If you have a computer, television, or radio, by now you’ve heard: the company you own a stake in whether you like it or not recently paid many of its former and still-employed employees $165 million in bonuses.
Yes, AIG—that three-letter acronym of a company that’s come to represent bad calls, bailouts, and bonehead moves like giving its staff bonuses with government money—has done it again, spitting in the face of the hand not only feeding it but holding the plug to the IV it’s been sucking on for months.
To say the least, AIG’s decision to pay employees bonuses because it’s contractually obligated to do so has proven to be a terrible one. On Monday, a day after the payments went public, AIG offices were bombarded with angry emails, phone calls, and even few death threats. Meanwhile, Republican Senator Charles Grassley from the Tall Corn State recommended that a few AIG executives either step up and admit they made an extremely poor decision, or else commit hari-kari. Later, the Iowa senator (sort of) retracted his statement that a few suits should take the honorable Samurai way out, but he’s still darn angry, like millions of others, that there’s been no public apology, and believes that handing out bonuses to folks partly responsible for crippling AIG—not to mention that the only reason they have or had a job was due to government (taxpayer) intervention–is an abomination.
The latest AIG blunder also inflamed the Obama administration and New York State Attorney General Andrew Cuomo (who’s always up for a bonus fight; he already has Bank of America/Merrill Lynch in his sights, and he’s locked and loaded).
Obama’s Treasury Secretary Timothy Geithner, after taking some heat for not stopping the bonuses from being paid in the first place, declared that the government will get its man, aka its $165 million back. And Cuomo dug up some dirt on the specifics of the bonuses, discovering that of the 418 AIG employees who received “retention” checks, 52 aren’t on the company payroll anymore, 73 cashed more than $1 million, and one made out with more than $6 million.
Since the news has been so highly publicized, federal and state government officials, after ripping a AIG a new one (AIG CEO Ed Liddy testifies—that is, receives a grilling—today in front of Congress), will be forced to increase their clamping down on any firm it’s given even a penny to, and will start policing everything from bonuses and salaries to free bagels and Putt-Putt outings. If it wasn’t clear before, it is now: Public representatives need to, at least, start giving the impression to U.S. taxpayers (aka AIG shareholders) that it won’t accept ridiculous and unethical acts by companies they keep bailing out.
And the implications will reach across the country, from AIG’s New York headquarters through the heartland and home of Grassley’s constituents all the way to the Pacific, affecting all sectors of the notoriously high-paying, scandal-ridden-as-of-late financial services industry.
This means you—if you’re employed by one of the big or small firms that have accepted funds under TARP—will feel the pinch of Uncle Sam’s grip sometime soon, and you have 418 or so employees over at the U.S.-owned (if not quite operated) American International Group to thank.
Derek Loosvelt is Vault.com’s global finance editor. He has a BS in economics from the Wharton School at the University of Pennsylvania and an MFA in creative writing from The New School. He is a writer and editor and has worked for Brill’s Content and Inside.com. Previously, he worked in investment banking at CIBC and Duff & Phelps.
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