The AIG bonuses furor: the class issues

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According to the Wall Street Journal, AIG International is paying out $450 million in bonuses to executives at its London-based subsidiary AIG Financial Products, which was primarily responsible for the company's staggering $99.3 billion loss in 2008.

The bonuses are on top of $121.5 million in "incentive pay" for 2008 going to 6,400 of AIG's employees and another $600 million in "retention pay" going to another 4,000 of them, for a grand total of over $1 billion.

The New York Times reported that seven AIG executives would receive bonuses worth $3 million or more each, while the Washington Post related that $165 million was being divvied up between 400 employees—an average of $412,500 each, or roughly ten times the annual gross pay of an average worker.
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Treasury Secretary Timothy Geithner is reported to have called the government-installed chairman of AIG, Edward Liddy, telling him that the bonuses were "unacceptable" and demanding that they at least be pared down. Given that in its first $85 billion bailout of the company last September the government took over an 80 percent share of the firm, one might have thought that Geithner's request would have carried some weight.


Liddy, a former board member of Goldman Sachs—the investment house believed to have received a large portion of the bailout money after it was "laundered" through AIG's insurance contracts—fired back an extraordinary letter telling the government to get lost.

"Quite frankly, AIG's hands are tied," he wrote, claiming that the bonuses were "binding obligations"—part of the executives' employment contracts—and interfering with them could provoke lawsuits. Moreover, he argued that they were fully warranted, despite the massive losses for which those receiving them were responsible. Without doling out a billion in additional compensation, he claimed, AIG would be at risk of losing "the best and the brightest to lead and staff the AIG businesses." Employees would leave if "their compensation is subject to continued and arbitrary adjustment by the US Treasury," he said.

"The best and the brightest?" The executives in AIG's financial division ran an unregulated credit-default swap operation that was just as much a scam as Bernie Madoff's fund, and far more destructive.

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FULL ARTICLE
http://www.wsws.org/articles/2009/mar2009/pers-m16.shtml