ProPublica does a nice job of tracing the timeline of AIG bonuses and points toward one of two larger problems:
In some respects, the sudden anger is mystifying. After all, there’s nothing
new about the bonuses except that a portion of them – $165 million – were
actually paid on Friday. Contracts instigating the bonuses were made a
year ago, and they’ve regularly been in the news in recent months.
And the amount involved is dwarfed by the tens of billions that flowed to
banks and hedge
funds.
Former Governor Eliot Spitzer agrees, asking why AIG's partners in the mortgage meltdown mess are getting to double-dip taxpayers:
And who were AIG's trading partners? No shock here: Goldman, Bank of America,
Merrill Lynch, UBS, JPMorgan Chase, Morgan Stanley, Deutsche Bank, Barclays, and
on it goes. So now we know for sure what we already surmised: The AIG bailout
has been a way to hide an enormous second round of cash to the same group that
had received TARP money already.
It all appears, once again, to be the same insiders protecting themselves
against sharing the pain and risk of their own bad adventure.
Seriously, $165 million is .001 percent of the TARP money AIG has received.
Sure I understand the anger over giving taxpayer bonuses to executives that sank the company, but shouldn't we and Congress stay focused on the bigger issues: Where did the big chunk of TARP money go? Why were companies that had already received taxpayer funds allowed to collect additional money, funneled through AIG, at what amounts to dollar-for-dollar reimbursement, for their mismanagement and failures?
Finally, for the sane among us: here's a lawyer's view of how best to "claw back" the bonuses, using basic legal principles, something New York attorney general Andrew Cuomo has already begun and upon which Congress and the administration can expand. Under present circumstances (80 percent taxpayer "ownership" of A.I.G.) it isn't a stretch to think that the bonuses could be rescinded on the basis of the company's "functional insolvency," according to Lawrence Cunningham, a George Washington University legal scholar:
[snip]
There is also at least some chance, given A.I.G.’s functional insolvency and the
government takeover, that these agreements may be rescinded either on the basis
of impracticability or by virtue of unforeseeable and uncontrollable
circumstances. A credible fact supporting both excuses is precisely the
company’s huge loss last quarter. Courts excuse contract duties when
governmental action essentially destroys the original purpose of a contract —
and the taxpayers’ 80 percent stake in A.I.G. is a more extreme sort of
governmental action than usually appears in such cases.
