There has been a three-letter word circulating the media for the past several weeks. No, it’s not what you think it is. It’s the American International Group, more commonly referred to as AIG.
I wouldn’t be surprised if most students hadn’t heard of the company before, but it’s almost impossible to avoid hearing or reading about their current predicament.
AIG is one of many companies who recently asked for and accepted a bailout from the U.S. government, but here’s the kicker. AIG used their bailout to pay the bonuses for their top seven executives.
One politician, Rep. Paul Hodes [D-N.H.] described the company best during a congressional hearing on March 18, ‘I think AIG now stands for arrogance, incompetence and greed.’
AIG’s problems didn’t start with what they did with the bailout money. It’s how they came to need the bailout. So far the U.S. government has given the company over $170 billion. An estimated $165 million went to the bonuses for the executives.
The money was supposed to be used to stablize the company and, by extension, the financial market. Instead it was stuffed in the pockets of the executives on the taxpayer’s dime. What’s more troubling is how politicians, of all people, are reacting by flip-flopping on their decisions more times than they should be allowed.
One minute they shake the executive’s hands saying, ‘We won’t let you fail,’ providing them with legislation to do things like this with bailout money and the next when the public finds out, they start shaking their heads and pointing fingers.
This sort of thing can make anyone lose faith in the whole system. One thing for certain, with a major company like AIG it really would desvastate the world market if it fell completely.
AIG is considered a world leader in insurance and financial services. They are the leading international insurance organization, with operations in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional and individual customers through property and life insurance networks.
With all the facts of what kind of a company AIG and what they have done with the bailout money, there is only one question that comes to mind: How does a mortgage insurance company come to need a bailout?
Well, let’s look at the facts: AIG’s problem is it goes beyond normal business lines of mortgages and crosses over into massive life insurance and retirement services operations, reporting an $18 billion loss this month alone.
Many are asking how the money could’ve been allocated towards bonuses. We can all thank Congress for that, particularly Sen. Chris Dodd [D-Conn.].
Dodd, who received donations from AIG in the past, slipped the section into President Barack Obama’s stimulus package that allows this ridiculousness to occur, but when asked he denied it and then after some poking and prodding he owned up to it.’
It’s pretty clear that boards of corporations can’t be trusted to oversee compensation, especially for the ‘big boys,’ even when the company is on the edge of destruction. AIG chairman Ed Liddy said the bounuses are required by law. The company also states that the money is needed to attract talent and clients. Well if they are attracting the same talent, they really don’t need to because they were the ones that got AIG into this mess in the first place.
I am all for rewarding success, but to reward failure, this concept is ludicrous. I come from the ‘trophy generation’ where every kid received a trophy just for showing up to the game. It’s supposed to be inspiring, but instead it might be the cause of creating more self-centered, young adults wondering why they can’t get the best jobs just for being themselves.
This is the time for the government to intervene and step up. ‘S’amp;P 500 CEOs last year averaged $10.5 million, 344 times the pay of typical American workers,’ according to the Executive Excess 2008 ‘How Average Taxpayers Subsidize Runaway Pay’ 15th Annual CEO Compensation Survey by United for a Fair Economy.
How many Enron jokes have to be told for Washington to get their act together and grab hold of Wall Street and slap some sens into these corporations?
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