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March 17th, 2009
01:07 PM ET

AIG needs to be taught who's boss

David Gewirtz | BIO
Editor-in-Chief, ZATZ Publishing

It's time for the White House to "man up" and put AIG out of our misery. Over the past six months, the U.S. government has given or loaned AIG more than $173 billion taxpayer dollars as compensation for an incredible inability to run a company properly.

And now, due to "contractual obligations", AIG wants to give its oh-so-talented management staff more than $165 million in bonuses. This is after taking billions from the U.S. government and spending it on lavish retreats at California spas and English hunting lodges. Oh, and they also gave more than $30 billion (yes, with a "b") of our money to foreign banks.

In the words of Nancy Reagan, it's time to "Just say no".

AIG is the nation's largest insurance company. Fundamentally, the business model for an insurance company is to bet against its customers. For AIG to win, many of its customers have to lose.

However, our problem with AIG is not the insurance business model. We rely on insurance companies to spread - not the wealth - but the risk, among us all.

For example, we all know the insurance-based healthcare system in this country is pretty sick. Think about it - for the insurance model to work, a healthy policy owner is paying money and receiving nothing in return, except for the feeling that he or she is protected. A sick policy holder is costing the insurance company money, so it's in the company's natural best interest to avoid paying for as long as possible, and pay as little as possible.

This is a tough game even for well-run insurance companies, especially as the actual costs of health care go up along with life expectancies.

Of course, AIG insures a lot more than just health. They sell all kinds of insurance and have holdings in virtually every business sector. They got in trouble with mortgages, like so many others in the finance sector.

The problem is that AIG has not distinguished itself as a company trying to turn itself around. It's given off no signals of humility or even an indication of a desire to learn from its mistakes.

Instead, it's showing the most venal side of corporate greed. Management is doing nothing to allay the impression that we're giving billions to a company whose sole trade skill is withholding payment. Not exactly a great investment for Uncle Sam.

The management team at AIG is riding this windfall for all it's worth, and it's worth plenty. They claim that they've got performance contracts that require these managers to be paid millions. Their secondary, laughable claim is that in order to keep such "stellar" talent, they need to pay such exorbitant sums.

I believe extraordinary talent should be paid extraordinarily well. The flip side is that screw-ups should not be rewarded. Rewarding failure isn't a good business practice. And when you work for a company that's so badly run as to require billions of dollars from American taxpayers just to stay in business, you have not earned your performance bonus.

News reports indicate that the White House is trying to find a legal means to prevent AIG from paying out the bonuses. How about the threat of incarceration?

This ain't my first dance and I've been around the block a whole bunch of times. For a company to be able to lose so much money with such abandon, there must be some freaky skeletons in its closet.

I suspect if the President were to deploy a team of forensic FBI accountants and another team of IRS investigators to AIG, the management team there would suddenly decide that 2009 isn't really the year to take these obscene bonuses.

Treason, like obscenity, takes many forms. You know it when you see it. What AIG is doing is un-American and comes dangerously close to treason. Although the company originally started in China, the initials AIG stand for American International Group. It's time for AIG stop the obscenity, put America first, and live up to values the word "American" stands for.

In return for our billions, we the people now own 79.9 percent of AIG. That makes the President of the United States, acting on behalf of the American people, the top shareholder at AIG. In any company, the majority shareholder is the boss. It's time for the management team at AIG to be taught who's boss.

Editor’s note: David Gewirtz is Editor-in-Chief, ZATZ Magazines, including OutlookPower Magazine. He is a leading Presidential scholar specializing in White House email. He is a member of FBI InfraGard, the Cyberterrorism Advisor for the International Association for Counterterrorism & Security Professionals, a columnist for The Journal of Counterterrorism and Homeland Security, and has been a guest commentator for the Nieman Watchdog of the Nieman Foundation for Journalism at Harvard University. He is a faculty member at the University of California, Berkeley extension, a recipient of the Sigma Xi Research Award in Engineering and was a candidate for the 2008 Pulitzer Prize in Letters.


Filed under: Bailout Turmoil • David Gewirtz • Economy • Finance • Raw Politics
soundoff (217 Responses)
  1. sally

    What are we gaining from this bailout experience ? Nothing but making us more angry. Let them use their resources to pay the bail out not our money..for the sake of crying out LOUD, AIG enough of this

    March 18, 2009 at 1:38 pm |
  2. Fred Symington

    I am somewhat surprised by the incredible outrage over the AIG bonuses. We gave a whole lot of money to greedy people. It's not that AIG doesn't "get it", they just don't care.

    March 18, 2009 at 1:31 pm |
  3. Randy from Texas

    The bonuses at AIG may need to be paid because of "contractual" purposes. While I feel it is a shame to be paying the bonuses, given the investment the Government had to make to keep the company afloat, it is the way "corporate America" operates at executive levels. I believe the only "recourse" we have is very simple. This is a "loan" to AIG – Let's accelerate the payback period by 50% or increase the rate on the loan 10 fold. Make those "bonus babies" earn their money and force them to deal with real world issues. If AIG can't repay the "loan" at the accelerated rate, let them go "bankrupt" and have those bounus babies join hard working Americans who are losing there jobs. A shot of "reality" is just what is needed at AIG.

