President Obama is using his precious (precious) time to lambast AIG's executive bonuses. Sen. Chuck Grassley is suggesting the executives resign or commit suicide, er, metaphorically. Everyone keeps raging about how everyone is raging ... and then NYTimes reporter and MSNBC regular Andrew Ross Sorkin bravely goes where no one else seems to have considered going. In today's Dealbook column, Sorkin writes: "Maybe we have to swallow hard and pay up, partly for our own good."
Sorkin's points: The government needs to preserve "the sanctity of contracts." Setting a different precedent now would worry the business community--and who knows what the effect would be.
Also, these AIG executives that got us into trouble in the first place may be the only ones with the knowledge to get us out. What's more, "taxpayers need to keep some of these brainiacs in their seats, if only to prevent them from turning against the company." Sorkin considers the possibility that AIG was trying to do just that with the bonuses.
After all, with all the mudslinging and whatnot, he asks: "Would you want to work at A.I.G.?"
One note: In a similar case, Bank of America needed an extra $20 billion in bailout funds to cover its Merrill Lynch acquisition around the time it was publicly disclosed that Merrill had paid out $3.6 billion in bonuses.
The differences here, it would seem: AIG's ability to pay its bonuses comes solely from its taxpayer-funded bailout, while Merrill Lynch paid out bonuses before the BofA takeover.