This is indeed something you don't see every day.
But to paraphrase Egon Spengler, I'm furious beyond the capacity for rational thought. So excuse me if this isn't the most coherent post.
There's a metaphor for this in Mr. Stay-Puft. (Stay with me a sec while I talk it out, in hopes of finding it.) Here we have a huge marshmallow dude, evil to the core. (Ahem, cough, AIG, cough, ahem.) He's been conjured by a well-meaning guy (i.e., Ray). Now Ray knew that things were bad, and knew he was faced with an impossible choice (i.e., which crappy Wall Street firm to trust with his money). So, unable to suppress his dreams, he puts his trust in an image that brought him peace in his childhood, with hopes that this image is so benign that it couldn't possibly destroy us. Next thing you know, AIG, er, Mr. Stay-Puft's crushing everything in its path with abandon, all while wearing the biggest grin you've ever seen.
Only this time it's not a church he steps on. It's your house.
Normally, I don't get too upset when I see rich people being drained by other rich people. It always seemed to me that people like that operated in their own, distinctly separate United States economy - much like the high-end casinos on the Vegas Strip. All the while, a high percentage of us have been stuck at the $5 blackjack tables in A.C. or pulling slot levers in Reno. Most of America wasn't been invited to the party. We just foot the bill for the biggest parlor game in the world.
The question with AIG, for me, doesn't lie in the amount these architects of disaster were paid in bonuses. The how much doesn't bother me. I'm furious because of the why.
"Retention bonuses"? Are you kidding?
Look, I know little about Wall Street, admittedly. But if you're telling me that its firms are thriving to the point where MILLIONS of dollars need to be paid in lump sums to their traders merely to discourage them from leaving? (Even that didn't work, apparently.) To say that "I wish my employer did that for me" would be irrelevant; I wish my boss could "franchise" me in the manner of an NFL player, paying me the average of the top 10 producer salaries in America - ain't happenin'. I realize that it's a different world than where I come from. But I thought that you get rewarded for good work, not incompetence that has your superiors holding out the tin cup under the President's nose, asking "please, sir, I'd like some more".
Eliot Spitzer knows dirt when he sees it (natch), and is as pissed as I am:
Everybody is rushing to condemn AIG's bonuses, but this simple scandal is obscuring the real disgrace at the insurance giant: Why are AIG's counterparties getting paid back in full, to the tune of tens of billions of taxpayer dollars?
It all appears, once again, to be the same insiders protecting themselves against sharing the pain and risk of their own bad adventure. The payments to AIG's counterparties are justified with an appeal to the sanctity of contract. If AIG's contracts turned out to be shaky, the theory goes, then the whole edifice of the financial system would collapse.
The appearance that this was all an inside job is overwhelming. AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation.
This is exactly the kind of shit Jon Stewart was talking about.
I'll turn it over to people who are much calmer, and are dealing with this from a real-world perspective. Megan McArdle:
The employees of AIG know which traders are good, and which ones are idiots who made a bad mess worse. But they're not going to tell us--or rather, they'll tell us, and the idiot traders will point the finger at someone else. From what I understand, you can't even just ask which traders lost money--some of the traders will be able to argue, with justice, that they lost money because they were helping the company cut its risk exposure rather than taking bets they might win. Others made good trades that were Overtaken By Events.
Why not just say "no bonuses for anyone at AIG"? To hell with the bums! Well, we now own the company. If we hasten the flight of quality employees out of the company, that will cost us money. The answer might be some kind of performance bond. But as in other financial firms, traders often take as bonus what should be salary, which means that they need at least part of their bonuses to maintain their lifestyle. If they're faced with bankruptcy, the traders who are talented will go elsewhere--the financial market is shrinking, but the top traders still have other opportunities. AIG has a lot of positions to unwind. Do we want to leave the job to the dregs of the organization?
The New York Times' Andrew Ross Sorkin (who upon first glance this past Sunday on the "Chris Matthews Show", appeared to be a huge douche) actually makes a good point, whether we like it or not:
Here is the second, perhaps more sobering thought: A.I.G. built this bomb, and it may be the only outfit that really knows how to defuse it.
A.I.G. employees concocted complex derivatives that then wormed their way through the global financial system. If they leave — the buzz on Wall Street is that some have, and more are ready to — they might simply turn around and trade against A.I.G.’s book. Why not? They know how bad it is. They built it.
So as unpalatable as it seems, taxpayers need to keep some of these brainiacs in their seats, if only to prevent them from turning against the company. In the end, we may actually be better off if they can figure out how to unwind these tricky investments.
Great. March on, Mr. Stay-Puft.