AIG Ripoff Gets More Maddening

Dan Gillmor is a BoingBoing guest-blogger.

It's even more disgusting than we heard yesterday. According to the Wall Street Journal, AIG, the financial giant that has taken more than $170 billion of our money to save it from extinction -- and given lots of it to other financial companies -- is paying almost half a billion dollars in bonuses (my emphasis in first quoted paragraph)

to employees in its financial products unit. That division was at the heart of AIG's collapse last fall, which compelled the U.S. government to provide $173.3 billion in aid to keep it running....

Those payments are in addition to $121.5 million in incentive bonuses for 2008 that AIG will start making this month to about 6,400 of its roughly 116,000 employees. AIG, which was rescued in September as it faced potential bankruptcy, is also making over $600 million in retention payments to over 4,000 employees.

Together, the three programs could result in roughly $1.2 billion in retention and bonus payments to AIG employees.

Who's worse? The legislators and executive-branch people who let this happen, or the AIG executives who are showing themselves to be supremely greedy, and who must be laughing at the rest of us by now. Close call...


  1. the truly hilarious thing is the way the money-grab apologists so earnestly explain to the camera that: “look now, you silly under $100K peasants, this is how it has ALWAYS been and so is the natural order of things. Further, if you insolent little plebes don’t shut up and apologize this very instant, we shall take away all our good services and leave you to fend for yourselves, you filthy, uppity, poor mongrels”

  2. If they don’t pay the talent retainer bonus the financial geniuses will leave? And go where, that other industry that pays out millions in bonuses for burning down whole markets? The best that could happen might be for these bonus “earners” to take a hike. If people are allowed to dictate what an hourly worker in Detroit makes, maybe we should get to dictate what a banking execute gets paid. Fair is fair, right?

  3. Monty Burns is looking less and less comically exaggerated compared to the real plutocrats.

  4. see in Japan executives commit honorable suicide when they seriously screw up a company the lives of their employees.

    In the US executives that screw up get rewarded with bonuses… and people wonder why the financial system is broken.

    Given that George Bush was such a Jesus loving president he certainly didn’t seem to know much about #2 on the seven deadly sins list: GREED. Why else would he let his buddies screw so much…

    … let’s hope our saviour Obama will be able to turn things around. In the first order or things he should hand out free harakiri knives to Executives of failed companies.

  5. I’m confused by the term “incentive bonuses” here.

    Exactly what kind of incentive are these bonuses supposed to create? If employees are rewarded regardless of success or failure… well, I guess I’m just not seeing it.

  6. Who’s worse? Not a close call at all. The politicians are.

    AIG is guilty only of being greedy. That’s a fairly common human flaw, and even more pronounced in large, impersonal corporations.

    But the politicians? They are guilty of being stupid, and while that’s also not an uncommon human flaw, the whole point of elections is supposedly to select people who are not stupid.

    I’m hard-pressed to figure out what the worst part about the politicians in all this is. Take your pick:

    — That they were willing to pass a bill they didn’t understand.
    — That they might have understood the bill, and still passed it
    — That they had been warned by numerous people that the money they were handing out came with no strings attached
    — That they are still talking about how future money will be distributed?

    WHAT? After all this, they still plan to give out more money?

    Screw that. If we’re pissed about the way the money’s been used so far, the first step is to get that money back. Somehow managed to spend those tens of millions of dollars you got for a bonus? Too bad…no more money for you. For the rest of you, return the bonuses (which you should have known you didn’t deserve in the first place), and then we’ll talk about the possibility of more aid.

    Even better: take the bonuses back by decree, and then divert all of the rest of the bank bailout to the “stimulus” package. Not that I think that’s really all that great an idea either, but it’s a way better way to spend the money than on some idiot’s yacht.

  7. Before we get out the torches and pitchforks, are they doing anything other than making good on existing contracts? They took the money to avoid bankruptcy, right? Another part of avoiding bankruptcy is paing money you’ve greed to paid.

    The fact the contracts may have been stupid doesn’t nullify them.

  8. Oh noes! If we don’t give these rapacious assholes all your money, then they’ll leave our industrious company and go work for other assholes.

    You know, because it’s easy to get hired when your resume says that you’re responsible for the world sucking.

  9. No. 6 more or less nailed it.

    I’m sure the AIG people really believe these are necessary measures. If I was born to that kind of silver spoon, I’m sure my mind would come up with all sorts of justifications that it was necessary for society.

  10. Who is worse? Surely the public for not demanding that their representatives do something about this or you’ll hand them their ass in the next election.

