AI n't it G rand?

By now you've probably heard about the $165 million in bonuses that AIG is set up to give out to its executives. When I first heard the news Monday morning I was livid. How could these executives accept these bonuses in the face of the fact that had they not been bailed out by the government, they wouldn't even be around to GET the bonuses. Had the government not stepped in and basically taken over the company, the executives in question would have long since been forced to find other work and we wouldn't be having this discussion.

Thank God the government stepped in. Otherwise I'd have nothing to write about.

So, as I said, I was livid. I'm sure you were too. We have a right to be - this is an outrage. Like in the movie Network, we're "mad as hell, and we're not gonna take it anymore!" Only, in this case, I think we're mad at the wrong people. And the administration and Congress are only too eager to let us direct our anger at those execs. Who we should really be mad at is the folks in Washington who are squarely to blame for this debacle. How, you say? I'm glad you asked.

Do you remember the stimulus bill from a few weeks ago? I had a lot to say about that. You'll remember how it flew through the halls of Congress without any one member reading the whole thing. Little Easter eggs were bound to come out as time goes on, and as it happens, a couple of those directly relate to AIG bonuses. Yep, if you take a look at the stimulus bill, then scroll all the way down the bottom (kinda neat how it's just tucked there at the end, huh?), you will see `SEC. 111. EXECUTIVE COMPENSATION AND CORPORATE GOVERNANCE. Once you get on that page, look at (b)/(3)/(D)(i), you'll see the following text:

[The Secretary shall require each TARP recipient to meet appropriate standards...including] A prohibition on such TARP recipient paying or accruing any bonus, retention award, or incentive compensation during the period in which any obligation arising from financial assistance provided under the TARP remains outstanding...

To translate: Any recipient of the government bailout funds can't pay out bonuses as long as their loans are still outstanding. AIG obviously received these funds, so score 1 for the government right? I mean, Holy &#@%! The big G actually got one right - this is a bona fide restriction that says you can't pay out bonuses while you're on our dime. Perfect!

If only the document ended there. Sadly, keep reading... (section iii a few paragraphs later...)

The prohibition required under clause (i) shall not be construed to prohibit any bonus payment required to be paid pursuant to a written employment contract executed on or before February 11, 2009, as such valid employment contracts are determined by the Secretary or the designee of the Secretary.

(emphasis mine)

Excuse me, but whiskey tango foxtrot? This statement just single-handedly AUTHORIZED every bonus that was stated in a contract before Feb. 11. You guessed it...that would be inclusive of the AIG bonuses in question. And guess who put it in there. Guess who was responsible for putting this little escape clause in there? Chris Dodd, the Senate Banking Committee chairman. Mr. I Think the Government Should Tax 100% of the Bonuses himself. Oh, to hear Dodd's aides tell it, he had no clue about the AIG bonuses at the time that he put that amendment in there. Sure. Not only have these bonuses been on the books since last year, but Dodd was the highest paid recipient of AIG political contributions in 2008. You do the math.

AIG tells Congress and the public at large that they were contractually obligated to pay these bonuses. In effect, they'd be subject to lawsuits if they didn't pay out the money. Yet despite this, the government seems to think that it has the authority to come in an declare a contract null and void to suit its own political purposes. It's very popular to be against big business and seeming excess among corporate executives, especially those who obviously failed in their tasks. Like I said, before yesterday everybody in Washington was ready to tear down AIG over these bonuses. However, no matter how popular it may be to come in and void these contracts, in doing so the government would be directly violating the Constitution, which explicitly protects contracts. Think of the precedents that this would set. If the government can come in and change/modify/cancel a contract because it currently suits its needs/desires, then what is a contract? Why bother establishing one? Bankruptcy laws were specifically designed to circumvent contractual obligations, since "bankrupt" basically means "we can't fulfill our contracts". Bankruptcy: wow, wouldn't that be a novel idea - getting around these contracts by allowing AIG to fail! Now why didn't they do that?!

Well, they didn't; and since they're painted into a corner between public outrage and political viability, they're grasping at straws. One suggestion (as mentioned earlier) was to tax the bonuses at 100%. Are you kidding me? 100%? Can you even imagine how the verbiage would have to be on that kind of resolution? As if they'd write a law to cover a specific instance of a specific company paying specific executives a specific bonus for a specific purpose with specific money. Great idea.

Now, don't misunderstand me; I would be happy if these execs weren't being paid a dime in bonuses, but unless there is a rational, legal, and Constitution-backed methodology for preventing such payouts, then the feds need to just back off. It sucks, it's frustrating to us nobodies, and it's unfair, but it's the law. And they're the ones who wrote it a few weeks ago. Good job, Dodd. I'd hate to be you in 2010...

One final question on this issue. Where the heck were these Washington nitwits declaring outrage when AIG was fulfilling their other contracts? I'm not talking about millions either...try that times a thousand. I'm talking BILLIONS. What? You didn't know? Oh sure, AIG has been steadily funneling money to other institutions all over the world - to the tune of around $44 billion to American companies and $62 billion overseas. (!!!) Did you catch that? Over $100 billion, distributed from our government, through AIG, to these other institutions. I bet you didn't know your tax dollars were going to Europe did you? As Glenn Beck said yesterday, it's like a huge elaborate money laundering scheme. Think not? Who owns AIG again? Oh yeah, the federal government. So who was ultimately responsible for these monies being distributed to these institutions? Bingo.

And despite all this, they have the audacity to bitch and moan about 0.16% of that amount??? The cynic in me sees these shenanigans as a smokescreen to misdirect us, the American people, from the real travesty here. The travesty that we even bailed this company out to begin with. You know, the AIG company as a whole wasn't that bad of a bad company; in fact, their insurance division was actually profitable. It's just this one division or two that has caused the problems. If we would have split them off we would have had a potentially viable company there.

Next up we can all start complaining about the bonuses Lehman Brothers is going to pay out to its execs next week. What's that? Oh yeah. They were allowed to fail, so we're NOT talking about them, now are we?