If you find my headline offensive, I apologize. But it accurately reflects just how offensive I find the latest actions of AIG.
The insurance giant is totally shameless. Since we, the taxpayers, bailed out AIG last year -- without, I must add, being specifically asked whether we wanted to do so -- our stake in the company has risen to $170 billion. And what has the firm done with our generosity? Used our money and abused our trust.
Now we learn that AIG is giving $450 million in bonuses to employees. Even more infuriating, these aren't just any employees. They are part of the financial products division, that same operating group that underwrote many of the risky subprime mortgages that set off our current economic nosedive.
Are you sitting down? There's more.
AIG wants to use another $121 million to pay senior executives and other company employees. Uh, didn't these same folks get treated, on our taxpayer bailout dime, to a ritzy spa retreat last year?
Again, I must ask WTF?
Obviously, that question is directed first to AIG, whose government-installed CEO Edward Liddy now claims that the company is (1) contractually obligated to pay the bonuses and (this is my favorite) that (2) AIG must hand over the money in order to hang onto the best people.
Liddy's exact words, from a letter to U.S. Treasury Secretary Timothy Geithner detailing the upcoming egregious outlays: AIG "cannot attract and retain the best and brightest talent … if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury."
Uh, excuse me. First, Treasury should be able to make adjustments since it's the one handing out the billions in bailout money. And more to the point, these bonus recipients are the "best and brightest" that AIG has? To paraphrase an old saying, with employees like these … .
Questions for Congress, too: WTF also must be asked of our lawmakers.
Hey, Congress! I thought you were going to make sure that this kind of outlandish disregard for taxpayers -- we now own around 80 percent of this company! -- wasn't going to happen again.
What happened? Are the inmates truly running the asylum? Are AIG's remaining attorneys that much better than our government lawyers? If anyone needs bonus payments, and I'm in no way saying they do, the only ones with any shred of a claim are the insurer's legal team, which is whipping up on their counterparts who set up the government side of the bailout deal!
And what's this BS about the government facing possible lawsuits if the bonuses are disallowed? Please, let me help file the petitions. Let's see how many of these guys actually have the cojones to go to court and argue, under oath, that they deserve the bonus payment. I'd love to be on that jury!
Plenty of disgust to go around: As you suspect, I am not the only person aghast at this latest AIG in-your-face-suckers development. More reaction comes from:
Politico: Lawmakers blast AIG
- CBS's Political Hotsheet: Summers: AIG Bonuses Are "Outrageous"
- Huffington Post: AIG Outrage Dominates Sunday Shows
- Wall Street Journal's Washington Wire: Reactions to AIG Bonuses: 'Outrageous,' 'Angry'
- Talking Points Memo: AIG, Begone!
It's the tax code's fault: Want some tax icing on the excessive bonus cake? Jeff Korzenik, says our tax code is to blame for hefty Wall Street bonuses.
In a commentary for Forbes, Korzenik, chief investment officer of VC&C Capital Advisers, points to Internal Revenue Code section 162(m), enacted in 1993, that governs the salary-based compensation of the top five executives within publicly traded companies:
The rule influences compensation by limiting the deductibility of salary expense to $1 million for each of these executives. Deductibility above that ceiling was permissible as long as the excess came in the form of performance-based compensation, whether cash bonuses or equity-based compensation like options (various technical rules needed to be followed as well).
IRC 162(m) is generally believed to be inconsequential because overall executive compensation, even of individuals covered by the act, has largely been unhindered. A few companies chose to accept the lack of deductibility of large salaries, but most simply find other ways to compensate their leaders. Over time, this has meant that executive pay has generally become more skewed to deductible bonus and option grants. The fact that deductibility limits were never indexed for inflation (which would have added about 40% to the deductible salary amounts) has only exacerbated this trend.
And while the financial industry bailouts have focused attention on excessive executive pay, Korzenik says "the real issue should be the executive pay regulations that contributed to the crisis in the first place."
So Congress, while you're figuring out a way to keep us from getting shafted again by AIG and other bailed-out businesses, how about taking a look at Korzenik's tax code take on the whole bonus issue?
The view from Bonus, Texas: In a special section examining bonuses, Forbes decided to get a different perspective. It visited the tiny Texas town of Bonus.
Check out what my fellow Lone Star Staters think about all this big money being handed out to corporate execs.