That might be hyperbole, but when you think of a company that fails to make a profit, you do not tend to think of handing out bonuses to keep that same talent that failed to make a profit. The Obama administration wants to do something about it. Perhaps utilizing FAR concepts to terminate the contractual obligations are in order. Because it isn’t “taxpayer” money, but the FED printing money and giving it to AIG, you have a problem wherein a pseudo-government entity [The Federal Reserve] interacting with publicly traded entity. Albeit one that lost 110 billion dollars in 2008. They appear to be immune from FAR type regulations to “abrogate contracts” as Larry Summers said in this Salon.com article by Glenn Greenwald. I will say though, that the Federal Reserve sure seems to be creating a problem by being the intermediary between the citizenry and AIG, if it had been coordinated through the same system that FAR covers, the acceptance of the stimulus could have forced the termination of bonuses.
I know that there are three systems that I’m tying together, FAR, Stimulus, and the FED, but I think that FAR is the best of all things. It is public, it is policed, it benefits the government and hence the taxpayer when it isn’t gamed by unethical contractors and/or cost-plus no-bid contracts which are going away with Obama’s administration, and best of all… contacts can be terminated for any reason or no reason at all.
Really, the nation is being fleeced by allowing AIG to stay in operation, it hasn’t been a going concern for a long time and the impact of it failing needs to be felt. But while the US Government/Taxpayers feed money to a failing system, you have an ever increasing amount of money being printed and eventually it will lead to too much money in the system chasing too few goods. I would argue that this will be felt when AIG does ultimately collapse.
I have been an advocate of complete transparency in publicly traded companies for a long time. It breeds trust, and allows those with an interest in the success of a business to see in real time the goings-on within a company. I had planned to do this as my Doctoral thesis, but I think because of the speed at which the US Economy is imploding, the message I wanted to bring is coming to the forefront by way of the Obama administration. Never forget what public shame can do to a company. Right now it seems that the shame is limited to just the name AIG, and not the principals that administrate the company. It isn’t the company that is bad, it is the people at the Helm of the ship, the people that allowed it to get this bad and assumed risk they were not personally responsible for. It is that ethic I want to change.
Update: An interesting result of the hearings today with Liddy was the revelation to the public that agreements were made before Liddy got there, and he’s just following the law. Furthermore, the people who were in the AIGFP department are gone, and new people are in place who were promised retention money, that money was to be paid to them for unwinding the problems the previous employees of AIGFP created. The retention was for a year of staying with the company and paid AFTER the job they were given was completed. That job was to unwind the documents, and when done, they got the bonus. It was not a retention bonus to keep them on the job after the money was given. more…