The outrage against the AIG bonuses brings to mind Kabuki theatre. More make-up and masks, please! Power Line has the minority view, based on the testimony of Edward Liddy, which seems reasonable to me:
* All of these payments, as to AIG's troubled financial products division, are retention bonuses, not performance bonuses.
* The money is not going to anyone responsible for the implosion of AIG--those people, who were in the credit default swap area, are gone.
* These retention bonuses were promised to AIG employees who are responsible for winding down the company's financial products division. At the beginning, this division had a potential exposure of $2.7 trillion. Winding down AIG's book of business in this area was a dead-end job, and there was a great likelihood that the people responsible for the work, who knew the most about the products involved, would take jobs elsewhere.
* In late 2007 or early 2008, AIG made a deal with these employees: if they would stay at AIG until specified conditions were met, i.e., either certain business was wound down or a given period of time had elapsed, they would receive a specified retention bonus.
* As to all of the employees involved, they satisfied the terms of the bonus by wrapping up a portfolio for which they were responsible and/or staying on the job until now. As a result of the efforts of this group, AIG's financial products exposure is down from $2.7 trillion to $1.6 trillion.
I hope AIG takes legal action against Congress to stop the ridiculous 90% taxation of these bonuses. Talk about scapegoats. Washington Post has a good article about the situation, and Jonathan Goldberg wrote a good column about mixing politics and business too.
"We should have learned from the government takeover of Fannie Mae and Freddie Mac what dangers lie ahead: The rule of law and political manipulation of the economy don’t mix well...What signal does it send when the president and Congress make it clear that they will revisit legal contracts that run afoul of populist outrage?"
If the AIG staff are forced to return their contractual bonuses, then shouldn't President Obama return the $130,000 he received from AIG in 2008? From ABC News:
"AIG employees kept doling out donations to politicians, including presidential candidate Barack Obama, after getting bailed out with federal funds last year, raising the question of whether those politicians will now return the money. AIG executives gave more than $630,000 during the 2008 political cycle even as the company was falling apart ."
More than $120,000 was donated after AIG received $85 billion in federal bailout funds in September 2008. Give it back, President Obama, Senator Dodd and Senator McCain!