And why, you ask, did AIG pay its employees all these millions?
Because there were signed contracts that stated it could.
It’s true. And indeed, it’s a terrible reason to go ahead with the bonuses from many perspectives, including a PR one (in the past 48 hours, AIG offices have been bombarded with angry emails and phone calls) and, according to Republican Senator Charles Grassley from the Tall Corn State, a moral one.
Yesterday, the conservative Iowa senator recommended that a few AIG executives either step up and admit they made some extremely poor decisions, or else commit hari-kari. Today, the senator (sort of) retracted his statement that execs should take the honorable Samurai way out, but he’s still darn angry that there’s been no public apology, and believes that handing out bonuses—while folks in Iowa, Ohio, Michigan and 47 other states flip through want ads—is an abomination.
The latest AIG blunder has also inflamed the Obama administration and New York State Attorney General Andrew Cuomo (who’s always up for a bonus fight; Andy’s already got Bank of America/ Merrill Lynch in his sights, and he’s locked and loaded). Both government parties are not going to make it easy for AIG to pay their employees going forward, especially since it appears that they won’t be able to legally reverse the latest round of bonus payments. They’re further ticked off because of how it makes them look to the American public—that is, not good.
Given that this piece of news is being so highly publicized, government officials will be forced to increase their clamping down on any firm it’s given even a penny to, and will police everything from bonuses and salaries to free bagels and Putt-Putt outings. Now more than ever, public representatives need to, at the very least, give the impression to the American people, aka AIG shareholders, that it won’t stand for these types of unethical acts by companies that they appear to keep bailing out.
And the implications will reach across the country, from AIG’s New York headquarters through the heartland and home of Grassley’s constituents all the way to the Pacific, affecting all sectors of the notoriously high-paying scandal-ridden-as-of-late financial services industry. This means you—if you’re employed by one of the big or small firms that have accepted fund under TARP—will feel the pinch of Uncle Sam’s grip sometime soon, and you have about 418 employees over at the U.S.-owned (if not operated) American International Group to thank.
If you have a computer, television or radio, by now you've heard: the company you own a stake in whether you like it or not recently paid some of its former and still-employed employees $165 million in bonuses. Yes, AIG—that three-letter acronym of a company that’s come to represent bad calls, bailouts and bonehead moves like giving its staff bonuses with government money—has done it again, spitting in the face of the hand not only feeding it but holding the plug to the IV it’s been sucking on for months.