    The government and the media sure aren’t going to do anything about this. Where’s the groundswell campaign, a-la Change Congress, that’s organising the write-and-call-ins to every Senator and Congressman asking what they are going to do about this?

    If nothing else at least ask them the question and get the answer on tape to play back at them come next election.

  11. @stefan jones

    I’d pay the bonuses in the form of AIG stock.

    Best idea I’ve heard in a long time.

  12. Time to sharpen the guillotine for all the Antoinettes out there. How’s the cake they assume you can afford tasting about now? Tired of the pinto bean flavor? Had enough?

  13. The line that bonuses are needed to retain TALENT reminds me of a story of a Sadhu who blessed that the Bad people prosper where they are and that the Good ones get displaced and move about. The Logic – we can’t afford to have Bad people move about and spread badness and Good ones to stay put and not spread goodness. Doesn’t actually make any sense.

    But it did ring a bell in this context.

  14. @#6
    I do not believe for one instance that our politicians are stupid. If we look at other nations, we see blatant corruption, theft, and a blatant disregard for their constituents. We do not see such things in this country, and I don’t believe it is because our system of government and those who are involved in it are incapable of such crimes against the public, but because they are smarter, greedier, and have interests that run deeper than those of some third world elected crook. What is common for us to see is our government acting in small ways against the public, small actions that over the long run add up in favor of our corporations (those in power) and of our elected officials.

    I know I sound like some conspiracy nut or worse, but given recent events I feel that this is not too far from the truth. I do not wish to imply some large scale conspiracy, but rather just a large number of agents acting in their own self interest through hand waving and some prestidigitation before a dull and complacent audience.

    In short, it is not our politicians that are stupid, but rather we are for being so easily hoodwinked.

  15. AIG has been nationalized by the US government. It belongs to American taxpayers. So there’s no real divide between the leadership of AIG and the government and politicians. They’re all one and the same now.

    So how do you want your government to spend your tax dollars on your company? That’s the question.

    We need to stop thinking of this as a bailout and start using the ‘nationalized’ word more often.

  16. How about naming names? Who ARE the individuals being paid these bonuses? Make them known & give them the opportunity to turn the money down. If they don’t, plaster their ugly mugs across the screens of America. I’d bet that most folks can now recognize Bernie Madoff if they saw him; let’s give ’em some more faces to study! At the very least, shame these creeps into unemployability, if that’s possible.

  17. Well, now, maybe this “retention bonus” thing is a little more nuanced than we think.

    I worked for a company several years ago, where one day they took me aside and intimated that the there was going to be a fair quantity of shit hitting the fan soon, and that the company might mutate grotesquely.

    But I was one of the IT crowd, important to keeping the monitors glowing. So they made me an offer: if you are still employed here six months from now, and you haven’t been fired for stealing (and can keep your mouth shut), we will pay you this rather large chunk of change. Here’s a written commitment. Choose the best one or two from your staff, and offer them the same deal.

    So I stayed. Things got very horribly bad, and 90 percent were laid off, or quit, as the business fell over and began vomiting blood. But I had a deal, and, on the appointed day, they paid me the retention bonus.

    I turned down other opportunities, to stay with a sinking ship, and worked hard to make the devolution work efficiently and equitably for everybody. I believe I *deserved* that retention bonus, and had they not coughed it up, I would have sued, and won easily.

    I am as ready as anybody to take up firearms against AIG, and the others who have trashed our economy. But maybe we should think a little about the nature of retention bonuses before we string ’em all up.

  18. @#17

    I get where you are coming from, but I have to think the differences make a difference:

    1. These are the Sr. Execs who, presumably, were steering the ship when they fucked it (and us) up. The IT guy *might* be a screw-up, but he’s not usually going to be the one who takes the company down, ergo more leeway on keeping him then on the folks who led the decline.

    2. If they had warning in early 2008 that the shit was hitting the fan and decided to put together retention bonuses, then WTF were they doing to keep the shit from hitting the fan and why didn’t we hear about it earlier?

    3. Your firm almost certainly wasn’t deeply involved in a set of activities that might bring the whole thing crashing down on us.

    The equities in this case are *not* in their favor. But, heck, I’m generous. Let them make their case. If they can justify this in any manner other than “we are legally obligated to do it” – I’m game.

  19. Sorry for the Anonymous post, but I wanted to post this ASAP.
    To any politician or aid bright enough to pay attention to this site, maybe you should take a good look at the contract that they say is legally holding them to pay these bonuses . I’m sure there is a clause in there that allows the company to forgo such payments of bonuses if the company is out of business, or in the process of being shut down. If they didn’t receive federal funds, they would be out of business.

