On Tue, 17 Mar 2009, Doug Henwood posted to LBO News:
http://doughenwood.wordpress.com/2009/03/17/those-aig-bonuses-how-to-break-the-contracts/
March 17, 2009
Those AIG bonuses: how to break the contracts
So Obama tells Geithner to do something, anything, to make sure the gov
can get back the AIG bonuses. Who knows if this is real or a pose? I'm
now leaning towards the latter, especially after getting this from a
friend who works at a hedge fund:
In the financial industry, reneging on contracts is, not quite SOP,
but certainly not rare....
Yeah, the sums involved are small change in the context of this
enormous bailout, but still, what a symbol this is. Bonuses to retain a
gang that drove the company into the ditch, and threaten to take the
rest of us with them? Acting powerless despite an 80% ownership stake?
Reluctant to stomp on toes and twist arms to remain "market friendly"?
The excuses just aren't credible anymore.
<end post>
Could it also be that paying them is cheaper than firing them -- that this money is going to technicians who aren't rogue anymore, but are doing exactly what we want them to do, and getting another gang up to speed would cost more?
>From Monday's LAT:
http://www.latimes.com/business/la-fi-aig15-2009mar15,0,5105807.story
AIG and administration sources said Saturday that after going over the
insurer's legal obligations, Geithner agreed that the employees might
win punitive damages if their contracts were broken.
An even bigger problem, they added, was that financial products
employees who are denied payments could quit and that AIG's losses --
the insurer took the deepest bath in red ink in American history last
quarter, losing $61.7 billion -- could spiral enormously if the only
people who understand the company's convoluted dealings are not around
to "unwind" the damage they have caused.
The employees are "de-risking actively," said Nicholas J. Ashooh, head
of communications for AIG. "If you don't have the right people at
financial products, you could lose a multitude of this amount in an
afternoon."
<end excerpt>
Michael