A Few (More) Words on AIG [UPDATED 3/17/09 AND BUMPED]

[Please scroll down for updates. HGS]

I haven't commented on the recent kerfluffle regarding the massive bonuses planned for the former insurance behemoth's executive squad, primarily because there doesn't seem to be any need to: it's getting quite enough play in the press.

But it seems to me that remaining silent might be construed as condoning the idea, and that, of course, will not do. So, for the record, while I don't believe that these execs should be forced to commit hari kiri, I do think that any bonuses should be remanded forthwith to the federal treasury, and used to help pay off the carrier's massive debt to the citizenry.

On the gripping hand though, there's this:

Current CEO Edward M Liddy avers that he has ""grave concerns" about the impact on the firm's ability to retain talented staff "if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury." And that may well be a valid point: if they can't attract, and retain, top-notch talent, what are the chances that they'll ever be in a position to repay us? Reason #14,287 why we never should have bailed them out in the first place.

UPDATE: In the comments, Bob takes me to task for missing the big picture:

"(T)his is a multi-faceted situation with no simple or direct solutions...The bigger problem with AIG is this. What did they do with the taxpayer money?

Apparently they used it to make several banks "whole". Billions were funneled back to Deutsche Bank, Credit Suisse, Goldman Sachs and others...

Sorry Hank, but targeting the bonuses misses the mark. There are MUCH bigger issues."

Well hey, it wouldn't be any fun if we agreed ALL the time. I think Bob's quite correct that there are other, perhaps larger issues at stake here. But it seems to me that even the appearance of impropriety, especially on such a volatile issue, is cause for a hard look.

UPDATE 2: It seems that not only are there contractual issues (which Rick also mentioned in the comments), there appears to be a specific, legal requirement to fulfill these obligations. Apparently, as the Senate was crafting the Spendulus last month, Sen Christopher Dodd (D-CT) "unexpectedly added an executive-compensation restriction to the bill. That amendment provides an “exception for contractually obligated bonuses agreed on before Feb. 11, 2009,” which exempts the very AIG bonuses Dodd and others are seeking to tax. The amendment is in the final version and is law." [emphasis added]

Although this is probably irrelevant, it should also be noted that Senator Dodd (D-CT) "was AIG’s largest single recipient of campaign donations during the 2008 election cycle with $103,100, according to opensecrets.org."

A lousy $100k? Sheesh, what a bunch of pikers!