Just recently Bernanke said if anything, it is developments in AIG that has disturbed him the most. Fed Vice Chairman Kohn was asked to testifyon AIG (haven’t read the details) and he refused to give details of AIG counterparties.
Today, Eurointelliegnce pointed that in its bailout of AIG, the US taxpayers has also saved Deutsche Bank, Societe Generale etc. (the list of counterparties who were paid from public funds is here). If this was not enough, read this news from NYT:
The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to executives in the same business unit that brought the company to the brink of collapse last year.
Word of the bonuses last week stirred such deep consternation inside the Obama administration that Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them.
The payments to A.I.G.’s financial products unit are in addition to $121 million in previously scheduled bonuses for the company’s senior executives and 6,400 employees across the sprawling corporation.
This is so bad that one needs to find another word for describing these practices. This is just like the RBS story in UK whose ex-chief continues to get his huge pension despite being majorly owned by UK Govt. Another case of taxpayers paying for the bonuses of the people who led to the crisis in the first place. On top of this, AIG chief says:
In a letter to Mr. Geithner, Edward M. Liddy, the government-appointed chairman of A.I.G., said at least some bonuses were needed to keep the most skilled executives. “We cannot attract and retain the best and the brightest talent to lead and staff the A.I.G. businesses — which are now being operated principally on behalf of American taxpayers — if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury,” he wrote Mr. Geithner on Saturday.
Still, Mr. Liddy seemed stung by his talk with Mr. Geithner, calling their conversation last Wednesday “a difficult one for me” and noting that he receives no bonus himself. “Needless to say, in the current circumstances,” Mr. Liddy wrote, “I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them.”
What skills and talent is he talking about?? Looking at the conditions in employment markets and of AIG, I am sure AIG employees must be more than grateful to have a job. People are struggling to get basic salaries (quite a few don’t even know what was their fault) and here we are talking about a firm barely functional on public funds, distributing bonuses! And what is worse is Government appointed CEO is defending it!! And all this is happening despite President Obama’s criticism of incentive structure.
US policymakers have just messed this entire bailout of AIG (and others). It is a complete confidence crisis in developed world policymakers.
1) I was seeing this presentation on AIG’s website which enforces how important it is to save AIG from collapsing. Really?
2) It also has a arrogant link which is titled as Setting the Record Straight. In this AIG tries to answer all media criticisms. Yes, the record indeed has to be set straight. We can’t have this situation anymore.