The AIG bonuses: Triggering a populist rebellion

“You have to admire the chutzpah of American International Group,” said the Los Angeles Times in an editorial. When the insurance giant nearly went bankrupt last fall, threatening to pull down the world economy with it, the Bush administration coughed up an $85 billion bailout—the biggest corporate rescue ever. Now, after subsequent AIG bailouts by Bush and by the Obama administration swelled the total to $170 billion, we see how the company has thanked us for saving its neck—by paying more than 400 of its employees $165 million in bonuses, with 73 getting $1 million or more. In other words, said Mike Lupica in the New York Daily News, AIG used “your money, and your children’s, and your grandchildren’s” to reward the same geniuses who drove the company to a $61.7 billion loss last quarter—the worst loss in U.S. corporate history. Among those who got this looted treasure was virtually everyone in its financial-products division, which devised “those brilliant credit default swaps” that have infected the entire financial system.

If that doesn’t make you hopping mad, said Ian Swanson in TheHill.com, consider this. AIG’s new management team proposed last year that the already-rich employees voluntarily surrender the bonuses in their contracts, given the company’s massive losses and the taxpayer bailout. The employees said, Hell no. So let’s get our money back, said the Chicago Sun-Times. The CEO, Edward Liddy, told Congress this week that some of the bonus babies have given them back in response to public outrage, but that there's no legal way to compel this. “There’s nothing to be done?” Baloney. Let’s challenge these contracts in court, or take Congress up on its proposed solution—emergency legislation that could tax the bonuses up to 100 percent.

Somebody better get that money back, or President Obama will pay the price, said Adam Nagourney in The New York Times. This week he denounced the bonuses, trying to acknowledge the public’s fury even as he ran the risk of “becoming a target of it.” Republicans are blaming him, as well as embattled Treasury Secretary Tim Geithner, for not knowing about the bonuses sooner or acting to stop them. In fact, Geithner’s Treasury Department actually approved the bonuses, said the New York Post. “Geithner’s already shaky credibility has received another blow—and the president’s feigned anger is fooling no one.”

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Everyone in Washington deserves to be muddied by this mess, said Rich Lowry in National Review Online. Now that it’s in the business of saving private companies, the U.S. government has put $11.6 trillion in public money on the line in bailouts, loans, and guarantees, including the $170 billion “bailout from hell” to AIG. Now the country is in revolt over a mere $165 million in bonuses? If Obama or Congress can get that money back, fine—“but where do we go to get the other $169.835 billion back?”

“Could we put the pitchforks down for a moment?” said Ruth Marcus in The Washington Post. AIG’s disgraced financial wizards devised many of the incredibly complex derivatives that caused the economic collapse, and only they may be able to take these derivatives apart. Driving them away from AIG by rescinding their bonuses “may make everyone else feel better, but it isn’t particularly cost-effective.” In other words, we’ve been had, said Robert Reich in Huffingtonpost.com. Taxpayers now own nearly 80 percent of this toxic company, yet for all our billions, “AIG is accountable to no one.” That, my friends, makes us all suckers.