Excellent-sounding suggestion about how to stop those abonimable AIG bonuses, from Bill Black, Tom Ferguson, Rob Johnson, and Walker Todd (The Huffington Post, 16 March 2009). Even if it doesn’t succeed in stopping the bonuses, their suggestion to break off AIG’s toxic Financial Products Division (like a hedge fund attached to an insurance company, as Ben Bernanke described it) from AIG’s main business, and then treat the Financial Products Division like the bankrupt entity it is, is very appealing.
Dean Baker makes much the same point: bankrupt companies don’t get to pay bonuses.
The NYT has another sensible editorial about AIG and who it’s been paying off with the $170 billion in bailouts it’s received so far. Under the bailout, the company has been paying off many credit default swap (CDS) holders in full, which is a great way to burn through hundreds of billions of dollars with lightning speed. And now we know that a good chunk of those billions went to CDS creditors like Goldman Sachs who, like AIG, are wards of the state. (To be fair, a substantial but smaller amount of CDS payouts went to state governments.) The only relief I can think of is Herb Stein’s old line: the good thing about something that can’t go on indefinitely is that it won’t.