Custom Search

Monday, March 23, 2009

AIG Retention Bonus Scandal

From the Hoss's Mouth

Today, Hoss Cents Free Financial Money Magazine discusses the AIG retention bonus scandal. Unless you have been totally deprived of news reports, by now you know that top executives of AIG Financial Products Division are eligible for $165 million in so-called retention bonuses.

The Financial Products Division is the arm of AIG that caused this successful insurance company to fail. As a result of their incompetence, 73 top executives became instant millionaires. One received a bonus of $6.4 million, seven received bonuses of $4 million, numerous others received more than $2 million, and still others received $1 million.

AIG Bonuses

Apparently in 2008, based on a successful year in 2007, the board of directors of AIG decided to write bonuses of $450 million in employee contracts for 2009. No regard was given to whether or not 2008 would be a successful year.

AIG then experienced severe financial difficulty, resulting in near collapse of the company and a bailout from the US Government totaling close to $200 billion to date with possibly more to come.

The US Congress Bill approving the bailout contained a clause that permitted these bonuses to be paid.

Senator Chris Dodd, after initial denials, admitted his staff was responsible for inserting the clause that permitted AIG executives to retain their bonuses. He did so at the request of the Treasury Department. In fact, in an interview, Treasury Secretary Tim Geithner said that his department asked Senator Dodd to include an executive pay provision in the stimulus bill. This loophole allowed AIG to pay out the controversial bonuses.

As outrageous as these bonuses are, you may be surprised to learn that The Hoss agrees with this decision. Why? Because, as in Mr. Geithner's own words, it was aimed at making sure that the bill was "strong enough to survive legal challenge." Many of these executives may have sued the government over deletion of their bonuses and the resulting litigation would have probably cost more than the bonuses. We may never know for sure what the true cost of litigation would have been, but we do know the true cost of these bonuses. In fact, eleven have already returned some or all of their bonuses.

Now, The Hoss is fully aware that before the auto makers received their bailouts, they were forced to renegotiate union contracts, and that the unions cooperated. Where is the fairness or equal treatment with regard to AIG? What's the justification?

The simple fact is that AIG is just too big to fail. The result would be devastating to the economy. And not just the American economy, but worldwide.

More on this aspect of the AIG retention bonus scandal in the next edition of Hoss Cents Free Financial Money Magazine.

Stay on track,

The Hoss

Next Hoss Cents Free Financial Money Magazine Post: AIG Too Big To Fail
Previous Post:Madoff Pleads Guilty, Jailed

1 comment:

  1. Hi,
    This is justine. Congratulations for maintaining such a good blog on finance!!

    I am a webmaster of some quality sites & blogs on-Debt, Real estate, Money, and Mortgage having good PR, internet presence and traffic. Yesterday when one of our forum moderators informed me about your blog, I visited it. Man, your finance focused & nicely presented posts really make me admit that the content of your blog posts are standard and relevant. Keeping in mind the quality information of your blog, we are planning to build up a nice link exchange relationship with you. We would love to have you as our link partner.

    So, if you are interested, feel free to contact me at my email: justine(dot)anderson08(at)gmail(dot)com when you get online.
    I am always online at Google talk, so we can discuss online also regarding link issue.

    Awaiting your earliest reply. Have a nice day. :)


Stock Ticker


The Hoss is not a financial adviser. This blog is a reflection of his personal opinion, experience and financial choices. For financial assistance, please consult a licensed financial services professional.

The contents of are provided for informational and entertainment purposes only, and should not be construed as advice. This material is not intended to provide, and should not be construed as providing individual financial, investment, tax, legal or accounting advice.

While the information shared on this website is believed to be accurate and reliable, the owners/operators of this website specifically disclaim all warranties, express, implied or statutory, regarding the accuracy, timeliness, and/or completeness of the information contained herein. Individuals leaving comments on this site are solely responsible and liable for the contents of their comments. Because this website is intended to provide general information only, you should discuss your specific needs with a qualified licensed financial services professional.

Links to other websites are for convenience only, and are independent from No liability is assumed for any inaccuracies in the information or for the content of any linked websites. No endorsement or approval of any other products, services or information is expressed or implied by any information, material or content referred to or included on, or linked from or to this website. No liability is assumed for incompatibility, non-suitability, viruses or other destructive/disruptive components on or from such websites.