Do these contractual obligations require AIG to keep these 43 officers for another year, at which time they will again be obligated to pay them similar bonuses? This isn't about keeping talent. It's about protecting club members.

I would like to see a Justice Department report upholding these contracts. Are people still going to argue that we shouldn't nationalize AIG? Wouldn't we have the authority to then dissolve these contracts and get rid of these corporate welfare queens? I'd really like to see some of these AIG executives in court trying to defend their pay.

Danp is right. The execubots is a club who likes to reward themselves. If they could, they would give bonuses for just breathing (which AIG essentially did.)

The whole executive compensation game is basically a circle jerk.
1) One guy gets paid out big bucks for "success"
2) Executive Compensation "Consultants" point to this as a "trend" thus executive should get paid more (much like sports agents, they get paid more when their clients do.) Of course, they overlook the context in which the One Guy gets paid for his success (like Lee Iacoca's payout post 1980s Chrysler bailout which pretty much started this game.)
3) Companies hire execs based on the executive compensation consultant recommendations.
4) Someone gets paid out even more bucks and the cycle of asshole continues.

Funny, how "contractual obligations" never stop the auto companies from wringing concessions out of UAW members.

Perhaps if we gave these guys a choice... voluntarily give up your bonuses or DoJ prosecutors will hound you until the die you die trying to find a way to hold you legally accountable for destroying the world economy.

Maybe the fine folks at CNBC could tell us that this is really an investment in the future. What goes around, comes around.

I think we have a new group of people for which the term "enemy combatant" would apply.

Cramer. Are you listening?

Criminal charges speak louder than words.

Obviously integrity and dignity are not prerequisite of employment at aig....economic revolution anyone?

Yeah, but they have to use the bonuses and retention pay as bribes to people quiet.

Mr Benen, Again, I ask you to please post a thread on the excellent article by Kevin Phillips, entitled, "The Tricky 2009 Politics of Finance" - It was up at HuffPo, yesterday. In this article, Mr Phillips takes President Obama to task for using Clinton retreads such as Geithner, Summers and aides. He, also, rebukes Bernanke. This financial crisis is far too serious to allow the wrong crowd to run the show. I love to snark, but, this is not a snarking matter. For the good of our nation, those appointees must go.

DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT! DAMN IT!

Why can't Congress impose a tax of 99.5 percent on bonuses paid to employees during any year that their employers receive government bailout money?

It sounds like it's time to haul the tumbrels out of storage and dust them off . . . .

The Obama administration is "outraged" but unable to do anything? I think not. The Obama administration is perfectly happy to be complicit in this theft from the American people, they are just marginally better at selling it since it.

Every time I see one of these stories claiming that they're doing these bonuses for "employee retention," I wonder where the heck they think these guys are going to go. Are other Wall Street firms eager to hire people who made such terrible decisions? They can't go to London or Hong Kong -- there's a reason it's called the global financial meltdown.

Who's going to be stupid enough to hire these guys even if they do leave in a huff for not getting their bonus?

I'm lost on how a payment stipulated by contract is a bonus. I mean if it's contractual, how does it become a bonus, as opposed to say, contractual compensation?

But that's mere idle curiousity compared to why any of these people should ever be retained in the first place.

Maybe it's time to let some small time druggies out of jail and make room for some real criminals.

Every time--EVERY TIME--I read something like this, it pushes me a little further from the oh-so-reasonable position of "We should fund these companies for the good of the economy," toward "Screw the economy, let the company fail, and start gathering rope and looking for enough suitable branches to hang these fuckers."

I know too much to be a libertarian, but damn if that false populism isn't appealing right now. It's hard not to feel as though we are rewarding them for their greed and selfishness, when we should be running them out of town on a rail.

Got pitchforks?

How are bonuses determined? Are they predetermined sums paid out no matter how well or poorly the company or the individual does? If so, why are they called bonuses, for they are simply part of salary. Or are they based on a percentage of profits or income or income increase? In these cases, how can bonuses be justified, unless the bailout money is counted as regular income or profit? Sounds like an(other) AIG scam to me, which any decent and honest government should prevent. Sharpen the blades now.....there's lots of work to be done.

WTF - But Liddy said he had "grave concerns" about the impact on the firm's ability to retain talented staff "if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury." That would be the talented staff that bankrupt their company and drove the economy into the ground? Yeah, sure - retention incentives all round, boys!

When you consider that all the terrorists in the world times ten could not, beyond their wildest dreams, have destroyed America as effectively as these "talented staff", you wonder if Obama was premature in dispensing with the 'enemy combatant' designation.

