Why I Think AIG Should Get to Keep Their Bonus

I thought I would avoid this topic all together, it makes me sick to see Congress wasting time on such a trivial amount of money, considering the larger issues that are currently going on.   The United States Government has paid around $173 billion to AIG in bailout funds, of that AIG has recently paid out $176 million in bonuses. So that is .1% of the money that has been paid into AIG.  If you had $1,000 and you dropped .1% of it you would have just lost $1. While you probably want that $1 you aren’t going to get get in an uproar about it if someone borrows it and blows it on a lotto ticket.

I don’t know of many people who would argue that a company’s greatest asset is the people.  While I admit the executives at AIG have messed up pretty bad but imagine firing them and trying to replace them with the following line, the US Government says I can hire you but I can only pay you $500k and I can make up for that by paying you a bonus but the government will tax that bonus at 90% but hey I am better than my counterpart who can pay you millions.  I don’t see you getting much in the way of top caliber talent that would be capable of turning your company around.

On top of all of this the United States Congress has taken it on themselves to start issuing punishment for companies who haven’t done anything illegal.  This takes Dave Ramsey’s “Stupid Tax” to a whole new level.  Congress does not, and should not have the right to arbitrarily tax individuals or specific groups of American Tax Payers at outrageous tax rates as a form of punishment.  This is why we have a judicial system to ensure punishments fit the crimes.

I know I probably haven’t convinced you yet, you are porbably thinking that is taxpayer money meant to save AIG from going bankrupt.  You are right, but lets see where that money has been going. According to AIG‘s recently released list of who they have been paying with Taxpayer money we find things like $11.9 billion to Societe Generale of France, $11.8 billion to Deutsche Bank of Germany, and $5 billion to UBS of Switzerland.  Of course we don’t hear about these billions we heare about the $1 bills not the $1 billion dollar checks.

If you think the executives shouldn’t have gotten a bonus, you are right.  Does the government have the authority to do anything about it, I don’t think so and the precendent they are setting to interfere in private enterprise is the downfall of the American way and a free market economy.  Yes I know, the United States Government owns a majority stake in AIG, but still they aren’t in the business of running businesses, they can barely run the country.

More Information on AIG can be found on their Moving Forward Website

{ 4 comments… read them below or add one }

1 Jason @ MyMoneyMinute March 20, 2009 at 9:57 am

Meanwhile, $1 billion goes out to ACORN in the stimulus bill without a word. Sounds like a smokescreen to me.

Does it suck? Yes. I hate when people are rewarded for doing a crappy job. But (1) these ‘bonuses’ were probably already agreed to contractually as part of their pay, and (2) you gotta look at what else is going on too.

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2 tom March 20, 2009 at 11:34 am

The other thing that doesnt seem to make sense to me is the Congress wants more transparency from the Federal Reserve, so why don’t they achieve that first?

I mean they don’t even know where they got the money from and now they have the nerve to tell them how to use it?

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3 Josh Wong March 20, 2009 at 3:36 pm

I’m surprised how few people have this perspective as the media is having a field day with this. I thought I was the only one.

Although there is the old argument that we are giving bonuses to “losers” (thanks Rick Santelli), I couldn’t help but smile when reading the following web comic: http://xkcd.com/558/

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4 Santos March 20, 2009 at 4:27 pm

The other reason to let go of the stupid bonuses is that 80% of AIG belongs now to the taxpayers. All this talk about how terrible and incompetent AIG is (which is mostly true) only makes their recovery less likely and if (or when, depending on how optimistic you are) AIG goes under, the entire $173 billion (with a B) given to AIG already will evaporate.

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