    Maybe there is enough of a case to put an injunction on keeping the payments from being given out until they come back for more handouts. Then you can demand resignations of all those who approved and are to receive such payments in return for more bailout funds. Then they can have their nice big payout along with having on their resume that they helped destroy the world economy.

    1. Sorry for the Anonymous post, but I wanted to post this ASAP.

      Moderator note: But, in reality, anonymous comments have to be hand-approved, which means they may sit in the bin for 16 hours, as was the case for your comment.

  20. Time to load my shotgun.

    Time to own a shotgun, for when shortages and prolonged unemployment caused by this “rescue plan” leads to rioting and dumpster fires.

    Use in asymmetric warfare:

    Due to the widespread use of the shotgun as a sporting firearm, it is used in guerilla warfare and other forms of asymmetric warfare. Che Guevara, in his 1961 book Guerrilla Warfare, notes that shotgun ammunition can be obtained by guerrillas even in times of war, and that shotguns loaded with heavy shot are highly effective against unarmored troop transport vehicles. He recommends that suburban guerrilla bands should be armed with easily concealable weapons, such as handguns and a sawed-off shotgun or carbine. Guevara also mentions an improvised weapon developed by guerrillas consisting of a sawed-off 16 gauge shotgun provided with a bipod to hold the barrel at a 45 degree angle. Called the “M-16”, this was loaded with a blank cartridge formed by removing the shot from a standard shotshell. A wooden rod was then placed in the barrel, with a Molotov cocktail attached to the front. This formed an improvised mortar capable of firing the incendiary device accurately out to a range of 100 meters.

  21. The burdensome tasks these high-value AIG employees face, such as making decisions based on spreadsheets, appearing confident about those decisions, dressing appropriately, being versed in the subtleties of business etiquette, and dropping the proper names, make them high-value assets that must be given generous compensation if they’re to put their minds to work.

    Just imagine the trouble AIG would be in if these people were to leave. Why, they could go to any one of AIG’s prosperous competitors, all of whom are brimming with cash and eager to snap up these, the best and brightest minds that America has to offer.

    But we can put aside all of that, because it doesn’t matter. These people are better than you, and they deserve to be given money for it. The sooner you accept that and stop your fucking whining, the better off they’ll be.

    Thank you.

  22. no Zuzu, even in times of extreme social dislocation, small arms will only be useful for a few days. Better to cultivate a core community from local affinity or geographic group. A friend who keeps watch while you sleep is infinitely more powerful than a machine gun.

  23. @Zuzu – Having the shotgun isn’t enough. One absolutely must have a plethora of ammunition (allocated 50%/40%/10% – slug, double-ought, and #4 for versatility). 12 Gauge is preferred for its ubiquitousness.

    Reloading gear & supplies would also be a good thing.


  24. Retention bonuses? The news articles say that a large portion of the bonuses are going to the AIG financial products group – these are the people that sold the derivatives that took down the market. Is there really anyone actually buying CDSs anymore? I doubt it. So, why does AIG need to retain these employees?

  25. The Financial Services Unit was responsible for the $170b worth of income to AIG – certainly they deserve a bonus for their skill in that, whatever their methodology, no?

  26. It’s really, really simple: cancel the bonus payments.

    If the execs and “best and brightest” feel this is not in keeping with their contracts, then they can turn up in public court to fight for their right to receive hundreds of thousands of dollars in bonuses.

    I shall make a fortune selling rotten eggs and tomatoes.

  27. You’ll feel better if you revise one fundamental assumption about this country– that it’s your country. It isn’t. It’s someone else’s country– the people who own it, and fundamentally you’re a step up from being a guest worker.

  28. zuzu, what if we loaded up our 12 gauges with rock salt rounds, and head down to wall st. sure, we would die a horrible and fiery death, but, it’s a good day to die.

  29. I totally agree with Glurpo – give us these greedy bastards’ names, pictures, info…I want a face to be able to think of and curse when I’m panhandling on the corner of 42nd because I can’t afford my apartment in the city anymore. Absolutely infuriating.
    -Bitter NY native

  30. While I generally dislike the chinese approach to, well, almost everything, at least in China these guys would be hauled off and executed as enemies of the state….doesn’t seem unreasonable at this point

  31. This is teh Ownership Society the Repugs wanted a few years ago; Too bad they didn’t wish better when that genie came out of that lamp they found in Iraq.

