Ethics in receiving bonuses -
Discussion: Wall Street Pursues Pay Loopholes – WSJ.com
Bad year or good, AIG employees got big bonuses – Yahoo! News
President Barack Obama said Monday that he would “pursue every single legal avenue to block” $165 million in bonuses to American International Group Inc. employees who were in part responsible for the insurance giant’s near collapse. But hours later, administration officials said the payouts made Friday couldn’t be extracted from their recipients without a legal fight that would cost the taxpayers even more. Instead, officials said the White House will focus on ensuring taxpayers recoup the cost of the bonuses and, going forward, executive compensation at AIG would be on a much tighter leash. As leverage, the government said it would apply new rules to the next round of AIG bailout funds, a $30 billion infusion pledged earlier this month. But administration officials also worry that taking too hard a line with AIG and other companies could discourage top financial experts and institutions from joining the government efforts to fix the financial system. That’s one argument that AIG itself has used to justify the bonus payments: that if certain executives leave at this point, their departures would complicate efforts to wind down the financial-products division. The unit’s books contain many transactions that are “difficult to understand and manage,” according to an AIG document explaining the retention plan the company submitted with the Saturday letter to Mr. Geithner. “This is one reason replacing key traders and risk managers would not be practical on a large scale,” the document continued.
Yesterday, facing a political firestorm, President Barack Obama responded: “This is a corporation that finds itself in financial distress due to recklessness and greed,” he said. “Under these circumstances, it’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay.” He then said he instructed Treasury Secretary Tim Geithner to pursue “every single legal avenue” to cancel the bonuses. What went wrong? AIG was done in by credit default swaps and other derivatives tied to securities and corporate debt. When these financial instruments weakened, the company lost massive amounts of money. In the course of one night last September, AIG’s cash needs went from $20 billion to $80 billion. To meet these financial needs, the whole company was practically wiped out.
Some top employees of American International Group Inc.’s disgraced Financial Products group have agreed to return hefty retention bonuses under mounting public outrage over $165 million in payouts to a unit that brought the insurer to its knees.
