# Bonuses For AIG **URL:** \ **Category:** The BBQ Pit\ **Created:** [March 15, 2009, 6:11pm UTC](https://boards.straightdope.com/t/bonuses-for-aig/489541 "2009-03-15T18:11:24Z")\ **Posts on this page:** 20\ **Page:** 21
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [March 21, 2009, 7:08pm UTC](https://boards.straightdope.com/t/bonuses-for-aig/489541/401 "2009-03-21T19:08:59Z")
Well, thank heavens for their generosity, out there producing wealth for spongers like firemen, teachers and farmers. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [March 21, 2009, 7:16pm UTC](https://boards.straightdope.com/t/bonuses-for-aig/489541/402 "2009-03-21T19:16:09Z")
> [@gonzomax](#): > > Right only a quarter billion. Do you think they could have made this kind of money the last decade if they did not determine their own salaries? They wrote the bonus contracts to assure they would get them no matter how much the company lost. Does that seem like a brilliant management decision or more like they had them written that way? I would love to see them be defended in court. Um, what is your legal argument that these bonuses are invalid? Are you saying that offering a bonus that does not depend on profitability is somehow illegal? I just received a bonus for helping bring a project in on time. We may still lose our shirt on the project. But I still got a bonus. Is that illegal? Or am I missing your point? The bonuses in question were added specifically because the company probably wouldn’t be profitable. They were bonuses offered to keep people working who otherwise could find higher paying jobs at companies that still had product to sell. Here’s a reasonably close analogy: A company goes into receivership. Someone has to wind down the assets, evaluate what’s worth what, and try to get fair value for the things being liquidated. You need good people for that. But good people don’t want to be in dead-end jobs. They know if they stay to the end they’ll be unemployed, and at the end a whole bunch will be unemployed at the same time. Other firms realize that there are good employees working for the dying company. So they see a buying opportunity, and start poaching them. The dying firm stands to lose a bundle if it loses the people who can unwind the mess, so it offers bonuses to compensate them for sticking it out to the bitter end. The alternative is to have the orderly unwinding of the company turn into a chaotic mess where huge value is lost because there aren’t enough knowledgeable people left to work the problem. So yes, you wind up with a failing company paying bonuses to people while it loses money. But the bonuses aren’t put in place to reward profitability - they’re put in place to minimize the downside damage. The people getting the bonuses are the people brought in to bring an orderly end to the financial products division. AIG is trying to divest itself of the whole thing, but there are trillions of dollars in outstanding debt that has to be sorted through and sold off. That’s what these people are doing. They are NOT the same people who created the problem. They’re the ones fixing it. They have already converted hundreds of billions of dollars. Every day they stay on the job represents a lowering of the risk that taxpayers are on the hook for. You damned well want these people there. But now politicians see an opportunity to do a little grandstanding and to deflect blame from their own miserable performance through all this, so they’re going to wreck this mechanism and help ensure that American taxpayers get the least value back for their AIG investment as they possibly can. The taxpayers have an 80% interest in AIG at this point, and their representatives are doing everything in their power to destroy the value of this company. Way to go, brainiacs. ---
**Author:** ![Ocean\_Annie](https://avatars.discourse-cdn.com/v4/letter/o/8797f3/32.png) [@Ocean\_Annie](https://boards.straightdope.com/u/Ocean_Annie)\ **Post date:** [March 21, 2009, 7:23pm UTC](https://boards.straightdope.com/t/bonuses-for-aig/489541/403 "2009-03-21T19:23:44Z")
> [@clairobscur](#): > > The UN??? What or who in the UN would have made such a statement, and based on what capacity? > I’ve a hard time thinking that any institution would recommend moving away from the dollar right now (even though you’re right when saying that China has fired warning shots and has made its displeasure known). This would seriously compound the issue for everybody. And moving away from the dollar towards what? > I’m not saying that the dollar couldn’t possibly lose its status in the aftermath of the current crisis, but I’m pretty sure that almost everybody is praying that it won’t. Brief hijack- Here is the [link.](http://www.reuters.com/article/newsOne/idUSTRE52H2CY20090318) There has been talk about an alternative reserve currency for a couple of years, so I try not to get overly concerned. I think this time it might be different. I am short on time and have to run, but if you are interested, read the G 20 platform. It is clear which direction other countries want to go, especially the EU. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [March 21, 2009, 7:41pm UTC](https://boards.straightdope.com/t/bonuses-for-aig/489541/404 "2009-03-21T19:41:35Z")