    March 18, 2009 at 1:15 pm |
  4. Dodie

    I would like to see a list of all the people who received bonuses from AIG using our tax money. Even more important, I would like a list of banks (both American and other countries) Corporations, Wall Street individuals, elected officials and government employees that AIG paid using over 44+ billion dollars from our tax money.
    My opinion of AIG = (Terrorists of economics).

    I would like to see a law in effect that stipulates that all bonuses, golden parachutes, etc. paid with bail-out taxpayer money be taxed at 99% and no deductions can be used with this income.

    I hope we have learned a lesson from this. There needs to be a limit set on impact from large corporations. Possibly a new law mandating all corporations to be required to pay a certain amount of money quarterly that would be held by the Federal Government in the event the corporation ever files chapter 11.

    March 18, 2009 at 1:00 pm |
  5. Dodie - Irvine California

    I would like to see a list of all the people who received bonuses from AIG using our tax money. Even more important, I would like a list of banks (both American and other countries) Corporations, Wall Street individuals, elected officials and government employees that AIG paid using over 44+ billion dollars from our tax money.
    My opinion of AIG = (Terrorists of economics).

    I would like to see a law in effect that stipulates that all bonuses, golden parachutes, etc. paid with bail-out taxpayer money be taxed at 99% and no deductions can be used with this income.

    I hope we have learned a lesson from this. There needs to be a limit set on impact from large corporations. Possibly a new law mandating all corporations to be required to pay a certain amount of money quarterly that would be held by the Federal Government in the event the corporation ever files chapter 11.

    March 18, 2009 at 12:57 pm |
  6. Paul

    Good information!
    Change we the people to….
    “We the unseen people” Perhaps it will take an AIG “Bonus” situation to stir “We the People” into action. Tim Geithner cannot sell the reimbursement to us he is part of the problem. AIG has a 50 to 200 Trillion dollar derivative problem. Paulson left his GS chairman job in 2006- 2008 paying him millions of dollars to become treasury secretary paying him $150000. WHY? The financial few knew that the entire system was crashing in 2007 they needed someone to rescue GS and other financial instructions thru taxpayer dollars. Just look at Bernacki and Paulson rescue plans in 2008 the Fed spent Trillions and it went virtually unnoticed and the FED refused to tell “we the people” where the money went. The Treasury spent Billions and this is where we focused our attention. The Trillions given to AIG and other financial institutions went to GS and other foreign entities to build their personal profit while the taxpayers 401 became 101. We the people have no representation in congress or the presidency in these financial matters. We can vote them all out, republicans and democrats and start new. Have term limits and replace them after two terms. They call this a populist movement perhaps we need one. I wonder if we formed a “WE THE UNSEEN PEOPLE” POPULIST MOVEMENT WITH NO REPUBLICAN, DEMOCRATS, LIBERAL OR CONSERVATIVE LABELS to present our viewpoint how many would sign up?

    March 18, 2009 at 12:47 pm |
  7. Kathy

    We need to hit AIG where it hurts their Bank account! Find another carrier and Cancel your policies with AIG immediately! Boycott businesses that are insured by AIG!

    They are laughing all the way to their banks and stockbrokers with their bonuses because they know theya re aso big the American taxpayer won't let them fail! Let's rally to make them smaller boycott AIG!

    March 18, 2009 at 12:28 pm |
  8. Ellen

    Amen. Something needs to be done about them. But, hey, AIG holds my husband's only insurance policy. We send them our hard earned money every 3 months for the $10,000 policy we can afford...gotta pay those funeral bills someday you know.

    March 18, 2009 at 12:20 pm |
  9. Denise

    I would like CNN to do an in depth report to help the American consumer get out of any dealings with AIG. I think we should take the paparazzi from the Octo-Mom and send them to the doorsteps of the AIG executives. They should camp out at their homes and tell the American people how they are spending THEIR money. They need to know that there is a price to pay for a handout. Since AIG has their hands in everything CNN needs to do an in depth report to let the American people know how to QUIT doing business with AIG. If this is done over time it shouldn't have the DEVASTATING effect that everyone keeps saying that it will. I am sorry but these exec bonuses are devastating to me.

    March 18, 2009 at 11:15 am |
  10. Anthony Miggiani

    As the Autragious Illicit Greed (aka AIG) saga unfolds live on CNN I'd like to know why no one, repeat: NO ONE has demanded to know the basic salary of each AIG bonus recipient. And is their basic salary fraudulently padded and obscene in the first place, inreasingly padded with their bonuses. Please CNN, get your cartoonist ready. Scenario in vivid colour: a scene from the Roman era of a bacchanalian orgy, all feasting on roasted hogs labelled "Billions Bailouts". Add horn-rimmed glasses to the pigs doing the feasting as a contemporary twist. That oughta do them justice!