In a letter to Geithner yesterday, Liddy agreed to restructure some of the payments. But Liddy said he had "grave concerns" about the impact on the firm's ability to retain talented staff "if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury."

The "employment" (read: financial rape of the American taxpayer, including the wealthiest among us, if I may say so) of this "talented staff" (read: stupid greedy profit monger wanna-be types who have most certainly earned the label of domestic terrorist) is already subject to the continued and arbitrary adjustment by the U.S. Treasury. HELLO?!? Where does Liddy think his payroll would be coming from, if it had not been for those paltry, measly, insignificantly-minuscule, irrelevant ONE HUNDRED SEVENTY BILLION BAIL-OUT DOLLARS???

Edward M. Liddy...Liddy Dole...G. Gordon Liddy...I really am learning to dislike that name, y'know

BTW, why was a cap on bonuses and incentives and all that fleecing not written into the bailout contract before the money was handed over?

This is a good argument that the company should have (and still should) be put into receivership, with an additional stipulation that the US Government will continue to back its contracts with external parties. Then a bankruptcy judge can determine whether to honor these sorts of contracts -- which really appear to have been a form of extortion, don't they?

This makes perfect sense in an economy like we have that a company must pay out retention bonuses or the employees will walk. It's not like there aren't recently laid-off and hungry workers willing to take their place.

If these bastards have that sh*tty a work ethic, especially given the state of the economy they helped create, that they need millions in excess pay just to stay on the job, I'd fire them just for their narcissistic attitude. AIG would be better off without these louts that are a drag on the bottom line and are an insult to the corporations new shareholders --us!

Ah, Kevin.

Typical liberal naivete about the economy.

Do you think these people work for altruistic motives?

The fact is, many of these "executives" are people paid on commission: head-hunters, sales reps, consultants, etc. Should a recruiter be punished for performance of interest rate swaps? Commissions sometimes form a significant portion of these worker's salaries.

eggie, old chap, once again you have cut to the core - Yes, you have a brilliant idea. We should send a group of head-hunters into AIG.

How about we compromise with AIG? Everyone gets bonuses except the leaders of the Financial Products unit, who spend the rest of their lives in prison.

Can someone please help a poor girl out. If the AIG execs are the "Best and brightest" then why did their company require a bailout package?

How do these folks delude themselves into thinking that they deserve this money. These upper level executives should all be very happy that they live in the US. Their behavior would warrant a beheading or massacre at the Country Club in other regions.

Edward Liddy was appointed to head AIG by former Secretary of the Treasury Paulson. He is a member of the Executives Club of Chicago and is a well connected part of the business community there. He is a former executive of G. D. Searle where he worked closely with Donald Rumsfield. Any other explanations needed?

I advise the Obama administration to not lie down on this. Announce that these "bonuses" (how can a scheduled payment be a bonus?) will simply not be paid, and the affected employees are welcome to sue. Given the speed of the legal system, it will take years for the case to come to trial. Screw 'em.

the firm would risk a lawsuit

Here's an idea: let them fucking sue. Let them demonstrate in court that they deserve these bonuses. If the case went before a jury they'd be lucky to leave with their pants on.

I am tired of hear about the effect of lowering bonuses will have on retaining the best. With all the money they pay for a bonus we shouldn't need to bail anyone out. We should all be rich. I say it is time to attract individuals who can do what is right for the company and the country. It seems the executives only interest is in bleeding these companies dry.

About a dozen years ago the State of Oregon Workers' Compensation confronted AIG with fines that brought the bigwigs out in person to negotiate. AIG has a long established culture. No bailout money or slap on the hand is going to change that.

time for the American People to take this company down...I have no AIG connection...switch your plan...inquire about how your new insurer pays its employees...did Katrina folks lose insurance claims because AIG had to pay a bonus with their money? This company's are down right fradulent and the executives should be in jail with a host of others....also how does my company during good times tell all the workers were cutting you by 10% and we don't care what your contract says and if you don't like it quit, but AIG MUST PAY bonuses to reward mass failure....All this is really the government's fault...the check should not be written to the company but to the need...Companies and people in general always take the cash and do something bad with it, instead of fix the need. I should never have to pay taxes again if my money is going to help a millionaire become a billionaire while hard working folks are losing their homes and can't afford healthcare.

You don't reward people for failure and AIG is a huge failure. Who was responsible? The same people who are getting bonuses. It's time to fire the entire bunch of them. Start at the Million dollar mark and up.

The other solution is to let the entire system fail. It would impact everyone the same. No more banks, no more loans, no more credit and no one owes anyone anything. You own what you have now. The people hardest hit would be the ones with the most money. I don't feel sorry for them. If your only skill is pushing paper, you'll be starving to death. Those people who actually have useful skills will survive through trade.