    Anarchy probably would be less disruptive and expensive to society than the financial bloodletting we’re undergoing right now. The people who will suffer the worst will be the scared upper crusties who are shaking in their gated communities as we speak.

  32. am i the only person who is seeing a sans serif font for the first paragraph of this post (Firefox 3 on OS X, not smoking crack)? this is very disturbing to me.

    err, AIG sucks too. but fonts need to be consistent, dagnabbit!

  33. Count me with the shotgun crowd. Torches and pitchforks just won’t get the message across anymore.

  34. I didn’t agree to give anyone anything, I didn’t sign any contracts with company employees promising them cushy bonuses and severance packages. So when the company bigwigs take MY money it should be spent on fixing the company they broke so us poor folks who are bailing them out don’t starve to death, not paying people off. The pres/ceo’s have the responsibility to pay the employees, not me, so they need to pay them out of their own salary or out of their own personal bank accounts, not with MY money. It’s like burning the community center down, the community gives you money to rebuild it and instead you pay off your credit cards. That’s not what the money is for, that’s not our responsibility. Is there an uprising? Is there some petition I can sign or email I can send or call I can make? I’m very upset and very frustrated and I want to do something but I’m not in a position to storm D.C. so I’m feeling pretty powerless.

  35. “New York Times:

    The Obama administration is increasingly concerned about a populist backlash against banks and Wall Street, worried that anger at financial institutions could also end up being directed at Congress and the White House and could complicate President Obama’s agenda.”

  36. AIG = Allowing Irreversible Greed.
    AIG = All in Greed.
    AIG = Arn’t I Greedy.
    AIG = A$#holes, in general.

    This is sick. Why in the world are we helping these companies that keep sending millions to people who do not know how to run a company? They cry yet get paid millions on the “average joes” taxes. Furthermore, I fear this is just the tip of the iceberg. Look what Enterprise rent-a-car did to get bailout funds:

    Not to make excuses for these people, but the bailouts are making crooks out of everyone that touches the money.

  37. When did “populist” become invariably synonymous and interchangeable with “popular”?

    Anyway, these bonus provisions appear to be built-in to the employment contracts of these AIG deadbeats so it’s just another liability that has to be addressed.

    Because otherwise they would sue and very probably win at a much accelerated cost to the taxpayer.

  38. I think if AIG falls, so does the USA. And with it, much of what’s left of western money and commerce. So they have seemingly no choice but to try and patch up a broken system with mountains of money. Another way would be to change the entire system, but this is not what politicians are able to do. This is what grassroots movements can do:

    “People are talking about the need for a green New Deal, and comparing this moment to the early 1930s, and they’re right. But what led FDR to take those risks and be that bold was that he was under enormous pressure from grassroots movements from below.”


    In another internet appearance by Ms Klein, she also advocates direct action to push the Obama administration to do what is needed, and that FDR did not offer the new deal out of warm heartedness, but as an alternative to large scale civil unrest and riots.

  39. i am sorry, but all the fuzz about a lot of the money going to non US financial institutions is just bogus. where did you think the money went? AIG is an insurance company. if an insurance company is in trouble and needs to be rescued it is because they can’t fulfill their obligations which is pay out on policies. and AIG being a global company had global clients who were smart enough to take out insurance policies on their CDOs. and that is also the reason AIG could not fail, it was way too interconnected across the global financial markets.
    on the bonus side, well it is a stupid move by AIG management, but in the end just a tiny drop.

  40. #34, thequickbrownfox, for the win. Have any of you seen the employment contracts of the employees being paid these bonuses? Did the employees meet their contractual obligations in order to receive the bonuses? If so, I don’t see how the company could get away with NOT paying them, legally. If not, then to thell with em.

    The retainer bonuses make me kinda sick though – an average of $150k per person? That’s some serious mazoola. I can sort of understand the logic – you don’t want your best and brightest jumping ship, and thus causing the whole company to collapse from the top down – but I’m willing to bet there’s a handful of million-dollar-plus retention bonuses in there that could easily be done without.

  41. This is an complete outrage. $crew A!G! They coulda bought Disney three times over, and had a weekly dress like Mickey day for the entire country.

    My lemonade shack is about to go under. Can I get a billion to keep it afloat?

  42. DEFAULT on the EXEC’s ‘contracts’ – let’em get in line and sue AIG – they’ll settle for pennies on the dollar while outing themselves – (it’ll look great on their resumes)

  43. Sigh.

    I can’t speak for AIG, but I can speak for companies in general.

    Yes, many companies in the financial world are insolvent, bankrupt, etc.. But to paint every single employee with the same brush is moronic.