    Anthony Miggiani,
    Toronto.

    March 18, 2009 at 10:59 am |
  11. Paul

    "We the people" Perhaps it will take an AIG "Bonus" situation to stir "We the People" into action. Tim Geithner cannot sell the reimbursement to us he is part of the problem. AIG has a 50 to 200 Trillion dollar derivative problem. Paulson left his GS chairman job in 2006- 2008 paying him millions of dollars to become treasury secretary paying him $150000. WHY? The financial few knew that the entire system was crashing in 2007 they needed someone to rescue GS and other financial instructions thru taxpayer dollars. Just look at Bernacki and Paulson rescue plans in 2008 the Fed spent Trillions and it went virtually unnoticed and the FED refused to tell “we the people” where the money went. The Treasury spent Billions and this is where we focused our attention. The Trillions given to AIG and other financial institutions went to GS and other foreign entities to build their personal profit while the taxpayers 401 became 101. We the people have no representation in congress or the presidency in these financial matters. We can vote them all out, republicans and democrats and start new. Have term limits and replace them after two terms. They call this a populist movement perhaps we need one. I wonder if we formed a “WE THE PEOPLE” POPULIST MOVEMENT WITH NO REPUBLICAN, DEMOCRATS, LIBERAL OR CONSERVATIVE LABELS to present our viewpoint how many would sign up?

    March 18, 2009 at 10:50 am |
  12. Christa Middler

    We all can agree on the bad decision AIG made... Is anybody thinking about the poeple who work for AIG and had absolutely nothing to do with this decision... I feel bad for them,,, and Cnn showed yesterday.. how far reaching AIG is and why the government could not allow them to fail... perhaps CNN needs to show that more often.. and explain how many companies are owned by AIG and how far this is impacting the world, if they let them fail... It is easy to jump to comclusion if we don't know all the facts... Our lawmakers should have attached new regulations for the first bailout money... and I wonder how can these CEO's look in the mirrow each day... would it not be refreshing if one of them would come forward and say..I don't wish to have this money..
    I guess I have too much hope in all poeple to do the right thing..
    We shall see what the CEO's have to say on the hill today...

    March 18, 2009 at 9:19 am |
  13. Gregg Pittsburgh PA

    This is very simple. The AIG Chief should simply take $165M of his own reserves, which I'm sure would not leave a dent in his pocket, and offer that to his employees in place of our money. I expect an argument that his people worked hard under his policies and should not be punished as individuals. Fine, I can understand that they made bad decisions, but when it costs the American people – that's where the line is broken. Do the right thing today, and come out as much of a "hero" as possible, and then we can move on to fix the next crisis.

    March 18, 2009 at 8:55 am |
  14. Geo

    Does anyone else see the hypocrisy here? AIG was on the brink of collapse and the people that could have prevented this are now receiving bonuses... That’s the outrage??? Here's the hypocrisy. I recall reading just recently all Senator and Congressman in our Government voted for there $4700.00 a year raise. On their watch our nation was brought to its knees and on the brink of collapse, millions of people losing jobs, taxes being increased, and liberties and freedoms are being infringed on. DO REALLY THINK THEY DESERVED THERE RAISE?...I DON'T !!
    If my employers company was on the brink of collapse under my watch and I was fortunate enough to still have a job, do you think I would have the audacity to ask for a raise.... I think not.

    The real outrage here is the Government thinks they can play by different rules than rest of us. This is tyranny people, don't be distracted the real focus needs to be on the corruption of our Government.

    March 18, 2009 at 8:27 am |
  15. Chad Attwood

    Shouldn't "free market capitalism" be able to take care of these AIG clowns? It's easy. The government starts an advertising blitz telling everyone who does business with AIG to change to other suppliers. If there is currently no competition, this is a very good opportunity for other insurers to take AIG's business. Then AIG will no longer be too big to fail, then let them go bankrupt, then close down the company and these clowns will all be unemployed and unemployable. Stop pouring money into this den of thieves. What is wrong with this government. I voted for Obama, but he seems unable to hire competent people to deal with these issues. The government is completely inept. Chad Attwood

    March 18, 2009 at 8:23 am |
  16. Dave Rusch

    AIG is the perfect example of why the system is failing. Greed at the expense of the blood and sweet of the American people.

    March 18, 2009 at 8:18 am |
  17. patrick

    Other than on top of a big fluffy pile of OUR MONEY, how do these RATS sleep at night? I thought you were supposed to get the pink slip for poor performance. These are the most incompetent people out there and they are getting more money in one check than i will ever see in my life. It is about time our government got some back bone and stand up for the people it is SUPPOSED to represent.

    March 18, 2009 at 7:30 am |
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