$100 Million AIG Bonuses Still Stink

Image: Huffington Post

When bailed-out AIG paid monstrous bonuses to its Financial Products employees last year (the people whose derivatives deals almost ruined the company), people got mad. This year, AIG is doing it again. Thanks to two-year-old contracts, it will pay Financial Products employees about $100 million in bonuses today. The Washington Post explains how AIG is actually trying to climb out of a PR mess with the bonuses:

This week’s retention payments go to those employees at the company’s Financial Products division who agreed recently to accept 10 to 20 percent less money than AIG had initially promised them two years ago. In return, they are to receive their payments more than a month ahead of schedule.

As the housing bubble was collapsing and the company’s trading in financial derivatives called credit-default swaps was starting to cost the company billions of dollars, AIG officials instituted the guaranteed retention payments to keep employees during the coming period of financial instability. Financial Products employees were promised more than $400 million in retention pay, with lump sums due in March 2009 and March 2010.

Government and AIG officials agreed last year that the bonuses at Financial Products, however unsavory they might seem after the company’s multiple federal bailouts, were legally binding. That explanation did not sit well with millions of Americans who were out of work and whose tax dollars had gone to prop up the faltering insurance giant.

While many in the public and on Capitol Hill have been angered by outsize paydays at financial firms, the AIG retention bonuses have been especially rankling because the company has received a federal rescue package of about $180 billion in loans, stock investments and other commitments from the Federal Reserve and the Treasury Department.

Once the AIG employees are paid what they were promised in their contracts, AIG bonuses won’t be a scandal anymore. At least that’s what the company assumes.

Last spring, AIG employees also informed the company that they’d return $45 million in compensation by the end of 2009. To date, $20 million has been repaid, according to the Washington Post.

So, AIG gets bailed out by the government. It promises its employees handsome compensation. It tells its employees to pay back some of their money, which they do, kind of. Then it honors a two-year-old compensation contract, paying those employees those same handsome bonuses. It hopes everything is over.

This still smells bad. It will for a while to come.

  • Alan

    We’re not really going to fix the US economy until we realize that the misguided shift away from manufacturing useful things to the profligate squandering of saved wealth via the “financial services” sector has evicerated our REAL economy and created a protected, privileged class of financial gamblers who are rapidly bleeding us to death with their enormous losses. Meanwhile, we now need to import many of our most utilized basic consumer products that we previously manufactured domestically, resulting in a perpetual trade deficit – thus turning China into our nation’s banker. This is the fast track to economic self-destruction, which is becoming irreversible because the forces of Globalism once unleashed have become irresistable. Massive AIG bonuses to people whose reckless risktaking has evaporated trillions of dollars of hard-earned wealth by generations of people who did real work to earn it is just another symptom of the wrong track that we are on. The fact that we, The American People, cannot do anything about it is a further indication that Globalism is working against the interests of the masses of ordinary working people and, instead, feeding a class of whitecollar leeches who have amassed enormous political power at the highest levels. Even a populist president cannot save us from our moneyed special interests and their armies of lobbyists armed with truckloads of cash. Thanks Supreme Court for oiling the mechanism of our country’s self-destruction – I’m sure more special interest money will really help Washington to solve our growing problems. And thanks AIG for providing us with the clearest view yet of what we have become as a people…

  • jojo

    America is so screwed. we will be luck to look have economy like senegal does now, in the future.