Wednesday, March 18, 2009
A staggering $60-billion, the biggest quarterly loss in global corporate history. Pushed to the brink of insolvency resulting from near-criminal high-risk financial racketeering by a bunch of reckless, greed-drunken Wall Street cowboys. Needing rescue from the U.S. Government to the tune of $200 billion to avoid death. So, this is what "the best and the brightest" brings ya, huh? If that's the case, for AIG (the Arrogance Incompetence Greed company), perhaps it's time for the worst and the dumbest to take over. Surely they can't do any worse.
What a week this has been following the news last weekend that AIG gave out another round of retention bonuses to these Masters of Failure. Retention bonuses, mind you, that went to virtually the entire unit responsible for this debacle, including 52 of these "can't live without 'em" geniuses who shamelessly took the money and ran. These folks are best and bright alright. They somehow figured out a way to obtain retention bonuses without having to be retained, thus perpetrating their shady deals right up to the very end. Incredibly, the now-80% taxpayer-owned AIG doled out millions in retention bonuses and 12% of these incompetent crooks walked out the door anyway. It's astounding and infuriating.
"Oh, but we had to pay them...it was in their contracts." Bullshit. Contracts are meant to be broken. They're either broken and/or renegotiated every day. That's why God created cutthroat lawyers. Otherwise they'd be doing real estate closings all day. Auto workers, teachers, civil servants, athletes, etc renegotiate their contracts all the time depending on changing circumstances. Why then is there a double-standard for Wall Street? If ever there was a justification to renegotiate, this is it.
The central argument being made by Treasury Secretary Timothy Geithner, Fed-appointed AIG CEO Edward Liddy, legal scholars and others is that the company was/is legally obligated to pay the bonuses, and that we must honor and respect the rule of law which protects the sanctity of these contracts. Technically correct. But in reality, a bunch of rubbish. If the government and AIG (one and the same now) really wanted to recoup these bonuses, there's several means by which to do so:
-advise the employees that while they can keep their "legally mandated" bonuses, their future total comp will be $1 until the bonus money is recouped;
-since the unit they work in is a gross financial disaster, thus a performance breach, inform them that keeping said bonuses will be grounds for termination if they do not return the money;
-inform them that if they choose to keep this money, there will be no more TARP bailouts. That keeping these bonuses is akin to AIG shutting down...unless it will be able going forward to run on operating income and on the strength of its own balance sheet;
-claim that the bonuses are voided due to their fraudulent origin. Didn't AIG know of its dire financial status early last year, and thus had no right to give away money it didn't have;?
-argue that there would've been no money for these bonuses had the U.S. Government not stepped in with TARP funds to stave off AIG's bankruptcy, an event which would've voided these contracts.
Some advice to the Wall Street happy hotshots: don't go spending that "hard-earned" bonus money just yet. As the moral outrage and public outcries increase, I suspect the pressure will mount so high that the Obama administration will, with the help of people like New York Attorney General Andrew Cuomo, ultimately succeed in finding its loophole to recover this stolen taxpayer money.
And one final word for the Obama administration: get some damned seats on AIG's board, as well as seats on any other board in whose company we're bailing out with taxpayer money. Ownership without board control equals corporate impotence, as we now unfortunately know.