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March 17th, 2009
01:07 PM ET

AIG needs to be taught who's boss

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/US/03/15/AIG.banks.list/art.aig.door.gi.jpg]

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. Diane

    I've heard a couple of oddities about the bonuses AIG HAD to pay out.
    1. "It's a contract...we're legally bound..."
    Oh, come on! They really think we are THAT stupid? I will lay odds the same legal department who drew up those contracts also put in a clause to get AIG out of paying those bonuses for whatever reasons they'd want.
    2. "We needed to pay the bonuses for key employee retention."
    Hello, there are 12.5 million people out of work. The majority of which would take HALF of what the greedy execs at AIG have been pulling out of the company even when they knew the ship was going down.

    I think AIG should have to produce all employee contracts to the government for approval. That's the only way we're going to know that next year the same thing isn't going to happen.

    March 17, 2009 at 10:23 pm |
  2. Sabrina Cleland

    AIG is not the only corporation that has received our bailout money and misused it, they are the headline today. Many other companies that have received bailout money have given bonuses to their board members while the employees that are running the day to day operations were cheated out of a raise.

    March 17, 2009 at 10:23 pm |
  3. Ruth

    It is disgusting here I am struggling on keeping my home because I am behind on my mortgage by $5,000 and now the bank wants to take my home. I bet you my bank is one of them insured through AIG. Maybe I should ask them to lend me the money. How about that? I hope President Obama hammers them for the abuse. How dare they knowing people are suffering. Shame, Shame, Shame, Shame

    March 17, 2009 at 10:22 pm |
  4. cindy Appleton

    yea, how about clawing back that 165 million in bonuses..... and giving it directly to every tax payer in the United States. There are bound to be 165 million of us that would love to receive say....one million apiece. We'd turn the economy around overnight. We'd pay off our mortgages, buy goods, invest in the stock market and hey, maybe even start a small business that would employ people. Think about it. Sounds good to me. We certainly didn't start this mess, but we could end it. Oh, right.....that makes too much sense -it will never happen. Shame on AIG, Bank of America...to name a couple. Rewarding people who created the mess we're in and will have to hand down the debt of fixing to our children. Shame, Shame, Shame ......

    March 17, 2009 at 10:22 pm |
  5. Lynne

    Arrogant Insatiable Greed is capitalism at its finest...all those Washington types that are screaming foul are quietly taking AIG contributions to their campaigns and PACs.

    March 17, 2009 at 10:22 pm |
  6. Pete

    I can understand that we may be contractually tied to this but, do you think A.I.G. might look at the bigger picture. I would accept this a little easier if A.I.G. put off or delayed the bonuses until they were on stable ground which to a lot of people this makes good business sense Delaying their bonuses shows good faith and that would go a lot farther in this country recovery process

    March 17, 2009 at 10:21 pm |
  7. Brian P

    The Obama Administration is showing their inability to control our tax dollars. They are saying one thing but AIG is doing whatever they please without any discipline. The senior executives should be immediately fired and Tim Giether should be removed from his position. I feel AIG shouldn't be given anymore tax dollars and let them run their business. If they fail, tough luck!! I like Chuck Grassley's idea from Japan. This country would operate more efficient if people were held to a high degree of accountability and we wouldn't have to worry about corruption, violence, immorality, etc.

    March 17, 2009 at 10:21 pm |
  8. Brian

    Why? They spit in our faces and the powers that be allow it to happen. Something has to and can be done about this, question is will they?

    March 17, 2009 at 10:20 pm |
  9. Dave Hearn

    Why can't AIG be split into a US company and a company that covers the rest of the world? The US tax payers would own the US company for the short term and let AIG do what they want with the rest of the business but they would not be able to use any of the US company funds anywhere except in the US for US customers? Protect the US customers and let the chips fall where they may for the rest of the company.

    March 17, 2009 at 10:20 pm |
  10. Rich from Michigan

    We the people can take of control of this madness. Uncle Sam has our money, and has proven repeateldly they will spend it with reckless abandon. But if we the people no longer purchase any products and/or services provided by any and all companies that have recieved bail out money, WE WILL force them into bankrupcy or out of business . At the same time we can support our brothers that do it the "old fashion way" we earn it. Enough of them.

