White House Looking To Recoup AIG Money?
By Justin Gardner | Related entries in Business, Economy
This is more political theatre than anything, but the populist rage against those irresponsible bonuses is at a fever pitch and if Obama doesn’t handle this one smartly it could seriously hurt the administration’s chances to get more bailout money down the road if it’s needed.
(CBS/AP) The Obama administration is looking for ways to recoup at least some of the $165 million American International Group, Inc. paid out in bonuses over the weekend, despite accepting billions in government aid to stay afloat, reports CBS News correspondent Peter Maer.The White House continues to negotiate with AIG to bring any payments in line with the government’s priorities, an administration official told CBS News.
President Barack Obama is scheduled to speak Monday morning on AIG while rolling out his plan to help small businesses. He’s expected to voice anger over the bonuses and could elaborate on administration efforts to recover some of the money, reports Maer.
The administration official said that the bonuses “long been known about inside and outside AIG. But we didn’t want to accept them.â€
The White House is seeking what are described as “mechanisms” to recover money spent on bonuses, but the company insists some of the bonuses are part of legally binding contracts signed before the government’s bailout.
That last bit of info is particularly important because I don’t think people understand that these contracts were in place before the government stepped in. So there’s little to no recourse the government can take right now besides breaking those contracts to appease the masses. But is that a precedent that any of you would be comfortable with? Doubt it.
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March 16th, 2009 at 10:21 am
One option is that Congress could have passed a law saying no bonuses for any company taking bailout money when the bailout bill came out in the first place. Another option would be for AIG to tell it’s employee’s that they can take the bonus, but if they do then publish their names on a public website (not great for motivation an moral).
Because no one seemed to have to foresight to put many strings on the bailout money, I think there will be an increased cry for bankruptcy for these companies since a bankruptcy judge can void these contracts (though often doesn’t).
March 16th, 2009 at 11:04 am
No contracts have to be broken if congress acts. Amend the tax code. Take the money back. Done.
March 16th, 2009 at 11:09 am
Let it fail. Or, break the contracts.
If the contracts are broken… does anybody really think some fatcat is going to sue the U.S. government, in public court, claiming that the government “owes” them millions of dollars in bonuses, under the TARP?
Gimme a frackin’ break.
No millionaire in their right mind would pursue such a case.
Break the contracts… call the bluff.
Agnostick
[email protected]
March 16th, 2009 at 11:25 am
Justin:
First, I’m betting that it will turn out that AIG entered into these contractual obligations just before the initial Federal Reserve $85 billion bailout last September.
Second, you bet I’d break those contracts to “appease the masses.” But short of breaking them in any company under any circumstances are a host of ways to persuade people to renegotiate their contracts, not least of which is the threat of firing. Ultimately, you can say to the involved employees, we don’t have the money; sue us. You have to buy into the notion that these are people who are the “best and brightest” and somehow indispensable to AIG to appease them.
Third, why didn’t Geithner and Obama get all “outraged” before Sunday and tell Liddy, who was installed by the government, to figure out a way to hold back these bonuses or prepare to be replaced by someone who will.
Allowing this to go forward was a huge mistake. Obama can pretend to being outraged along with everyone else but this was an irreversible tripwire: the financial system may genuinely need a lot more in bailouts for the benefit of the whole economy and all of us, but now, Congress — Democrats and Republicans alike — will no longer be able to coutenance any more bailouts. It won’t be possible politically. Anyone who votes, yea, on more dough to Wall Street had better have a safe seat. People are now furious. AIG was the weak link in this whole affair all along. These bonuses are a bridge too far.
March 16th, 2009 at 11:29 am
Ag – I’m with you. Screw’em – how would they get paid if AIG really was going out of business – they wouldn’t. This is pure theft in the gilded tower fashion – time for them to be taken out back and put down.
March 16th, 2009 at 11:57 am
if the government tried to screw me out of a pre-negotiated bonus, you bet your ass I would sue them, so would any other rational person who who worked hard to reach a sales quota, and some bozo tries to take it away.
March 16th, 2009 at 12:18 pm
Support for my point in the above comment comes from Mickey Carroll, long-time NYTimes political reporter and now head of Quinnipiac polls. Says Mickey in Politico:
Way back when I was reporting on New York City’s “fiscal crisis” for the Times in the 1970s, I got the impression that bankers could be a slippery lot, far less reasonable to deal with than politicians. Now everyone is, as you note, “outraged” — appropriately — at what AIG is doing with the public’s money. To suggest that this sort of stuff will make it harder for the Obama administration to manage a bank bail-out is an understatement. Let’s hope (a) that the administration can improvise some way to make AIG behave better, and (b) that this isn’t just the tip of the iceberg. If we start finding out that there’s much more of this kind of stuff, the public, followed by Congress, is bound to rebel and we can say bye-bye-bailout.
http://www.politico.com/arena/
March 16th, 2009 at 12:59 pm
How about Nationalizing A.I.G.? I know that sound like socialism but folk lives are being destroy because of this kind of business.
March 16th, 2009 at 1:00 pm
I was would just either let them fail or Nationalize A.I.G.