 12:02PM
the man with a plan said...
as long as the people let thease guys get away with insurence hikes and things they will make more and more and we tax payers are paying . i feel almost a shame to be a american at times when things are so hard and our gov is letting things get buy just like leting electric comp rase rates , letting banks charge foe out rages things and top it off they are giving them all the money they want what about taking all the billions of dollars and symplie give it to the people its theit money to start with not the aig and others out their that cant run a buisnes . i say give our money back .
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10-23-2009 @ 12:16PM
Allen said...
That Henry Paulson elected to bailout AIG, which was insuring his own employer, Goldman Sachs (yes, I am aware that he was also Secretary of Treasury), thereby protecting his own interests by giving away taxpayer dollars. In doing so, he enabled the perpetuation of a major criminal enterprise (AIG), rather than allowing it to fail, which would have been the proper response. It boggles the mind to think that the same incompetents who caused the collapse of our country's economy are now being rewarded with huge compensation packages - in the name of "retaining top talent" - what a joke. Let them leave and try to find a real job somewhere else. (Few will leave if this happens.)
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10-23-2009 @ 4:35PM
gleeminghope said...
Wasn't Paulsen also responsible for making Bear Sterns and Lehman Brothers go out of business leaving only his own interest...Goldman Sachs...
The sweetest part of the AIG deal was that the firm’s main competitors, Bear Stearns and Lehman Brothers, no longer exist so Goldman completely dominates the market.
Why did George Soros purchase 3,446 shares of Goldman Sachs at the time when they were pursuing government bailout money (2008) ..it brought his shares up to 18,000 or 40.63 holdings. Wasn't George Soros the one who financially backed Obama?
Why does Goldman Sachs escape from having to limit it's bonuses? They are giving out record bonuses. How does Goldman Sachs go from getting TARP and TFLG money from the government, then another 12.6 billion from AIG to making record profits...
read this article:
http://trueslant.com/allisonkilkenny/2009/10/22/goldman-sachs-skirts-slashes-in-compensation/