> [@Sam\_Stone](#): > > Um, what is your legal argument that these bonuses are invalid? Are you saying that offering a bonus that does not depend on profitability is somehow illegal? > > I just received a bonus for helping bring a project in on time. We may still lose our shirt on the project. But I still got a bonus. Is that illegal? Or am I missing your point? > > The bonuses in question were added specifically because the company probably wouldn’t be profitable. They were bonuses offered to keep people working who otherwise could find higher paying jobs at companies that still had product to sell. > > Here’s a reasonably close analogy: A company goes into receivership. Someone has to wind down the assets, evaluate what’s worth what, and try to get fair value for the things being liquidated. You need good people for that. But good people don’t want to be in dead-end jobs. They know if they stay to the end they’ll be unemployed, and at the end a whole bunch will be unemployed at the same time. > > Other firms realize that there are good employees working for the dying company. So they see a buying opportunity, and start poaching them. The dying firm stands to lose a bundle if it loses the people who can unwind the mess, so it offers bonuses to compensate them for sticking it out to the bitter end. The alternative is to have the orderly unwinding of the company turn into a chaotic mess where huge value is lost because there aren’t enough knowledgeable people left to work the problem. > > So yes, you wind up with a failing company paying bonuses to people while it loses money. But the bonuses aren’t put in place to reward profitability - they’re put in place to minimize the downside damage. > > The people getting the bonuses are the people brought in to bring an orderly end to the financial products division. AIG is trying to divest itself of the whole thing, but there are trillions of dollars in outstanding debt that has to be sorted through and sold off. That’s what these people are doing. They are NOT the same people who created the problem. They’re the ones fixing it. They have already converted hundreds of billions of dollars. Every day they stay on the job represents a lowering of the risk that taxpayers are on the hook for. You damned well want these people there. > > But now politicians see an opportunity to do a little grandstanding and to deflect blame from their own miserable performance through all this, so they’re going to wreck this mechanism and help ensure that American taxpayers get the least value back for their AIG investment as they possibly can. > > The taxpayers have an 80% interest in AIG at this point, and their representatives are doing everything in their power to destroy the value of this company. Way to go, brainiacs. They are the same people except Liddy who is one of them.They did not go outside. The idea that they write their own packages with a friendly board and controlled compensation committee is shameful. Is it legal? Maybe, I just want to see them defend the practice in a court of law. I want more light on the backstage shenanigans of the overly powerful. The politicians are not damaging the company. They did that very well all by themselves. If bailing them out with 170 billion is destroying the company, I am sure a lot of companies would welcome such abuse. I want a trial to throw a spotlight on their abuses. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [March 21, 2009, 7:42pm UTC](https://boards.straightdope.com/t/bonuses-for-aig/489541/405 "2009-03-21T19:42:27Z")
I’ve been following these moves to get away from the U.S. dollar, and it’s a very bad sign. Another bad sign is that China is now moving out of long positions in U.S. treasuries and into short positions, indicating they have no faith in the long-term stability of the dollar. And possibly not coincidentally, the U.S. Treasury just bought up a trillion dollars of long debt. These are very bad signs. The U.S. could be facing the need to raise interest rates during a recession to attract buyers of the debt, and/or print money to monetize the debt, which will bring back inflation as the economy tries to recover. The U.S. could be heading right back into the teeth of stagflation and a very long recovery. What’s different this time is that the government is carrying far more debt, and the current government is spending money like a drunken sailor, running up the deficit even more. That means it will be much, much harder to raise interest rates to curb any incipient inflation. That in turn will make it harder to monetize the debt without running the risk of runaway inflation. There are plenty of examples of economies that have cratered in exactly this way. Just none as big as the U.S. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [March 21, 2009, 7:51pm UTC](https://boards.straightdope.com/t/bonuses-for-aig/489541/406 "2009-03-21T19:51:42Z")
