Tuesday, March 17, 2009

AIG and the President

Man, I keep thinking that I'm going to quit writing about politics.  I do worry that I'm angering more folks than I'm changing minds or informing, but it's what is on my mind, so here I go again.

But first, a little background to make sure everyone is up to speed.  American International Group put together many of the financial instruments that added to the current recession.  I don't think they caused it.  Lending to folks who could not afford the mortgage was the cause.  These financial instruments hid the problem and misstated the  risk associated so that good folks who were invested in these instruments got hurt.  For that, AIG as a company and those responsible inside the company should make those investor whole before they have anything in their lives beyond the necessities.  I don't that that much will get much argument.

What I have a problem with in the case of AIG is when the politicians involved know the truth and say things that ignore that truth for political gain.  The case here is the President and congress.  This week, the President has been out in public proclaiming his dismay at the 'bonuses' that are being paid by AIG after they have been bailed out by the American taxpayer.  Were that the whole story, I'd be right there with him.  In fact, I think that was my first reaction.  But there is more to the story.

Note: The facts following come from an article in the Washington Post (a more liberal paper does not exist).

The 'bonuses' are not really bonuses, but are retention payments, meaning, workers/managers who signed contracts agreed to stay through the year and in return, they would get these payments.  It is nothing more than restructured salary.  This was the conclusion of the Federal Reserve.  The administration agreed with this conclusion.  The payments were so well known that the congress made protection of this type of 'bonus' a part of the bailout bill.  It is the law now.  Here is the amendment as proposed by Sen Chris Dodd (D-Conn) and passed:

"Crack down on bonuses, retention awards and incentive compensation: Bonuses can only be paid in the form of long-term restricted stock, equal to no greater than 1/3 of total annual compensation, and will vest only when taxpayer funds are repaid. There is an exception for contractually obligated bonuses agreed on before Feb. 11, 2009."

So not the President is out playing politics by expressing outrage and vowing to "pursue every legal avenue to block these bonuses."  Many regular folks are also outraged instead of informed and the employees of AIG who had nothing to do with this are under armed guard at work because of the threats caused by the President's grandstanding.  Many employees are not coming to work and some of their work is to unravel the mess made by those responsible.  If that does not get done, the economic situation can get worse for us all.

I would expect my president to stand up for fulfilling obligations, like employers paying employees, and to stand up for the law.   I certainly don't want him spouting off with false surprise because it will play well with the public.  In this case it is endangering the employees of AIG and the economy.

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