I simply can't understand why, after bailing out AIG, the government can't say "no bonuses!" And if the so called "talented" executives leave, so be it. Let them try to find another position. And let AIG sue.

Since "We" own AIG, report the bonus numbers and SSN's of those receiving them to the IRS, (just in case the redipents forget) and automatic audit next year.

Ah, Kevin.

Typical liberal naivete about the economy.

Do you think these people work for altruistic motives?

You remain a comedic genius. The catch, of course, is that we're laughing AT you, not with you.

The fact is, many of these "executives" are people paid on commission: head-hunters, sales reps, consultants, etc. Should a recruiter be punished for performance of interest rate swaps? Commissions sometimes form a significant portion of these worker's salaries.

I love that egbert is under the impression that when a company goes out of business, all of its employees get their unpaid bonuses and commissions, so therefore if a company is bailed out with taxpayer dollars, the taxpayers have to pay those bonuses and commissions.

More proof that righties have never actually worked in the business world and have no idea how it works.

I would like a job where I get a bonus for failure

There will surely be some commentator on CNBC who will be mad as hell and won't take it anymore, just as there was for the deadbeats who suckered the financial institutions by taking out mortgages they couldn't afford.

Egbert, can we recruit some more head-hunter experts, say from the Amazon river, and send them in to AIG to help the guys there out with their troubles?

It won't cost anywhere close to a 100 million and it is bound to be a cleansing experience.

Egbert, no one said not to pay workers the commissions they deserve. The problem is bonuses in addition to commissions and salaries that are built into the system to reward the upper echelon workforce for going along with the other excessive pay packages the top execs earn. It's a bride to go along with the program, to the detriment of company customers, shareholders and rank and file workers. If these were government officials, the term used would be corruption, but since this is private enterprise we are supposed to turn a blind eye.

These are publicly owned companies, yet the these princely rewards are to the detriment of all the people who actually own the shares. These bonuses are a supposedly legal way for top management to loot the company's treasury. This has nothing to do with just compensation. It's a bride to keep these guys from "going Galt."

At some point as the largest stakeholder in many of these institutions the US government and Obama could send a clear message that would get everyones attention that they mean business by simply firing the CEO and bringing in the auditors. Wall Street had no problem cheering when it was done to the labor.

Even better: allthese guys, or most of them, are in London, so this is basically taxpayer money going directly to foreigners. Pay them in options. Mandatory vesting on January 1, 2010, at the price listed on June 1, 2008.

Simple answer! offer the AIG execs double or nothing. If they get this thing fixed in 12 months, they get double the bonuses if they don't they get nothing. If they are worth thier salt they would snap up the deal. If they don't take the deal,They are certainly not worth keeping around!

One of the excuses for the bonuses is to retain the best and brightest.

If they are really among the best and brightest they would long since have sent their resumes to companies that are viable.

And if for some reason they haven't stumbled to the fact that AIG has been trashed and will cease to exist in the near future, what better way to signal them then by stopping bonuses.

What a waste of money!

AIG is not the only location of festering greed, even when our country is submerged in dark chasm of unemployment and foreclosures. The reason AIG, a massive mega insurance company became insolvent is that it got too big? It is a stain on America integrity as the ponzi scheme of Mr. Maldoff has shown us. When Americans taxpayers are suffering from this terrible plight cause by so many individual issues.

The import of thousands of fraudulent cheap labor through the H-1B visa game, hardly ever supervised by the dept of labor, engineered by iniquitous immigration attorneys. The unceasing betrayal of our politicians as Speaker Nancy Pelosi (D-CA) who has sold out the American worker by killing E-Verify. Unfair trade agreements that have seen our industrial base disappear into third, cheap labor countries, so that millions of US companies have closed their gates.

All around the country we have seen the padlocked factories and silent machines, because it was cheaper to import car parts from Mexico. Then to import them back across the distressed drug infested borders. Then the taxpayer bails out banks, insurance and hundreds or other defaulted business to the tune of more than a trillion dollars. Then without any oversight the executives are still receiving massive bonuses even though the company has failed. As we sink lower into this financial quagmire, our bumbling politicians led by Sen. Harry Reid (D-NV), has dishonored his Oath to Nevada constituents and the US people. By tearing out the E-Verify amendment in both the Stimulus/omnibus spending bills. It will now allow at the least 300.000 illegal immigrant labor to take construction jobs from documented workers.

