Sooooooooooooooo apparently it's not acceptable for your company to take huge financial gambles, screw up badly, ask for the government to help and then hand out cash to every employee with their hand out. The AIG fiasco has made the US government stand up and notice. While everyone is upset with people taking millions of dollars, they also need to appreciate the position that Tim "the softest hatchet man in the world" Geithner is in. Mr. Obama has handed him the keys to the treasury, without proper assistance or staff, and basically instructed him to solve the entire crisis. Sunday evening, Mr. Obama appeared on CBS's 60 Minutes and discussed the problems facing the economy. The president ordered Treasury Secretary Timothy Geithner to use every legal means to recover the bonus money from AIG. If it is not repaid, it will be deducted from the company's next bailout payment. The House decided to extract its own revenge by passing a bill that would impose a tax of up to 90 percent on the AIG bonuses and on the bonuses of anyone making more than $250,000 a year who works for a financial institution receiving more than $5 billion in bailout funds.
While the government and the public in general are outraged by a company giving bonuses out of public funds/taxpayer pockets to "executives" who failed, some other facts need to be pointed out. Arthur Leavitt, former SEC chairman points out that some of the AIG bonuses were in fact contractual in nature. How would you like it if a major Canadian employer suddenly stated that your "contract" was no longer valid? I'm not suggesting that the bailout should not have happened, but as Leavitt points out, we essentially have the government riding a wave of anger and determining that contracts can be broken unilaterally. Just imagine you were an employee of AIG who didn't do anything wrong, your "area" made money, and you no longer get a contractual bonus or have to pay it all in taxes.
Many times, we look at the surface of a problem and come to a quick conclusion based upon what we assume are all of the facts. Is that the case here? We need to look at all of the facts before we make a decision. Hopefully this blog will help you see past the "noise" when it comes to finance issues.
Stay well and pay it forward.