ARTS & FARCES internet

American International Group (AIG), the insurance company that US taxpayers have bailed out to the tune of US$170 billion and of which the US citizenry now owns 80%, just doesn’t get it. David Cho and Brady Dennis writing for the Washington Post broke the story that AIG will distribute about US$165 million in bonuses to the very executives who drove the company into the ditch and required the taxpayer bailout to begin with. The bonuses cover 400 employees and range from US$1,000 to US$6.5 million, Edmund Andrews and Peter Baker report for the New York Times.

Never mind that Timothy Geithner, US Treasury secretary, had a come to Jesus telephone conversation with AIG CEO Edward Liddy that Liddy described to the Post as “difficult.” Geithner told Liddy that the “payments were unacceptable and had to be renegotiated.” Liddy wrote a letter back to Geithner agreeing to “restructure some of the payments” but saying 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 US Treasury.” Liddy was appointed by Bush’s Treasury Secretary Henry Paulson Jr.

What? He’s worried about being able to retain the people that drove the company over the cliff. By all means, let them go. In fact, why weren’t they shown the door when this travesty first came to light? And get this: Geithner’s Treasury Department lawyers concurred with AIG: “the firm would risk a lawsuit if it scrapped the retention payments at the AIG Financial Products subsidiary, whose troublesome derivative trading nearly sank AIG.” AIG promised its employees about US$600 million in bonuses payable in 2009-10.

AIG argues that it must keep these financial wizards who created the mess because there’s still the US$1.6 trillion “portfolio of complex derivatives” that only these wizards can unravel. Say, what?

Friends and neighbors, we’ve just been exposed to the financial bizarro ray. Thankfully, it was a minimal exposure and we still have our common sense.

Here’s what has to happen immediately:

1. It’s time for a come to Jesus meeting (no phone calls) with AIG. It’s time for AIG to realize it’s employed by the US taxpayers and AIG employees are now employees of the US federal government.
2. Barack Obama must realize that Tim Geithner is in over his head. Obama should immediately appoint his wife, Michelle Obama, to oversee and sort out the AIG mess. She’s a Harvard Law graduate and I gather something of a shark and can probably handle this in her spare time.
3. Crowdsource the contract that contains these unbreakable retention payment clauses. Let the internet have at them. I’ve been around the block with lawyers a few times and I’ve yet to see a contract that couldn’t be broken.
4. Expose the names and job descriptions of the bonus recipients. Publish them on the AIG home page.
5. AIG must immediately be nationalized, formally, and it’s assets valued a the current market rate. Yes, the investors—including probably my retirement account—will have to take a bath. They gambled and lost; that’s the way capitalism works.
6. Sever the financial products subsidiary, completely, and immediately rename it Titanic Deck Chair Rearrangement Corporation.

Update: Sunday, 15 March 2009 1:20PM: Holy crap! The New York Times’ Gretchen Morgenson reports that AIG’s insurance claims—the ones that drove them into the ditch—have already been paid out: “The insurance claims were paid off in full, even though widespread defaults on the underlying debt have not occurred.” Soak those pitchforks in kerosene and set them alight.