Today in Washington, the CEO of American Insurance Group, Edward Liddy, denounced $165 million in executive bonuses paid out last weekend to current and former employees, while at the same time urging Congress not to ask for the money to be repaid.
Sucking and blowing much?
AIG was one of the financial services firms rescued with a US federal bailout. Now, American taxpayers own 80 per cent of the company that was rocked by its involvement in the sub-prime mortgage scam. Given this history, Liddy’s plea to allow the AIG employees to keep their bonuses is, not surprisingly, falling on deaf ears. Even so, his rationale is stunning.
Liddy argues that the AIG execs deserve to keep their bonuses – for "retention" of key employees, if you can believe that – because the agreements that led to them were reached before the federal bailout of the company.
"When you owe someone money, you pay that money back," he told a congressional committee Wednesday.
The irony of Mr. Liddy’s argument was not lost on any of the congresspeople at the committee hearing. Here you have a company that gorged itself on unsupportable credit instruments, and then took taxpayer money to stave off obliteration, talking about legal obligations to pay money rightfully owed to its employees, some of whom were involved in designing and executing the sub-prime mortgages.
I’m sure Mr. Liddy’s assertion that an obligation from an employer to an employee is a solemn contract must come as cold comfort to the millions of Americans who thought they had job contracts with their employees only to find themselves unemployed. Or the one in five Americans who, despite being assured that real estate was a good investment in a market supported by unsupportable lending, now owe more on their houses than the house are worth.
Congress will roll these bonuses back, as well they should. But when do the titans of finance start waking up to smell the coffee?