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AIG Bonuses are not the Problem

March 16, 2009

Here is a response counter to most you will get today. I understand the anger of the bonuses but too many folks fail to realize is the $160 million is 1/10th of 1 per cent of the $170 billion AIG has received in bailout money. I am not happy about bonuses but given the totality of the $170 billion I will not get angry over it.

Here is another fact:

American International Group Inc. used more than $90 billion in federal aid to pay out foreign and domestic banks, some of whom had received their own multibillion-dollar U.S. government bailouts.
Some of the biggest recipients of the AIG money were Goldman Sachs at $12.9 billion, and three European banks — France’s Societe Generale at $11.9 billion, Germany’s Deutsche Bank at $11.8 billion, and Britain’s Barclays PLC at $8.5 billion. Merrill Lynch, which also is undergoing federal scrutiny of its bonus plans, received $6.8 billion as of Dec. 31.The money went to banks to cover their losses on complex mortgage investments, as well as for collateral needed for other transactions.

AIG is also in the mode of selling itself division by division to repay the bailout money and that requires competent people to administer this sell down. If we want to see as much money as possible returned from the bailout we need to keep a competent team on board. I don’t like the fact that some of these AIG people will benefit from this sell down but we as taxpayers will suffer much more if the sell down is not done correctly.

Another item which may or may not matter but there is a simple thing called a contract which when the Democrat Congress wrote the TARP law they put no restrictions on the TARP money, yes no restrictions. If any of your readers call Washington please ask their Congressperson how they could be so stupid as to give $170 billion with no strings.

I was the recipient of a major corporation rewriting my employment contract when they reduced my pay by 38% and took a pension worth $1.6 million dollars at age 60. We are back to 1985 wage rates and when you are on the wrong side of having a contract changed you feel differently about losing a contract.

The real problem is not the bonuses but the failure to supervise, regulate and monitor the financial instruments sold and backed by AIG both before and after the Wall Street meltdown.

Getting angry is worthwhile if you get angry about the correct thing. Stupid government actions, terrible legislation and zero systemic change are the things to bet angry about.

Mike Protack

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