Ok, that's not really fair. It's not fake. It is, however, foolish. It's ivory towerish, it's strictly ideological and it's a particularly low form of short-sighted populism. But above all, it's wrong on the facts. Or at least it probably is, if we don't see the contracts there's really no way to know. And that's one thing I agree with. We SHOULD be able to see the contracts.
But at the end of the day, AIG, or whoever owns the payment side of those employment contracts will probably be responsible for the renumeration of the bonuses. It's in pretty much black and white. There is a way that this may not happen, but it's not gunna happen. Not in a million years.
The explanation after the jump:
The argument being, if AIG is in the crapper, why is there any money for bonuses? This is looking at one particular form of bonus. Profit sharing. No profit, no bonus. Easy enough...right? Except that most bonuses that I've heard of in modern corporate structures go beyond strict profit sharing. The whole idea is to reward your bigger producers rather than the the hanger ons. So performance bonuses often do not involve the state of the company, but rather, they look at individual performance.
So as an example, lets say a CDS contact in AIG might be rewarded by the number of CDS they sell. They sell two million units, they get a bonus of x%. They sell three million units, they get a bonus of y%. This would be something that is hard-coded into their contract, more than likely. This actually is not a bonus, it's part of their expected renumeration determined by their personal performance. It is a bonus, technically. It's an extra on top of the base salary, however, it's not limited by corporate profitablity.
More than likely that is the type of bonus we're talking about here. Why? Because that's prevailent in the corporate writings. Performance based pay. That's the buzz-word of the day. It's not a leap to think that AIG and other financial companies organize their pay structures the same way.
Because this is probably in black and white, these folks getting the huge bonuses would win any lawsuit I do think if the government/companies tried to weasel out.
One argument is, well, what about the autoworkers? They had to cut wages/benefits, so why shouldn't AIG folks? The autoworkers made the decision to renegotiate their contract, because they need the long-term stable employment. The higher-ups in the financial industry HAVE NO SUCH NEED. They're making a ton of money. So what if they lose their job? This bonus is worth more than long-term job security to them. If they push AIG into a politically desperate situation because of their greed...well it's only gain to them. By the way.
Between this and the situation with the CDS/Mortgage agent fraud, there's a huge moral hazard issue going on here with these bonuses. And this is the REAL issue. They have no interest in stability, only in personal (not even corporate) growth. And this causes rampant fraud and instability.
Please note that I do not support these bonuses
Excactly the opposite, actually. The fact that people were rewarded for putting short-term gain over long-term stability is how I feel that we got here in the first place. Making too much money actually can result in irrational behavior. It removes consequences for bad actions.
But we probably can't do anything about this round of greed. It's too late. There's too many people I trust who say that letting the banks die would cause economic devastation. I think I grasp the short-term loan issue, and see how that would be a catastraphe to pull the rug out at this point.
But the question is, what can we do about the NEXT round of greed? My suggestion is strong rules for the financial sector limiting personal rewards based upon either individual stats or quarter by quarter results. In fact, ban them entirely. The financial/management sector are BIG fans of "non-economic rewards" for the little guy.
Sales up? Give them a pizza. Let them wear jeans on Friday. That will make them feel good about themselves. What's good for the goose, is good for the gander.
But at the end the day, the problem here isn't that we're paying the bonuses. It's that the bonuses were given in the first place. The problem is that these people are being paid huge amounts of money to cause economic and social devistation around the planet. It's time to change that.
The first step, by the way, is to disown as much of the financial sector as we can. Who cares that the DOW didn't grow under Bush? Do you know how much power we gave the looters by pushing that statistic? And a LOT of people around here did. There are some uses, personal loans, and lines of credit, that need to be done for a healthy economy. But it needs to be so tightly regulated that it's barely profitable. And if no private company wants to work in such an evironment, then just make it public.
Edit: Because people keep on saying it. The Autoworkers went back to the table to renegotiate because GM going bankrupt isn't in their best interest. Long-term stability is what working class folks are looking for. We want stable jobs, benefits and pensions. Full stop. Getting a little bit less to ensure that happens is in the best interests of the middle class.