AIG Chairman Edward M. Liddy gets the Creep of the Week award for his stunning, overwhelming, dumbfounding display of cluelessness.
Liddy not only awarded $165 million in bonuses to the very AIG employees whose risky speculation in credit default swaps bankrupted the once-great insurance giant, forcing it to beg for $170 billion in taxpayer bailouts, he then claimed he was a helpless victim of retention bonus contracts written before he took over in September. Here's exactly what he said: "Quite frankly, AIG's hands are tied."
No other contender for this week's Creep prize awarded by the USW sunk close to those depths of obtuseness. And in so many diverse areas! Let's count the ways:
First, there's Liddy's claim that he just can't squirm out of contracts. Boy, he'd be the first CEO on God's green earth to be too feeble to break a contract. Think about it: Congress insisted that the Big Three auto companies crack open their contracts with the United Auto Workers to qualify for federal bailout money. Union contracts at all sorts of companies across this country have been broken, bent, re-opened and renegotiated by cooperative labor organizations willing to accept a variety of cuts to preserve employment during an economic crisis caused by the likes of, well, let's face it, reckless speculators at AIG! But, somehow, Liddy couldn't find a way to break, bend, re-open or renegotiate contracts with the white collar workers who caused the mess taxpayers are both suffering and cleaning up.
Second, there's Liddy's claim that he had to honor the bonus contracts or he'd be sued by his employees. With a straight face, Liddy asserted that the employees in AIG's Financial Products subsidiary who neglected to account for the possibility of a decline in real estate prices would actually list their names on court documents contending they deserved extra money after bankrupting the company. If Liddy thinks there's a jury in America that would buy that argument and award the bonuses, I've got some credit default swaps I'd like to sell him. It's clear, in fact, even Liddy doesn't buy the argument since he's declined to publicly release the names, though he has given a great deal of information - under duress - to New York Attorney General Andrew M. Cuomo who is working on a lawsuit to recover the bonuses for taxpayers.
Third, there's Liddy's failure to understand these simple facts: people who caused a company's demise don't get bonuses and neither do employees of companies getting bailouts with federal tax dollars. The average AIG bonus payment was $395,000 - though 51 employees got more than $1 million and the winner of the fattest bonus got $6.4 million. Liddy told Congress he has asked some of the 418 recipients to return half of their bumps. If all 418 complied, the average would decline to a mere $197,500. That may be chump change to a Wall Streeter, but it is a life-saving sum to a middle class worker who has lost his job or can't pay his mortgage because of Wall Street's greed and recklessness. In addition, there's an important reciprocal issue Liddy failed to understand: the fury he has provoked by paying those bonuses has made the middle class even less willing to invest their tax dollars in any future bailouts that Congress may claim AIG or Wall Street banks desperately need.
Fourth, there's Liddy's ability to treat with reverence those who caused the financial meltdown while regarding with disdain those who suffer as a result of it. It was Liddy's contention that his white collar workers were special. He had to give them the bumps, or they would abandon AIG, refusing to clean up the mess they'd made. That didn't apply to auto workers, though. No one cared what happened to them. They could be furloughed as a result of Wall Street's misbehavior -- and pay taxes to clean it up as their bonus. But what's worse is the level of continued boldfaced, outright deception from Liddy and his like. The bumps were crucial for retention, he said, right? Wrong. Cuomo discovered that 11 big time bonus beneficiaries - those who got $1 million or more - had already left AIG.
Fifth, Liddy acted as if the American people didn't already own 80 percent of his company. Earlier this month, after AIG reported a $61.7 billion quarterly loss, the largest in corporate history, the federal government promised to help prop it up by giving it another $30 billion in taxpayer dollars. The solution here is simple, as the Washington Post pointed out in a story last week. If the feds simply insist on a 100 percent share of the company, which, frankly, the American people deserve for that kind of investment, the bonuses stop.
In addition to Creep of the Week, Liddy gets a special bonus award: Clueless of the Week.
We also need to slap a heavy tax surcharge, not only on the CEO's of AIG, but on the top 1% of income earners - that surtax would force all CEO's to understand a simple truth - that there are serious consequences for reckless behavior. In other words, we need to hit CEO's where it hurts - their own bank accounts and their own wallets.
The $165M paid to a small group of AIG people means little. It's little compared to the tax breaks that the IRS is working on to give to the people and charities that climbed on Madoff's tight knit pyramid. The pyramided victims, formerly speculative investors, may be able to write off their loss as "theft" loss after the pyramid tumbled. If the total loss is $50B, writing it all off, at just 20% tax break, the IRS is giving back $10B. That's 60 times the money that AIG people are "stealing" from American taxpayers. So who's robbing who?
Now I wonder if IRS stands for Internal Robbery Service.
Cap Schmap:
http://www.butasforme.com/2009/03/17/obamas-stimulus-bill-explicitly-grants-aig-the-legal-right-to-hand-out-bonuses/