    Do executives deserve bonuses? No. The buck ultimately stops at them, and it would take one HELL of an argument to convince anyone that they deserve a cent. ie.- If one exec was able to prove they had fought and yelled and pounded that their policies would lead to ruin and tried their damndest to turn the ship before it was too late and was simply ignored by everyone else, then maybe they should be given a bonus and put in charge of the operation.

    But they don’t exist.

    As for the employees beneath them, even in a company that goes off the cliff, there will be those who actually MAKE money for the firm. 6% of the total employess will get paid a bonus, which averages out to around 78k per person. That is incredibly low for a US-based global financial services firm.

    What if those 6% were the people who actually turned a profit during the collapse? Don’t you want them to stick around while you’re trying to save the company? Or do you want the schlubs who failed miserably and won’t be hired by anyone hanging around to keep screwing up?

    And put yourself in the shoes of the guy who had a career year and is told he won’t get paid anything for that. You’ve worked for years trying to get that big payday, and when the world is crashing down around you, you manage to pull it off. You see more profit directly tied to you that you have ever seen, and your boss comes and says, “hey, good job! this pat on the back is all you’re getting.” How do you feel then?

    I’m not saying pity they millionaires. The numbers are irrelevant if they payouts are deserved. If you want a meritocracy, then you have to pay those who merit it, and not say “well, your company lost money, so you personally must have messed up too.”

  44. It makes me so angry to hear Lawrence Summers on TV saying, “We are a nation of laws. Contracts must be honored.”

    What about the contracts that countless corporations broke with their employees to provide them with pensions and health care upon retirement? Where were the elected officials saying, “Sorry, Monsanto, we are a nation of laws – pay up,” when they cut my grandfather’s pension benefits by 80%?

    If AIG had been allowed to go bankrupt, those bonus-providing contracts sure as hell would have been tossed right out the window. They should not get to have their cake and eat it too.

  45. 6% of the total employess will get paid a bonus, which averages out to around 78k per person. That is incredibly low for a US-based global financial services firm

    Keep in mind you are talking about “incredibly low” bonuses that 1 1/2 more than the 2007 median household income. The idea of realistic yearly income reported in the media these days must be grotesquely inflated cos I read posts like these all the time and no one bats an eye.

    I don’t personally know anyone that makes over $100k a year and I’m a college graduate. I love these rich people telling us things like 78k bonuses are not really alot of money. PLEEEZ

  46. It makes me so angry to hear Lawrence Summers on TV saying, “We are a nation of laws. Contracts must be honored.”

    Contracts also have to be enforceable, which is why they’re adjudicated in the event of a dispute.

    For example, slavery contracts are unenforceable because there’s no physical/extant way for anyone to sell their cognitive autonomy.

    Likewise, a contract whereby I leased you the moon, or the Brooklyn Bridge, is unenforceable because I don’t own those things.

    c.f. incomplete contracts (aka imperfect contracts)

    One free-market argument for private adjudication (i.e. dispute resolution organizations) is that market pressures would overwhelmingly prefer simplicity of contracts and expediency in their enforcement. Unlike with a government legal system, convoluted and deceptive contracts would simply not be cost-effective for any business to settle on behalf of the interested parties, so such contracts wouldn’t exist with any realistic expectation of their enforcement.

  47. It doesn’t matter what AIG does with the money, they got it and it plus all the other “bailout money” was created out of nothing leaving a huge hole plus interest. Like a dry ocean that we now must fill with our sweat. Many are reaping huge rewards for loaning us the bailout money. The more they give us the more they own us.

  48. Decimation (Latin: decimatio; decem = “ten”) was a form of military discipline used by officers in the Roman Army to punish mutinous or cowardly soldiers. The word decimation is derived from Latin meaning “removal of a tenth.”[1]

    A cohort selected for punishment by decimation was divided into groups of ten; each group drew lots (Sortition), and the soldier on whom the lot fell was executed by his nine comrades, often by stoning or clubbing. The remaining soldiers were given rations of barley instead of wheat and forced to sleep outside of the Roman encampment.

    Because the punishment fell by lot, all soldiers in the selected cohort were eligible for execution, regardless of rank or distinction.

    The leadership was usually executed independent of the 1 in 10 deaths of the rank and file.

  49. why doesnt everyone just boycot AIG….if the companies that insure them renew with another company then eventually they will fail….let them fail…….and or let the govt. take them over and divest the interests…pass them off to competitors…..we should then put a cap on how big these insurance companies can get so we never have a problem like this again…..

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