> [@gonzomax](#): > > They are the same people. They did not go outside. AIG has 70,000 employees. Are ALL of them responsible? The people in question were not the ones running the financial products division when the crap hit the fan. The current CEO was brought in to fix the problem. The people getting the bonuses are largely not the people responsible for the decisions made before. > [@](#): > > The idea that they write their own packages with a friendly board and controlled compensation committee is shameful. Is it legal? Maybe, I just want to see them defend the practice in a court of law. Because what every struggling business needs is to have its best people hauled up in front of a kangaroo court so you can get your pound of flesh. > [@](#): > > I want more light on the backstage shenanigans of the overly powerful. The politicians are not damaging the company. They did that very well all by themselves. If bailing them out with 170 billion is destroying the company, I am sure a lot of companies would welcome such abuse. You think so, huh? From that conservative bastion, [The New York Times](http://www.nytimes.com/2009/03/21/business/21nocera.html?_r=2&hp): > [@](#): > > ``` > By week’s end, I was more depressed about the financial crisis than I’ve been since last September. Back then, the issue was the disintegration of the financial system, as the Lehman bankruptcy set off a terrible chain reaction. Now I’m worried that the political response is making the crisis worse. The Obama administration appears to have lost its grip on Congress, while the Treasury Department always seems caught off guard by bad news. > > And Congress, with its howls of rage, its chaotic, episodic reaction to the crisis, and its shameless playing to the crowds, is out of control. This week, the body politic ran off the rails. > > There are times when anger is cathartic. There are other times when anger makes a bad situation worse. “We need to stop committing economic arson,” Bert Ely, a banking consultant, said to me this week. That is what Congress committed: economic arson. > > ``` If I were an AIG stockholder, I’d be running for the exits. If I were thinking of working for AIG, I’d think again. If I was a CEO of a company that needs a bailout, I’d do anything to avoid it. If I were a company thinking about doing business with AIG, I’d have to think about whether any profits I might make in the deal would make me a target of the wrath of the government and maybe single me out for new special taxes. AIG’s life is getting much harder because of the actions of the President and the Congress. And since YOU own 80% of AIG, you should care about that. ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [March 21, 2009, 8:04pm UTC](https://boards.straightdope.com/t/bonuses-for-aig/489541/407 "2009-03-21T20:04:57Z")
From an opinion piece in the _NY Times_, **Sam**. Your attempt to give it extra cachet for being published in a …gasp!..liberal outlet is not quite kosher. Tsk. ---
**Author:** ![ElvisL1ves](https://avatars.discourse-cdn.com/v4/letter/e/5daacb/32.png) [@ElvisL1ves](https://boards.straightdope.com/u/ElvisL1ves)\ **Post date:** [March 21, 2009, 9:00pm UTC](https://boards.straightdope.com/t/bonuses-for-aig/489541/408 "2009-03-21T21:00:32Z")
> [@Sam\_Stone](#): > > If I were an AIG stockholder, I’d be running for the exits. If I were thinking of working for AIG, I’d think again. If not for the bailout, it would be too late _already_. Do you grasp that? > [@](#): > > If I was a CEO of a company that needs a bailout, I’d do anything to avoid it. You would need the bailout mainly to avoid bankruptcy. A CEO already does anything to avoid that. The prospect of a bailout would make the bankruptcy-doomed company a \*more \*attractive investment, and the CEO’s life would be _easier_. Your actions would be foolish. > [@](#): > > If I were a company thinking about doing business with AIG, I’d have to think about whether any profits I might make in the deal would make me a target of the wrath of the government and maybe single me out for new special taxes. Without the bailout, you’d have to worry about getting pennies on the dollar in bankruptcy. Is that worse? > [@](#): > > AIG’s life is getting much harder because of the actions of the President and the Congress. And since YOU own 80% of AIG, you should care about that. Nonsense. They have a life at all because of the actions of the President and Congress. Do you grasp that? And yes, I and my fellow Americans do own 80% of AIG, and do have the authority to require them to begin to act responsibly in restoring the economy. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [March 21, 2009, 9:21pm UTC](https://boards.straightdope.com/t/bonuses-for-aig/489541/409 "2009-03-21T21:21:28Z")
