I for one am getting tired of the sanctimonious blather coming out of Washington about the AIG bonuses. First of all, and what no one seems to understand, is that these were not performance bonuses but retention bonuses. Retention bonuses aren’t pretty. They are incentives to keep existing executives on board as the ship is sinking, and as such are usually viewed with skepticism and bitterness by all the stakeholders who are not compensated for going down with the ship. They are however fairly common business practice and, arguably at least, a necessary evil. Even though the executives who get the bonuses are the self-same scoundrels who scuttled the business in the first place, their knowledge of the systems, processes, markets and other particulars of the business are seen to make them useful in forestalling the chaos that attends a catastrophic business failure.
Secondly, the contracts that put the bonus payments in place were dated March of 2008. Thus they predate not only the bailout agreements but any general public knowledge of the company’s imminent failure.
These two reasons alone explain why Secretary Geithner passed on the payments. They were and remain--all the commotion aside--standard business practice governed by legal contracts that had been in place for a year.
My guess is that Secretary Geithner in particular and the rest of the Obama administration in general thought--with blushing bride naïveté--that that is how the bonuses would be regarded by most reasonable and knowledgeable men. They were subsequently blindsided by Washington's stellar capacity for self-righteous indignation and woeful disregard for sensibility. Now the President himself, knowing that he is never ever going to be able to justify or even explain the bonuses--not even to an adoring public--in the face of the self-aggrandizing vitriol spewing out of Congress, is forced into the duplicitous role (he does seem to wear it comfortably though) of condemning the bonuses as morally objectionable on the one hand while defending the actions of his secretary and his administration on the other.
What galls is this. At the same time that AIG was spiraling down the toilet, at the same time they were facing a massive cash shortfall that they knew or could reasonably expect would require a taxpayer bailout, at the same time they were contracting to pay these allegedly immoral and irresponsible retention bonuses, they were also making substantial campaign contributions to the same lawmakers who are now shrieking on the nightly news.
If Congress wants the bonus money back, if the President wants to exhaust every means possible to recover the bonus payments, if all this is being done and championed in the name of the taxpayers, then we (the taxpayers) ought to get the campaign contributions back as well as the bonuses. Congress is at least as culpable as the AIG executives for our current economic turmoil. For them to keep the money given them by AIG is at least as arrogant and reprehensible as a bunch of incompetent insurance salesmen hanging on to their bonuses.