U.S. taxpayers own about 80% of American International Group, Inc. (AIG
) and should be able to call the shots as the former insurance giant tries to work its way out of the mess that caused us to cough up more than $182 billion to rescue AIG from extinction. That is sort of the case.
Last September, employees in AIG’s Financial Products group agreed to return $45 million in bonuses or not get any bonuses at all. That seemed fair to most Americans who saw the company’s employees as a bunch of money-hungry gluttons who deserved nothing. Now, the company is going to withhold $21 million in bonuses due the 70 or so people, who still stand to earn some $46 million in bonus payments.
Most taxpayers would be satisfied if AIG employees were shown the door, starting with CEO Robert Benmosche, who threatened to quit if the government wouldn’t keep its hands off employee bonus payments. “Bob, here’s your hat; what’s your hurry?”
Certainly part of the problem is the Treasury Department’s kid-glove approach to dealing with AIG and the other institutions that nearly caused the global financial system to collapse. Treasury secretary Tim Geithner’s main goal after taking office was to prevent that collapse, and to him that meant dealing with the devils that you already knew, not creating new ones by cleaning house and starting over.
One can argue that Geithner’s approach worked to the degree that things did not get worse in the financial system. The price he had to pay for that, though, was a loss of faith on the part of his real constituency — U.S. taxpayers. Most believe that he should have taken a much tougher line with the people who created the mess. But Geithner chose instead to believe that the people who caused the problem were smart enough to fix it, if they were watched closely enough.
Therein lies the problem. To average Americans who wonder every day if they’ll still have a job at the end of the day, it makes little sense to reward the miscreants by letting them keep their jobs, and it is infuriating to pay them millions of dollars in bonuses to fix a system they broke in the first place. If your plumber came in to fix your sink and broke your shower while doing it, would you want to pay him to fix the shower too? Not likely.
For better or worse, that’s how people see what’s happening in the financial system. And neither Geithner nor his boss has really been able to explain that satisfactorily to the American people. Today’s cut in AIG bonuses won’t help the public relations problem at all, and will do little to bring AIG back to life. It just focuses attention once again on the culture of greed and makes people madder.
