Legal Commentary

AIG Bonuses Cause Furor

By Big Tent Democrat

The chances of a future TARP are hurt by news like this:

The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to executives in the same business unit that brought the company to the brink of collapse last year. Word of the bonuses last week stirred such deep consternation inside the Obama administration that Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them.

. . . The payment of so much money at a company at the heart of the financial collapse that sent the broader economy into a tailspin almost certainly will fuel a popular backlash against the government’s efforts to prop up Wall Street. Past bonuses already have prompted President Obama and Congress to impose tough rules on corporate executive compensation at firms bailed out with taxpayer money.

Some say there is legal recourse against paying these bonuses, namely bankruptcy I think that is wrong legally (I'll do a post about that later), but it does pretty much make clear that the chances of another TARP-style bailout is zero. For those institutions unable to meet their financial obligations, temporary takeover is going to be the only way out.

Speaking for me only

Full post as published by TalkLeft on March 15, 2009 (boomark / email).