The only thing anyone wanted to talk about today how it was possible AIG was able to pay these bonuses to their employees. The front page of the Wall Street Journal and just about every other newspaper and news show today led with this story. Is it possible that this story, just like a lot of the headline news stories are overblown by our news media? I think so. Don’t misunderstand. I certainly do not think that anyone is entitled to a $6.4 million bonus, regardless of who the employee is or how well he/she has performed. No doubt there were people at AIG who were paid bonuses and do not deserve bonuses. That is not right or fair. Well, lots of things aren’t fair.
There are two reasons why we all just need to take a chill pill. First, I suspect that there are some people in the AIG organization who have received these bonuses and have actually done a good job (i.e. they deserve the bonus). Can you imagine, for example, a single mother of three, who works as an insurance sales agent for AIG, selling property and casualty insurance? She busts her ass all year long to make her sales goals, earning about $60,000 throughout the year. Because she met her sales goals, she is entitled to a $20,000 bonus. Should she not be able to receive her bonus because of the poor decisions (which resulted in billions of dollars in losses) made by 20 reckless individuals in a derivatives products division of AIG, in the London office? Of course not. She is entitled to her bonus and as such should receive it and keep it. Second, Mr. Libby in his testimony to Congress today (see video below) had some valid points. These bonuses were contractually obligated to be paid and as such AIG is legally bound to pay those bonuses. Second, as it turns out, the government gave the green light for these bonuses to be paid. YES, that is right the government said “go ahead”. So can we really blame AIG for moving forward and paying the bonuses? No. Not only did Mr. Libby testify that they consulted with their representatives at the Federal Reserve about the bonuses, but that the Federal Reserve knew, in advance, that AIG would making these bonus payments to their employees. To top it all off, Senator Chris Dodd admitted today that he was pressured by representatives at the Treasury Department (i.e. Tim Geithner’s team) to put language in the federal stimulus legislation that would allow bonuses that were contractually obligated to continue to be paid out by companies such as AIG. The same group of politicians that are screaming bloody murder about the fact that AIG paid out these bonuses are the same group of politicians that allowed the act to occur and knew about the payments in advance. Now they want to grandstand and summons the CEO of AIG to be raked over the coals in front of Congress. Keep in mind that Mr. Libby was just appointed (by the previous Treasury Secretary) to take over the AIG CEO position and he is paying himself $1 per year as a salary. The guy is being paid $1 to oversee the unwinding of what may be the single worst car wreck in the economy. The real culprits in this scandal, as with the entire economic crisis, are our politicians in Washington.
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