Treasury’s current position on the AIG bonuses:
“We will impose on AIG a contractual commitment to pay the treasury from the operations of the company the amount of the retention awards just paid,” Geithner wrote. “In addition, we will deduct from the $30 billion in assistance an amount equal to the amount of those payments.”
Spot the gap in logic? Give you a hint – it’s the same one that pops up in discussion of companies repaying the TARP money.
We own AIG, at least until we work up the courage to shut it down and leave its ownership to the decisions of the bankruptcy court. If, by some miracle, the company ever generates distributable cash, eighty cents of every dollar already belong to us, and the only reason we don’t have the whole thing is that we haven’t bothered to amend our domination/consolidation laws to deal with government absorbtion of limited liability companies.
It means nothing to say that the company will “pay” the Treasury an additional amount of money. That’s like saying, in response to a procurement scandal, that the Defense Department would “pay” out of future performance. AIG should already be operating on the minimum necessary Federal infusion level, and it cannot pay us with something we do not already own.
If we are going to have public money at risk, we ought to behave like owners. That means active supervision and management for our financial best interests. If this goes against our core values, or if this is something the government does not feel prepared to undertake, then let the businesses fail and the private sector can sort things out. The zombie company thing is insulting to all of us, and, far from being a rogue event, the AIG bonus issue is exactly what you would expect from a business with no constraints and a hopeless financial deficit.
