The AIG Outrage: Where Are Your Taxes Going?
If you’re like me, you must’ve winced when you heard of the latest news surrounding AIG and how they’re funneling some of their bailout money towards employee bonuses.
With untold billions of dollars having gone to shore up the insurance giant AIG (American International Group), we taxpayers have the right to know what was done with that money and who it benefited the most. Tens of billions of those dollars have already passed through AIG to its derivatives trading partners, shielding them from losses as per news reports.
When asked to identify the beneficiaries of the bailout, the Fed wouldn’t give out names, saying in effect that nobody would do business with AIG if any names were revealed. Hogwash! If the business is above board and ethical, then what’s the problem? Well, AIG finally caved under pressure and has produced the list of recipients of their bailout money. More in this video.
We’re Not Paying For Bonuses, They’re “Employee Retention Awards”
Just the other day, we published a post on investment bankers with Wall Street jobs who were defending their salaries and big bonuses. Well here we go again: AIG has already received a total of $180 billion of taxpayer cash to avoid a collapse. Yet they insist that they need to honor contractual obligations to employees who were promised huge bonuses. The insurer had plans to pay about $165 million in bonuses by today, though some payments were reduced after Treasury Secretary Timothy F. Geithner intervened.
They could have taken the ethical and moral position here by deciding to scrap or defer their bonus program and to cap executive pay. But alas, greed rules!
We, the taxpayers, already own 80% of the company and yet, its board of directors still plan to fork over a ton of money! It’s beyond belief. Why don’t we just fire the whole group of executives (after all, we are the boss) and replace them with a fresh batch of graduate students just out of business school? I can’t see them doing any worse (and they just might do better) than those cynical old men who caused the crisis in the first place.
This video about AIG bonuses will get your goat:
Imagine this: 168 AIG employees are scheduled to receive payouts that range from $92,500 to $4,000,000 so that they stay with the company for ONE more year. Why doesn’t AIG call their bluff and allow them to leave? And how ridiculous is this, when unemployment rates are soaring and people are struggling to find jobs in this environment? Those who are struggling financially are the very people who are funding these outrageous bonuses via taxpayer dollars!
Small wonder that Time named Joe Cassano (insurance executive with AIG) as one of the “25 People To Blame For The U.S. Financial Crisis” and that CNN also included him in their “10 Most Wanted Culprits of the Collapse”.
Your Insurance Policies and Annuities With AIG
If you’re doing business with AIG in some way related to its insurance unit, don’t worry, your benefits are fully protected. Even if an AIG holding files for bankruptcy, the subsidiary that sold you your life insurance policy will continue to operate normally (this is according to InsureMe).
Also, you’re protected by your state’s guaranty fund. There is at least one in every state and they function pretty much like the FDIC for bank deposits. So do not panic!
Note as well, that if you have annuities with AIG through Vanguard, you are protected. According to Kiplinger’s:
For the annuities, the AIG life insurance companies hold substantial assets to back their payment obligations to the Vanguard Lifetime Income Plan fixed annuity contract.
So if you are thinking of pulling out of your life insurance with AIG, consider the financial consequences — the fact that you may have to pay up for cancellation penalties, surrender charges and higher premiums as an older customer, not to mention those commissions to new insurers. So think carefully before abandoning AIG at this time (even though they’ve made you angry enough to want to desert them!).
Should You Become An AIG Shareholder?
As of last week, you could buy one of AIG’s shares on Wall Street for $0.50. Yes, 50 American cents. It plummeted to half a dollar from a dizzying height of $49.50 before its shady deals were uncovered by negligent federal agencies.
You may be surprised that it’s actually crossed my mind to consider the possibility of buying some very cheap stock from a giant company that’s supported by our taxes. Then again, a part of me feels aggravated enough to stay away from AIG as far as possible, at least, until their controversy (scandal) boils over and until they restore the goodwill they’ve lost. I just don’t know how many people would have the stomach to “buy low”, or would find the desire to help out a company with such a tarnished reputation in the eyes of the public. Does it make sense to be an AIG shareholder right now?
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