From today's edition of The New York Times
http://www.nytimes.com/2009/03/15/business/15AIG.htmlThe American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to 400 executives in the same business unit that brought the company to the brink of collapse last year...
In a letter to Mr. Geithner, Edward M. Liddy, the government-appointed chairman of A.I.G., said at least some bonuses were needed to keep the most skilled executives.
We cannot attract and retain the best and the brightest talent to lead and staff the A.I.G. businesses which are now being operated principally on behalf of American taxpayers if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury, he wrote Mr. Geithner on Saturday.
Several points are in order:
1. Without taxpayer money, AIG would be insolvent. The company lacked the funds to make the bonus payments. Under such circumstances, there typically are legal avenues to delay or reduce such payments.
2. Even as it seems reluctant to do so, the federal government should take steps to claw back the money that amounts to a misappropriation of taxpayer funding.
3. Mr. Liddy's argument about seeking to retain the "best and the brightest talent" fails on two grounds. First, in the deep recession, financial services jobs at all levels are disappearing. It is not very likely that most of those the payments are aimed at "retaining" would be likely to depart in the current environment. Second, it is highly questionable (to be kind) that the individuals who transformed the company into a giant hedge fund are anything close to the "best and the brightest talent" in the field unless "success" is measured by the size of the financial hole they created.
4. A carving out of the company's viable insurance business and auctioning of it to a viable insurance company and orderly dissolution of all of the firm's non-viable operations remains preferable to continuing to feed taxpayer funds into the company, some of which are now being misappropriated.