So we have to be nice to the financial bosses because they will go elsewhere. Any idea where? I am watching Alastair Darling the Chanc. of Exchequer getting grilled in England. They have problems with stopping the huge bonuses and salaries their bankers took. They set up a go between company called UKFI to manage the banks. Seems they have more reluctance to trust their thieving bankers to fix themselves. Our financial geniuses took the world down. Sweden has taken over their banks. Would our brilliant banker be able to go there? Broom them and take it over. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [March 21, 2009, 9:50pm UTC](https://boards.straightdope.com/t/bonuses-for-aig/489541/410 "2009-03-21T21:50:19Z")
> [@ElvisL1ves](#): > > If not for the bailout, it would be too late _already_. Do you grasp that? Of course I grasp that. So in your mind that makes it okay to sink 180 billion dollars of taxpayer money into the company, and THEN set fire to it? “Hey, we bailed you out, so now we have the privilege of destroying you! After all, if we hadn’t bailed you out, you’d already be dead.” Is that the logic you are supporting? > [@](#): > > You would need the bailout mainly to avoid bankruptcy. A CEO already does anything to avoid that. No, they really don’t. For example, they might decide that bankruptcy is a better solution than putting their company in the hands of a bunch of teenage children with matches. At least under bankruptcy there are laws and rules and the possibility of restructuring and living to trade another day. These companies will only seek bailouts over bankruptcy if they think the bailout is the lesser of two evils. Congress is doing everything in its power to make companies believe that it would be better to simply declare chapter 11 than get in bed with these bozos. But it’s more critical than that: TARP was set up to encourage companies NOT facing bankruptcy to take part as well, so that the ones who are truly in dire straits would not be stigmatized by taking TARP money. This was done because of the risk that the mere act of getting involved with TARP would poison a company’s stock and reputation and hasten its collapse. But now, any company that’s even remotely solvent will avoid this circus, ensuring that the only companies under TARP are the ones that are a breath away from demise. That’s going to make it very difficult for those companies to survive, and for taxpayers to get back any money given out under TARP. > [@](#): > > The prospect of a bailout would make the bankruptcy-doomed company a \*more \*attractive investment, and the CEO’s life would be _easier_. Your actions would be foolish. Does it look to you like the Congress is currently making AIG executives’ lives easier? > [@](#): > > Without the bailout, you’d have to worry about getting pennies on the dollar in bankruptcy. Is that worse? Gee, I don’t know… Having your reputation dragged in the mud and having government officials calling for you to commit suicide seems to be about as bad as it can get. > [@](#): > > And yes, I and my fellow Americans do own 80% of AIG, and do have the authority to require them to begin to act responsibly in restoring the economy. Yes, and what if acting responsibly means paying bonuses to retain the people who can figure out how to get the taxpayer’s money back for them? I have yet to hear an argument for not paying these bonuses that doesn’t just come down to, “I want these fuckers punished.” I haven’t yet heard a rational argument that says not paying the bonuses will lead to the best financial outcome for AIG and the taxpayers supporting them. Would you like to present that argument so we can debate it? ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [March 21, 2009, 10:06pm UTC](https://boards.straightdope.com/t/bonuses-for-aig/489541/411 "2009-03-21T22:06:08Z")
> [@Sam\_Stone](#): > > I haven’t yet heard a rational argument that says not paying the bonuses will lead to the best financial outcome for AIG and the taxpayers supporting them. Are you seriously arguing that paying bonuses up to now has resulted in the best possible financial outcome for AIG? ---
**Author:** ![eleanorigby](https://avatars.discourse-cdn.com/v4/letter/e/ee7513/32.png) [@eleanorigby](https://boards.straightdope.com/u/eleanorigby)\ **Post date:** [March 21, 2009, 10:08pm UTC](https://boards.straightdope.com/t/bonuses-for-aig/489541/412 "2009-03-21T22:08:34Z")
I don’t understand Congress’ recent actions. [WTF?](http://executivesuite.blogs.nytimes.com/2009/03/20/stop-the-presses-congress-is-angry/) I understand and share the anger and disgust, but again, we need to direct this anger into appropriate legislation, not just shoot at random. We will end up cutting off our nose to spite our face. And if China puts the hammer down… I feel terrible about the addresses of these AIG folks being “released”. Thing is, someone (hello, media?) needs to actually FOCUS on this complex issue and delineate clearly. We are not off the hook, either–we need to PAY ATTENTION and not go off half cocked. I’m for more oversight and regs (unless it’s a case of the fox watching the henhouse), but retroactive taxation sounds a lot like King George III to me. I hope Obama is smart enough and politically savvy enough to NOT fall for the shenanigans going on. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [March 21, 2009, 10:12pm UTC](https://boards.straightdope.com/t/bonuses-for-aig/489541/413 "2009-03-21T22:12:16Z")
