AIG bonuses story partially explained

A lot of things have been said about the AIG bonuses worth $165 million to high-ranked employees. Here’s an interesting analysis by Alain Delaqueriere from the New York Times. There is no additional information about Mr. Delaqueriere besides his job, and I am not one who reads articles that are written by specific persons, so I am not going to talk about him at all.

In case you missed it, his research tells us who is actually to blame for. Contrary to the reaction of 99.99% of the people in the U.S. and around the world, AIG has turned out to actually not be the one to be blamed for the bonuses. Blame Tim Geithner and his assistants as well as Ben Bernanke’s assistants who “were reluctant to impose what they viewed as punitive and possibly self-defeating pay restrictions on companies being bailed out”. Blame the Treasury officials who haven’t taken seriously the e-mail correspondence on the bonuses with the New York Fed and the Federal Reserve Board.

I am not an economist but I can’t see anything “self-defeating” in restricting those companies from using the bailout money for anything other than the purpose of bailout. And bonuses can never be considered bailout. Bonuses are given when a company is doing well or even better, and they have nothing to do with government money. Knowing that, bailouts must always have certain restrictions so that they work.

But bonuses retain workers…

Opponents would say that bonuses would retain workers, as mentioned in the end of the fourth paragraph of a research article by David Herszenhorn from the International Herald Tribune. This attitude is a dysfunctional one in times of financial instability. Workers have few reasons not to want to work for a company without being given bonuses in a time when losing your job is among the worst scenarios, whether voluntarily or not, and finding new job is harder than ever. On the contrary, with millions of people being laid off the still employed are more willing to have their payments decreased than cotributing to a higher percentage to unemployment.

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Filed under Economy, Politics

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