05 February 2010

Wall Street, where failure pays big

In late 2008 and early 2009, the U.S. government bailed out American International Group (AIG), the largest underwriter of commercial and industrial insurance in the country, with $180-billion in aid. The boys and girls at AIG had screwed up big time. The executives of the financial products division had brought the corporate giant to the brink of collapse, triggering the largest corporate bailout in American history.

So, of course, they must be punished. Whereas last year they received bonuses totaling $168-million, this year they will only receive $100-million. That will teach them.

But wait a minute! They're still getting $100-million for screwing up? Can't help it, says Obama's "pay czar" Kenneth Feinberg, the contracts were drawn up years ago and "we've got to abide by the law." Well, OK, the law's the law, but that doesn't quite explain how any employer would be stupid enough to sign contracts that hand its executives massive bonuses even if they trash the company. Aren't bonuses supposed to be for doing something especially good? But these guys are getting bonuses for doing something especially bad. Capitalism is so entertaining.

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