    I would suspect that many of these businesses getting bail out money, turn it full circle, much going right back to our elected officials that passed the charity plate to them. WE can put an end to it.
    Many people can make a hugh difference. Just think what happens to AIG if we "small folks" move our business away from these knuckheads.....it won't take long...there done !!

    March 17, 2009 at 10:20 pm |
  11. Terry

    This has been a train wreck in the making for a number of years. When depression era legislation was rolled back (at the request of the wealthy CEOs - with the backing of their favorite Congressmen) and banks and investment banks were allowed to merge their products under one umbrella, it was only a matter of time before "mega Greed" rolled out as the new way of doing business. In the name of cost savings, top management has been rewarded with mega bonuses, while knocking the knees out from under the masses of people who keep the economy going by buying goods and services to support daily living. Well, have we learned our lesson? I sure hope so. In borrowing a line from on of the Jackie Chan movies "Rush Hour 2", "Greed will imprison us all."

    March 17, 2009 at 10:19 pm |
  12. Richard Merritt

    I would submit AIG stands for Audacious Incredible Gonads.

    March 17, 2009 at 10:19 pm |
  13. Diane

    The White House, all of Congress and AIG (the company) themselves need to "man up" all right....
    Those who don't... are "GIRLY MEN"!!!!
    Contracts can be broken. It happens ALL THE TIME!

    March 17, 2009 at 10:19 pm |
  14. Marc P.

    If the government owns 80% of the AIG then the government should inform the thieves that if they don’t return the stolen money (i.e. bonuses) then they will be fired. This is a theft of tax payer money. Plus they are the ones that caused the company to fail and asked us to save them. There should be a $100K cap on all salaries for any company that asks for tax payer money and no bonuses until the tax payer is repaid in full. But what do I know I just work for a living and get no help.

    March 17, 2009 at 10:19 pm |
  15. George NM

    AIG SHOULD NOT BE MAINTAINED ON LIFELINE…IT IS CRIMINAL TO THE TAXPAYERS!

    I believe the time has come to close the chapter on AIG and the cavalier attitudes of its CEO (Mr. Liddy), its Board and some key executives.

    While a huge number of US tax payers are going hungry at home, sleeping rough and/or living at a subsistence level, these folks at AIG are using bailout money to employ their buddies and to secure their retirement/pension. Under the guise that the market will collapse if AIG fails, they are feeding from the troughs and building the nest eggs, while Middle America struggles, go hungry, and being humiliated by joblessness and homelessness.

    Mr. Liddy is incompetent, placed there by his buddy, the former Treasury Secretary. The Board of Directors have been “yes men and women”, been there for the money only and, arguably, vicariously responsible and criminally negligent in the demise of AIG. What is left is a shell and image of a company, of no value, with Liddy and his cahoots feeding off bailout monies, just to secure and bloat their retirement plans.

    AIG has been dead for a while. Liddy is deceptive in his continuous statement that he can re-pay the government loans. It is a façade for him and his close associates to extend the demise of AIG to enrich themselves as much as they can. Liddy is not a sophisticated executive and he should go immediately. This shell of failure, which we call AIG, can be closed down in a quarter. Those who made risk bets can accept their risks and take their losses.

    What is being done here is unacceptable to hard-working Americans:
    – Liddy must go immediately. He is incompetent and has not provided any value, strategic or otherwise, to the company. (I am not a supporter of Hank Greenburg, but what he said of Liddy is absolutely correct.)
    – The Board members should be removed and, if possible, banned from holding executive positions for a while.
    – AIG should repay the government money immediately of allowed to fail. Those who bet on AIG knew the risks.
    – AIG should be wound down within a quarter.

    NO MORE PAYMENTS THIS DEAD DUCK, AIG. IT MUST BE CLOSED DOWN WITHIN A QUARTER. NO FURTHER REPRIEVE.

