Actually had this conversation (or a variation on it) with both Naperville Greg and Joisey Ken recently. AIG, as just about everyone knows by now, is one of the largest insurance companies in the world and they were bailed out to the tune of $170 billion. And everyone knows that they paid bonuses to execs to the tune of $165 million. And we have all seen that both Republicans and Democrats were outraged in addition to President O'Bama.
Most of what I just wrote, which the media has shoved down your throat, is wrong or at the very least misleading.
First, use of the term bailout is misleading. The implication is that the company was given money to save them from going under. The reality is that AIG essential sold a good chunk of their company to our government. Back in September, yes under the previous administration, the Fed lent $85 billion to AIG in the form of a two year note in return for 80% stake in AIG in the form of warrants and secured by their profitable insurance business (note that their financing arm is what caused the losses, not their insurance arm). Since then we've injected another $85 billion into AIG. So did we bailout AIG? No, we BOUGHT AIG, unless their business turns around. If that happens, then we just loaned money to AIG and they paid us handsomely for it (LIBOR plus 8.5% on the loan....so over 10%).
AIG paid bonuses to execs. Well, what they did was fulfill their CONTRACTUAL OBLIGATIONS to employees. Unfortunately, those employees' bonus metrics were NOT tied to the solvency of the company. Those contracts were put in place by Robert Willumstad, a two year AIG vet who was previously with Citigroup as their #2 guy and who was fired after the first intervention mention above. Liddy came in but could do nothing about the contracts. Renig on the contracts and the employees can not only sue AIG, but they could now sue the government. How much MORE than $165 million do you think that would have cost? Everybody's hands were tied.
Republicans and Democrats were outraged when the bonuses became public. Really? That implies that the members of Congress who are irate didn't read any of the documentation on the $85 billion action provided by the Fed, except possibly the dollar amount. What's the threshold in dollars to get them to read? Maybe it's $100 billion.
At least it looks like today that Obama is saying, "Hey, my bad. I should have known about this." Yes, he should have been briefed on it by someone, but truthfully they have a lot of shit going on right now and missing this point is an excusable error. Not saying "the buck stops here" would have been, which was his stance until today.
So if you look at the whole picture you'll see AIG took a loan from the Fed which they have to pay back or turn the company over to the U.S. Government. AIG owed money to employees which were supporte by contracts. Should they stop paying rent or their utility bills? Same concept. And finally, this should not have been a surprise to anyone. If you're going on tv and complaining now, it just means you weren't doing your job before. And the chief jack-ass in Congress? Senator Grassley from Iowa who wanted the AIG execs to resign or commit suicide, ala the Japanese. Unbelieveable. Instead of going out for blood Grassley, try doing your job for a change.