AIG Continues to Waste Your Money

The American people rightfully own an 80 percent share of American International Group. Yet the United States government continues to sit on its hands as the insolvent company doles out tens of millions of dollars in bonuses to the very executives whose actions drove the firm into the ground.

The conflict of interests represented by stupendous executive pay-scales is part of the reason for our current financial crisis. Executives feel no need to guarantee sound performances if they are able to come away with millions of dollars in ill-gotten gains regardless of their company’s outlook.

AIG is a perfect example of this lack of accountability, and the disconnect it creates between the imagination and reality. AIG chairman and CEO Edward Liddy has argued that the “retention payments” he is currently handing out to thousands of top-tier executives are a necessary and vital part of the company’s turn around. Indeed, no company can return to profitability and growth if it continues to lose workers; and AIG will be in desperate need of creative and innovative minds in order to figure a way out of its current financial mess. However, the sheer size of the “retention payments” is the issue here.

Among 38 executives with annual salaries between $160,000 and $1,000,000, AIG has handed out “retention payments” ranging from $92,500 to $4,000,000. These payments are not coming from AIG’s own reserves or profits – which are non-existent – they are coming directly from the billions given to the firm by both the Federal Reserve and the Treasury Department. Even in a place as high-priced as New York City, the idea that someone who already makes over $150,000 per year will need another $100,000 just to stay with the company is preposterous.

The average income for one person in New York City is roughly $50,000 and literally millions of New Yorkers live on an income in that range. If a highly trained corporate executive is barely getting by on an income three times greater than an average person, his ability to reasonably manage money is clearly insufficient; his qualifications to hold that position in the financial industry should be called into question.

To make matters worse, aside from some strongly worded remarks and other posturing from Congress, AIG is simply being allowed to continue with the status quo. Mind you, this is the same organization that sent its highest paid executives on a tax-funded vacation immediately after receiving capital infusions from the government. AIG is already under investigation by the New York State Attorney General’s Office for the questionable legality of many business practices and is part of an FBI investigation into accounting fraud.

If ever there were a time and place for the government to put its foot down and definitively stop obvious wrong-doing it is here and now. Unfortunately, it is too busy ignoring the clear and present danger facing the American auto industry among other caprices and oversights. Congressmen Elijah Cummings has taken a stand against the Treasury and the Fed’s role in this crisis and against AIG in particular, but once again nothing is actually being done. The American people are no longer simply being led astray; we are being robbed in broad daylight and we choose to ignore it.

Source Bloomberg:

Click here to contact your Representative in Congress.

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