Righteous Indignation: The AIG Edition

Senator Chris Dodd is miffed at AIG and thinks that the bonuses that were recently doled out by the ailing giant should be taxed. Governor Cuomo has his panties in a bunch and so does President Obama. All this posturing for political gain (I know, they’re politicians) is nauseating. But let’s get a few issues out from behind a fog that the politicians kind of glaze over…

  • Many of the bonuses that are being paid out are done so through contractual obligation. If AIG broke those contracts, they would likely have to wind up paying them out anyway after legal proceedings. Then you would have the cost of the bonuses plus legal fees. Those legal fees would come out of the bailout money, too.
  • Bonuses already are taxed. Ask anyone who has received one and they will tell you how much of a chunk the gubbermint takes out of the bonus. Does Dodd and company want to add on a special tax, an “evil capitalist tax”, above and beyond the normal tax rate for bonuses? Who would pay it?
  • Forgoing bonuses. All the AIG folks who were not contractually bound to receive bonuses have already had them whacked or eliminated. Many high level officials have given up a significant chunk of their base pay, too.
  • Retention bonuses. The linked article mentions those. It may not be exactly clear what those are, so let me explain it. AIG went into the crapper, employees heads were on a swivel as the situation worsened, news of the bailout spread amongst the rank and file, morale plummeted and a LOT of folks started looking for a new job. AIG knew that things would go from really, really bad to OMFG terrible if employees started filing out in droves. Sure, head count was going to get whacked, but AIG needed skilled employees to keep the machinery running. So they paid folks retention bonuses to keep them from leaving. It’s kind of hard to right a ship with no hands on deck.

I understand that much of what is going on just plain looks bad. And politicians are much more concerned with looks than they are with substance. My indignation has nothing to do with AIG paying out any bonuses or having a meeting at a swankienda that was already contractually obligated (if you’re gonna have to pay for it, you might as well use it). I’m pissed that the gubbermint is using my tax dollars to bail out ANY organization.


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