Something is horribly wrong when a company that receives billions in taxpayer money from the federal government gives its senior managers big pay raises and bonuses, particularly at a time when many families are facing unemployment and home foreclosure and as the global economy falls off a cliff - an outcome the company played no small part in.
Yes, I'm talking about AIG.
And yes, I'm also talking about Citigroup, Morgan Stanley, Wells Fargo, and other bailout recipients that are scheming about how to skirt executive pay rules and make sure they continue to reward their top "talent." It reads like a ghastly commercial: "If you loved AIG's bonuses for senior money managers who profited off of the financial bubble that collapsed our economy, then you'll LOVE Citigroup's!"
We sent an open letter today to the CEO of AIG, Ed Liddy, demanding answers to questions like "Do you think that any of the senior management at AIG owes the taxpayers of this country something for giving them a job and a paycheck?" and "Eleven of the people who received 'retention' bonuses of $1 million or more don't work for AIG any longer. How can you possibly explain that?"
But AIG also shines a light on the major problems with the bailout as a whole that must be fixed, not least of which is whether other companies plan to follow AIG down the road of both financial and moral bankruptcy.
Other bailed-out behemoths are planning a more clever work-around than AIG, as the Wall Street Journal reported yesterday.
In response to expected bonus restrictions, officials at Citigroup Inc., Morgan Stanley and other financial institutions that got government aid are discussing increasing base salaries for some executives and other top-producing employees...."The trend is to increase the base pay in light of the reduced bonuses," said Scott Talbott, senior vice president of government affairs at the Financial Services Roundtable. "Without the revenue" that top performers provide, he adds, "these companies can't survive."
Wrong, Mr. Talbott. The companies had these so-called "top performers" and didn't survive - until the U.S. government bailed them out. The notion that these top performers deserve million dollar bonuses, which will come out of taxpayer dollars until the companies are solvent again, is not only misleading and wrong but morally offensive.
Yet this is what they plan to do, and Congress has yet to stop them. Indeed, Congress failed to enact meaningful transparency in the bailout from the beginning, which fed public outrage as companies like AIG needed more and more taxpayer money to give to who-knows-where. We still do not know how bailed out banks have spent the taxpayers' billions nor whether it is working to shore up the economy, as we all hope.
Going forward, we must demand not only that AIG's bonus recipients give back the money and that the other financial titans stop playing the games of the wealthy with the tax dollars of the working class. We must also demand that Congress not simply react to AIG's idiocy with fanfare and a Band-Aid solution - tax the bonus! drag them to a hearing! - but pass into law the transparency and accountability provisions to restrict executive compensation without exception, to disclose how banks are spending bailout money, and to ensure that the public's investment in rescuing our financial sector has the best possible return.
If AIG can contribute anything to the longer-term solution, it is to show how little regard some on Wall Street have for common sense and shared sacrifice in this challenging time, and that Congress and the people must put rules in place to ensure that our money is spent for our greatest benefit.
Case in point: Henry Paulson worked at Goldman Sachs for over 30 years before becoming Secretary of the Treasury. Unlike the Swedish government, which swiftly moved to nationalize the banks in the face of impending financial collapse, U.S. regulators are having to be dragged kicking and screaming into doing what's necessary to save the economy.
We have a lot of work to do if we are to fix this system.