Articles

Too Big to Fail? How about too stupid to be Rescued?

In economics/money, industry excesses, stupidity, U.S government on March 15, 2009 by Editor Z

Despite their sorry financial state, AIG will go ahead and give its top executives bonuses. How tone deaf can they possibly be? The Obama administration keeps trying to make the case that we need to infuse capital into these giant casinos to keep our economy afloat. Its disgraceful practices like this that make the job of President Obama and anyone else all the more harder.


New York Times:

Word of the bonuses last week stirred such deep consternation inside the Obama administration that Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them.

The payments to A.I.G.’s troubled financial products division are in addition to $121 million in previously scheduled bonuses for the company’s senior executives and 6,400 employees across the sprawling corporation. Mr. Geithner last week pressured A.I.G. to cut the $9.6 million going to the top 50 executives in half and tie the second half of their bonuses to their performance in restructuring the company.

The payment of so much money at a company at the heart of the financial collapse that sent the broader economy into a tailspin almost certainly will fuel a popular backlash against the government’s efforts to prop up Wall Street. Past bonuses already have prompted President Obama and Congress to impose tough rules on corporate executive compensation at firms bailed out with taxpayer money.

Personally I don’t see why the government doesn’t exercise more leverage here. After all since the U.S government and by proxy the U,S taxpayer now owns 80% of the operation.

UPDATE (3/16/09): Rep. Barney Frank (D-MA) said the same thing that maybe its time to get rid of some of those who got us into this crisis rather then enrich them. Of Course that would go for some of the politicians who got us into this disaster by removing some of the regulatory frame work that helped make this so catastrophic. Proof that deregulation and a no rules economy doesn’t work.

Digg!

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