Thanks to the Democratic leadership even our workforce must--submit--to millions of illegal cheap labor. They have squirreled into the both blue collar to the higher professional echelon of positions. We have till September to right this disgusting wrong, by demanding every politician revise--EVERIFY-- in perpetuity. Washington switchboard for your incensed calls to 202-224-3121

So on the business merits, they're bankrupt. But we decide it's in the national interest to prevent formal bankruptcy.

That's the money quote. We can be as angry as we like, but the fact is we did not let them go bankrupt. We bought eighty percent of the shares and now the company (meaning us) must honor its contractual obligations.

The contracts might not make any sense at all given the current circumstances, but they are still to be honored. Perhaps the geniuses getting the bonuses should decline them as the honorable thing to do, but I won't hold my breath.

Should we have let AIG go bust? I don't know, but letting Lehman go broke didn't work out so well. Without more information I'm inclined to think that taking over AIG and its obligations was the least bad option available.

I can understand the populist out rage, but don't see it as productive unless it can be channeled into action, such as regulatory reform. Otherwise it becomes more fuel for the demogogues and a club with which to beat the Administration.

That's the money quote. We can be as angry as we like, but the fact is we did not let them go bankrupt. We bought eighty percent of the shares and now the company (meaning us) must honor its contractual obligations.

As people have pointed out elsewhere, when JP Morgan took over Washington Mutual, all contracts (including bonuses) were considered null and void because there was a new owner. Everything had to be re-negotiated with the new owners.

Why should AIG be any different just because the American taxpayers are the owners and not another corporation?

Why should AIG be any different just because the American taxpayers are the owners and not another corporation?

My understanding is that the government invested capital into AIG for which it received a share of the company. If the corporation is intact, why should AIG be relieved of its obligations?

Here's an explanation of what happened to WaMu, courtesy of Wikipedia:

On September 25, 2008, the United States Office of Thrift Supervision (OTS) seized Washington Mutual Bank from Washington Mutual, Inc. and placed it into the receivership of the Federal Deposit Insurance Corporation (FDIC). The OTS took the action due to the withdrawal of $16.4 billion in deposits, during a 10-day bank run (amounting to 9% of the deposits it had held on June 30, 2008).[7] The FDIC sold the banking subsidiaries (minus unsecured debt or equity claims) to JPMorgan Chase for $1.9 billion, which re-opened the bank the next day. The holding company, Washington Mutual, Inc. was left with $33 billion assets, and $8 billion debt, after being stripped of its banking subsidiary by the FDIC. The next day, September 26, Washington Mutual, Inc. filed for Chapter 11 voluntary bankruptcy in Delaware, where it is incorporated.

The cure would be to let AIG file for bankruptcy, and let bankruptcy court handle the details. As long as AIG can count on money from the feds, AIG will do with that money whatever AIG wants to do.

UnstableIsotope: Are people still going to argue that we shouldn't nationalize AIG?

Bankruptcy will work better. Nationalization will produce, as it did with Fannie and Freddie, overpaid executives who are friends of Senators.

If govt can't or won't prevent or punish such egregious greed, then the masses will (and should) get more and more restive. Our society cannot let this stand. We should not resort to physical violence like the extreme so-called pro-lifers who stalk doctors and their families - but surely there are other, effective ways of publicly exposing and humiliating these greedy, powerful people for all to see, until they change. (I well recall when the Bush admin and their judical appointees would not stop Enron and other energy companies from raping California a few yrs ago). Instead of shrugging and letting it continue, can't we use our numbers to stop it?!

Marler, re: AIG: Bankruptcy will work better. Nationalization will produce, as it did with Fannie and Freddie, overpaid executives who are friends of Senators.

Really? Will bankruptcy "work better?" Please explain in detail how you think this is so and be careful to show your work, give that every other business analyst and thinking person on planet earth understands that an AIG bankruptcy would be "an extinction event" that would sink our financial system -- which is why the government keeps bailing it out.

The continuing bailout of AIG is essentially a bailout of the entire monetary system by keeping that company from defaulting on enormous credit swaps that would sink any number of business entities that are counterparties, decimating mortgage-related assets even further and destroying the hedge funds.

Once again you've shown that you cannot know too little about an issue to prevent you from opining on it anyway and giving an insubstantial and completely correct view, particularly if you're under the impression that you're getting in a really good shot at your perceived enemies.

There is a term for that: quixotic.

The effects of regulation by STERN LETTER will get us nowhere ...

Nationalization will produce, as it did with Fannie and Freddie, overpaid executives who are friends of Senators.

And this would make AIG different than it is today ... how, exactly? Or are you under the impression that AIG has no pull on Capitol Hill and they're helpless victims being force-fed government dollars?