Daughter of the Ring of Fire » American International Group

Posts Tagged ‘American International Group’

Mar

2009

About those AIG Bonuses

Posted on 17:39, March 15th, 2009 by EKSwitaj

Read my latest story, "A Tale of Two Birthdays", at 52|250.

Of course, we should all be outraged that AIG plans to use taxpayer money to pay bonuses, but not one of us should be surprised, nor should we take at face value expressions of outrage from politicians who have done little or nothing to prevent such actions. The fact of the matter is that while this use of $165 million of our money is a highly visible outrage, it is actually in line with the goals of the bailout.

Bailouts for companies like AIG have always been intended to maintain the wealth of those in the higher classes and the instruments by which they expand their wealth in good economic times. A cheaper option would have been to allow these too-big-to-fail companies to fail and then use the money saved by not supporting them to help the little people—people like you and me—affected by that failure. TARP has been a sort of top-down class warfare that seeks to maintain an unsustainable system which has always included cycles of economic misery.

For all the populist positioning and expressions of outrage about these bonuses, it is difficult to believe then that any politicians truly object to these bonuses. Consider the excuses being offered by Obama’s advisers:

Mr. Summers suggested that the government’s ability to require the bonuses be scaled back was restricted by preexisting contracts, even though he did not specify what those restrictions may be.

“We are a country of law,” said Mr. Summers, one of several economic officials to hit the Sunday-morning talk show circuit. “There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system.”

Mr. Goolsbee explained it this way: “I think the root of the problem has been some of the people have things written in their contract that say, ‘Look, you sell this much life insurance, you get a bonus of X,’ and it’s in their contract and that part can’t be changed.” (source: NYTimes)

Really? Contracts can’t be changed? Of course, that doesn’t apply to autoworkers, but then again, they are not members of the class that bailouts are supposed to protect.