    It is unacceptable what the government is wasting on AIG…all being done on behalf of taxpayers. Well, count me out. If in doubt, the government should let Middle America express its views on this. I bet it will be complete disgust, betrayal, and unacceptable.

    It is unbelievable what is going on!

    By George
    (in Philadelphia)

    March 17, 2009 at 10:19 pm |
  16. Tammy

    The dash to find a way to get some of the money back leads me to believe that we gave these companies billions without so much as having them sign a contract stating what they can and cannot use the money for, AND the ramifications for breaking the rules of said contract. Could this be so?

    March 17, 2009 at 10:18 pm |
  17. shirley wright

    Excuse me but, I hear it said that Government can't change the law and make AIG pay back what they have stollen from we tax payers.
    I THOUGHT OUR GOVERNMENT WAS THE LAW.

    March 17, 2009 at 10:18 pm |
  18. Bob

    AIG is noted as "too big to fail"; 74MM policies – personal and business; am I missing something? There is an entire insurance industry available to absorb those customers. It's time we ended this dominance by a group of financial terrorists – no more bail out for AIG; run the business off to companies that will not blow up the world economy.

    March 17, 2009 at 10:18 pm |
  19. Chris Frouge

    Anderson,
    I would love to see the face , the name and the bonus amount of the 100 highest AIG beneficiary every day, at the begining of your show, until they decline it. I guess the fear to end up in the last 10 would give them incitation to do the rght thing.

    March 17, 2009 at 10:18 pm |
  20. Freida

    AIG Bonus, we the tax payers own 80 percent of AIG, if they are to big to fail I say lets sell them off. One piece at a time

    March 17, 2009 at 10:18 pm |
  21. Adrian

    AIG records a record breaking all time quarterly loss of I believe $60B plus for Q4 2008. Bonuses were paid out. I want to know why management clearly had no minimum performance or corporate profitability requirements before they'd pay out. Clearly poor management. Maybe they are hiring – I'll just do a terrible job and get a bonus – sounds like a good deal to me.

    March 17, 2009 at 10:18 pm |
  22. Vallelc

    Paid the bonus and them send the I.R.S. to do and audit of the last 7 years of every one of those pay .

    March 17, 2009 at 10:18 pm |
  23. Linda Petrone

    AIG should recieve no more bailout dollars,in fact all these banks and companies should just be allowed to fail... If we the taxpayers own 80% of AIG, I say we fire everyone employed there and let the compny fail...If average Joe America had done what was done at AIG, do we really believe we would have been bailed out? I think not.... Its time for we as taxpayers to demand that the people we elected work for us and and not for these greedy entities...Yes, I'm angry!

    March 17, 2009 at 10:18 pm |
  24. Jovina

    The government seems to think that the executives at AIG are indispensible. If they are so smart, they shouldn't have driven the company into the ground. They are greedy and corrupt and should be required to return every penny of our tax dollars. Not only that, they should resign from their overpaid positions and do us all a favor and get lost.

    March 17, 2009 at 10:18 pm |
  25. James Hidle

    Why don't you say anything about Sen. Chris Dodd writing the legislation so that AIG could give out those Bonuses. Sense he got more money from AIG for his campaign than anybody else.

    March 17, 2009 at 10:18 pm |
  26. Dan D. - Palo Alto, CA

    Since the government now owns 80% of AIG, it's time to exercise authority. Replace the entire board of directors since they are fully responsible for the current state of the company. Also, it boggles the mind that the CEO is still in position. Fire him immediately, as he has no concept of what "bonus" means. The company is a complete failure, so no one should be receiving bonuses, which are meant for performance beyond expectations.

    March 17, 2009 at 10:18 pm |
  27. rj myers

    Certainly the bonus payments never should have been paid – their payment is a slap in the face to the American taxpayers. However, the amount of the bonus represents less than 1/10 of 1 % of the bail out money that has been given to AIG Everybody is rightfully jumping on the issue, but it may just be a politically expedient thing to do. What I'm wondering is – who is looking after the other 99.9 % to be sure that it is being used wisely. Or is there another bigger surprise just waiting to happen because everybody is focused on the bonus payments.

