Aieeee, AIG! (Part 1)

$61 billion in fourth-quarter losses, tens of million in new bonuses, mostly to people in the most toxic financial products division on Earth, namely their Financial Products division.

And the bailouts just keep on comin’.   Word is that the bonuses will be restrained in the future, but why not in the present, when AIG has already received $170 billion in government funds?  AIG’s line is that the bonuses were contractual obligations made before the company’s implosion, but aren’t bonsuses supposed to be paid out of company profits?  AIG has gone from hosing its shareholders to hosing the taxpayers.  And if the government has a plan for dismantling this atomic bomb of a company, it’s doing everything in its power to suggest otherwise.   Seems that “Welfare Cadillac” was written about forty years too early:

UPDATE, 16 March 2009:  Sunday’s NYT had a sensible editorial on the matter.   News of the backlash and the identities of AIG’s counterparties was all over the wires on Monday.  Warren Buffett’s warning that credit derivatives were financial weapons of mass destruction looks truer than ever — AIG’s bottomless obligations now seem to be married to the federal government’s bottomless pocket.   While the systemic risk from letting AIG fail was huge (and no doubt still is), is it really a worse risk than all-out banana-republic bankruptcy for the U.S. government?

UPDATE, 17 March 2009: Actually a week old, but James Hamilton’s AIG analysis and recommendations on Econobrowser are worth pondering, as is the long comments thread.

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One Response to “Aieeee, AIG! (Part 1)”

  1. democommie Says:

    Ranjit:

    The conceit is timeless; it just needs a new title:

    “Welfare Hummeferrari”

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