> [@eleanorigby](#): > > And if China puts the hammer down… And what hammer is that? It’s not like they can call in the note or anything. They know good and well what will happen if they do anything to make our economy worse. All they can do is hope the dollars we are paying them back with retain some value. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [March 21, 2009, 10:25pm UTC](https://boards.straightdope.com/t/bonuses-for-aig/489541/414 "2009-03-21T22:25:05Z")
> [@Fear\_Itself](#): > > Are you seriously arguing that paying bonuses up to now has resulted in the best possible financial outcome for AIG? I’m talking about these particular bonuses. Let’s try to stay focused. Putting aside what happened in the last 25 years, the current question is whether or not the actions of Congress in this particular case are helping or hurting the economy of the United States. Please make the case that this 90% tax, or calls for the heads of the people trying to save AIG, is improving matters. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [March 21, 2009, 10:34pm UTC](https://boards.straightdope.com/t/bonuses-for-aig/489541/415 "2009-03-21T22:34:06Z")
> [@Sam\_Stone](#): > > I’m talking about these particular bonuses. Let’s try to stay focused. I’m focused like a laser on your claim that if we don’t pay these bonuses, we won’t get the best possible outcome for the taxpayers. All the evidence says bonuses do not change that outcome. It is exceedingly naive of you to think these executives will respond differently to \*these \*bonuses than they did to previous bonuses. ---
**Author:** ![eleanorigby](https://avatars.discourse-cdn.com/v4/letter/e/ee7513/32.png) [@eleanorigby](https://boards.straightdope.com/u/eleanorigby)\ **Post date:** [March 21, 2009, 10:41pm UTC](https://boards.straightdope.com/t/bonuses-for-aig/489541/416 "2009-03-21T22:41:12Z")
> [@Fear\_Itself](#): > > And what hammer is that? It’s not like they can call in the note or anything. They know good and well what will happen if they do anything to make our economy worse. All they can do is hope the dollars we are paying them back with retain some value. Maybe not the actual notes, but I know this: when you owe someone a lot of money, it’s in your best interest to appease that person as much as possible. There is more to the world than money–there is power and influence. That’s quite a hammer to have. ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [March 21, 2009, 10:41pm UTC](https://boards.straightdope.com/t/bonuses-for-aig/489541/417 "2009-03-21T22:41:28Z")
I’m a bit confused, more so than usual. On the one hand, I’m being told that these are innocent lambs who had nothing to do with the toxic business practices that initiated this galactic clusterfuck. Then I’m told that it is crucial that we retain their _expertise_ in the same toxic business practices. Because they are so knowledgeable, or because they are so innocent? ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [March 21, 2009, 10:45pm UTC](https://boards.straightdope.com/t/bonuses-for-aig/489541/418 "2009-03-21T22:45:21Z")
> [@eleanorigby](#): > > Maybe not the actual notes, but I know this: when you owe someone a lot of money, it’s in your best interest to appease that person as much as possible. There is more to the world than money–there is power and influence. That’s quite a hammer to have. To the contrary, China should worry we don’t drop the hammer on them by printing so much money the dollar starts falling precipitously. When I owe you $100, I have a problem; when I owe you $1 trillion, you have a problem. ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [March 21, 2009, 10:46pm UTC](https://boards.straightdope.com/t/bonuses-for-aig/489541/419 "2009-03-21T22:46:50Z")
Might lead to a Communist takeover! ---
**Author:** ![eleanorigby](https://avatars.discourse-cdn.com/v4/letter/e/ee7513/32.png) [@eleanorigby](https://boards.straightdope.com/u/eleanorigby)\ **Post date:** [March 21, 2009, 10:48pm UTC](https://boards.straightdope.com/t/bonuses-for-aig/489541/420 "2009-03-21T22:48:26Z")
> [@Fear\_Itself](#): > > To the contrary, China should worry we don’t drop the hammer on them by printing so much money the dollar starts falling precipitously. When I owe you $100, I have a problem; when I owe you $1 trillion, you have a problem. Thus endeth my foray into the world of high finance. [Previous page](https://boards.straightdope.com/t/bonuses-for-aig/489541.md?page=20) [Next page](https://boards.straightdope.com/t/bonuses-for-aig/489541.md?page=22)