    March 17, 2009 at 10:18 pm |
  28. Todd Downing

    I am not only furious about the bonuses AIG has paid... I am livid that everyone keeps saying they are contractually obligated. The government forced the UAW to re-work contracts for blue-collar American workers in order to receive bail-out monies so it can be done. There has been just NO WILL to do so when it comes to the suit and tie raiders that have created this mess.
    It's time for Obama and crew to stand up and say enough is enough!

    (And yes Airie – I remember your stories about the $450 million)

    I also find it interesting that the republicans are trying to blame Obama for not standing tough when it was them and their pundits who beat the drum – we don't want to Nationalize! – well guess what? If we had we could have prevented these absurd pay-outs from happening.

    Viva la France!

    March 17, 2009 at 10:18 pm |
  29. Carol Eldridge

    Hope and change has turned into garbage. How can any American look these people in Washington in the face nad believe anything they say. They are all scrambling to cover up their ineptitude, power, and partisanhip. Let AIG fail. I can self-insure my house and car better than thoes people. Send them all to jail – Geithner, Dodd, Frank, Paulson, Durbin, etc. America will be better off without all of them!!!

    March 17, 2009 at 10:17 pm |
  30. Greg B

    AIG has shown contempt for the American public. The company is hiding behind their "too big to allow failure" mantra. The fact is that AIG is now a welfare company propped up by the American Taxpayers. The CEO's have shown themselves to be worthless...yet they manage to basically steal taxpayer funds for their private use.

    Obama and his staff are equally guilty of incompetence. The reports have been made continually that AIG is paying bailout funds to incompetent CEO's who are not even with the company anymore! Yet Obama and all his alleged "top people" failed to see the abuses that everyone else in America saw coming!

    What other blatant waste is coming up that Obama and his staff fail too see?...until it's too late?

    March 17, 2009 at 10:17 pm |
  31. Pb

    Ali keeps saying night after night AIG is to big to fail because it writes so many policies, that's a load of crap. Plenty of other insurance companies would love to write more policies. Answer that Ali! LET AIG FAIL NOW!

    March 17, 2009 at 10:17 pm |
  32. TH, Kansas

    One question...AIG is supposedly obligated to pay these bonus', yet they are basically bankrupt. So how were they going to pay these bonus' if they had not received any of the bailout money.

    March 17, 2009 at 10:17 pm |
  33. Jim Freemark

    Anderson,

    Why do you keep saying who received bonuses at AIG from the taxpayers of America. WHY DON'T YOU SAY THERE NAMES WITH PICTURES? WHY DO YOU PROTECT THEM?

    Jim F.
    From Mpls

    March 17, 2009 at 10:17 pm |
  34. dRinPA

    Why would anybody or business want do any business with AIG after all this???

    March 17, 2009 at 10:17 pm |
  35. John Kleven Edmonds, WA

    I got a better idea than giving out bonus checks. Let's just kick them in the nuts, and we'll call it even.

    March 17, 2009 at 10:17 pm |
  36. Vimal

    This AIG thing is costing us more money that our most recent conflicts,Afghanistan, Iraq and Gulf war combined.

    Is there a competitor for AIG. If not why not we create a new Company and let AIG fail.

    Is AIG an abbreviation for A – fghanistan, I – Iraq, and G – ulf , the wars which almost ruined us economically!

    March 17, 2009 at 5:53 pm |
  37. Mundito

    R U kiddin' me .. AIG misappropriated billions but Washington is looking at millions!!!
    Com'on now!!!

    March 17, 2009 at 5:51 pm |
  38. Mimi from Philly

    I have an idea for the AIG execs. Give them AIG stock options as their bonus.
    When they asked Gietner why there weren't more restrictions in this last bailout, I'm sure no one thought that AIG would have the gall and chutzpah to give out MORE bonuses, given the current climate.

    March 17, 2009 at 5:50 pm |
  39. cal

    AIG? Who made them king? If the goverment gave the money, why don't they take it back? Call the note back,. simple. My bank can do it so why can't the goverment.

    March 17, 2009 at 5:41 pm |
  40. Susan

    If AIG is claiming that they will be sued if they do not honor the bonus contracts, let the bonus recipients sue AIG. Then AIG will be force to file bankruptcy which will make sure they do not pay out the bonuses.

    March 17, 2009 at 5:36 pm |
  41. L, Tampa, FL

    This AIG mess was not created by the Obama camp, this mess was created by greedy executives. Why would you accept taxpayers money and then give it out in bonuses. This makes absolutely no sense. The Government is giving out bail out money like it is Halloween. The unfortunate scenario to all of this is the Finacial institutions are receiving billions of tax payers dollars. The average American is having to foot this bill and these companies are still being allowed to outsouce jobs to India and other countries. This is what brought on this mess, this is why we are in a recession. Hardworking Americans who have worked and fought for this country are now without work or a home while our government is bailing out Corporate America and they are send our jobs to India. This has to stop. Has anyone stopped to look at the big picture. It was not the bad mortgages which got us into this predicament it was/is the outsourcing of jobs. At least if the jobs were kept in America then we could pay our mortgage.

    March 17, 2009 at 5:36 pm |
  42. Mary B

    So pay these bonuses in stock options using the price of AIG stock at Jan 2008 prices.
    Why are we afraid to ask these companies who take the bailout money to use as it was intended. Why are they treated so "special"
    I can't understand how more jobs & savings would be lost by the average American if some of this companies like AIG would fail. But it might make a dent in the "brightest & best" people's bank account who got us into these mess.
    If these companies don't want my tax dollars without some conditions – so be it. Let them get out of their own mess without it.
    Give the money to the small banks/credit unions who still following normal banking rules and would loan money in a resonabile manner.

    March 17, 2009 at 5:34 pm |
  43. Ardis

    Bonuses are a reward for contributing to the success of your business, not a requirement. There was no success to their business, so there should be no bonuses. My company has not only stopped bonuses and raises in this economy, they also had to lay off many of us.

    March 17, 2009 at 5:15 pm |
  44. Sharon S

    Most of the execs who received these bonuses no longer work for AIG they say it was in their contract and you can blame you Faulty Government for this mess for one they did not put any stipulations on the money they gave AIG, secondly they did put any regulations on how this money was to be used!

    So basically your Wonderful screw all the good working Americans, Gave AIG and many others this money without ANY stipulations!
    so don't be angry at AIG Be Angry at the culprit, YOUR GOVERNMENT!!!

    They did this to you and me NOT AIG!!! Because Our Government had the choice to put rules and regulations on the money they chose NOT too!

    March 17, 2009 at 5:02 pm |
  45. Billy

    As a canadian i have often admired you, our neighbors to the south & your patriotism.....but the Exec's at AIG are not patriots...they are terrorists and ought to be sent to Guantanamo before it closes.

    March 17, 2009 at 4:53 pm |
  46. Gregg

    The cries of the public regarding the most recent AIG scandal certainly bears some symmetry to French history...

    Perhaps we should revive the "French Kiss of Death"? Viva Le Guillotine! Whether it's figuratively or literally, clearly somebody's head should roll over this travesty.

    March 17, 2009 at 4:47 pm |
  47. Stefano Righi

    We should throw these AIG execs in jail and throw away the key.
    There is NO other solution!

    March 17, 2009 at 4:43 pm |
  48. GF, Los Angeles

    One word – deplorable.

    March 17, 2009 at 4:42 pm |
  49. Tim

    Gotta love the AIG executives especially the one's no longer employed getting bonus pay for there incompetance.

    Can you believe for smart intelligent executives getting rewarded for failure. Our congressman and senators are no better than AIG when it comes to bonuses.

    Again the American individual is treated like an idiot to let this go by again! At least we have responded by pulling back on buying. At least that is telling the government something.

    We need to start marching on Washington to hold the president, congressman and senators to the fire for this fiasco!

    March 17, 2009 at 4:38 pm |
  50. Carla

    This is insane. These people have no shame?
    I wish the goverment can take action and take those crazy AIG bonuses back if not put those people in jail.
    They are criminals !!!!

    March 17, 2009 at 4:17 pm |
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