When buying a company you should always conduct your due diligence in examining how that company operates, is financed and what ongoing contracts or obligations it has. In other words you ask for their financial books and you begin your due diligence discovery. On May 1, 2008, Delta Airlines and Northwest Airlines agreed to create the world's largest airline through a merger of the two companies. At some point prior to this announcement they both had to open their books for financial review to see if this potential marriage would work.
Along comes our Federal Government with its gotta get something done now mentality and buys $170 billion of American International Group, Inc. better known as AIG. Former Treasury Secretary, Hank Paulson, called the Wall Street company to Washington D.C. to iron out a proposed bailout of AIG which had gotten into deep money troubles with the collapse of our financial industry. What Paulson and the rest of the Washington knuckleheads did not do was ask all of the banks that were being bailed out to allow the government to examine their financial books thoroughly. $170 billion dollars later everyone is an uproar about $165 million in bonuses being paid out by AIG. In other words all of these intellectual dimwits did not do their due diligence for the American taxpayer. You and I spend more time reading our escape clause in our cell phone contracts than what was done here.
If this had occured just maybe someone would have seen the contracts for these bonuses. Because we are a country based upon the rule of law there is nothing anyone from Barney Franks, to Chris Dodd, to Nancy Pelosi or even Barack Obama can do. These bonuses are contractual and were already in place prior to the sky falling in for AIG. One way that these bonuses could have been eliminated is to have allowed AIG to go into a controlled bankruptcy and then the people who were slated to be paid bonuses for 2008 would have to get in line with the rest of the creditors as AIG tried to emerge from bankruptcy. Another way would have been to ask that the bonuses be deferred as long as the company was in trouble and owed the taxpayers.
Now that everyone on Capitol Hill is ranting about the timing of these payouts; they should look in the mirror. They are responsible for this not AIG. Had they taken the necessary time instead of rushing to the rescue there would have been better opportunity to review all of the operations of AIG and others. Paulson also set up the bailout so that these companies did not have to report how they planned to spend the monies lent to them. No court in this land will override the decision of AIG to pay these bonuses. Contracts are binding unless there was fraud by one party and since the recipients are getting what they expected and AIG indicates these bonuses are due then who was defrauded? Not the Federal Government. They never did their due diligence.
AIG is a holding company for many different companies. AIG has businesses in general insurance, financial services, asset management and life insurance & retirement services. And because we do not know who exactly will receive these bonuses and how each of the many companies under the AIG umbrella performed; it is not prudent to assume that someone is not deserving of their bonus. Nor do we know how each of the many companies performed individually. Some divisions of this organization may have been performing well above expectations and that is what helped trigger their contractual bonus payout. If it turns out that AIG is just paying bonuses to pay bonuses without the necessary performance triggers then shame on them and they deserve the intense scrutiny they are receiving. But our government set it up that they did not have to report as to how they are spending your money. Due Diligence not done! Necessary precautions not taken! No common or business sense. Government at its very best! You see what happens when Congress does things in haste. The good thing is that Obama and his team did not set these arrangements up but he did vote yes to the $750 billion bailout as Senator and Presidential candidate.
I am not opposed to anyone at AIG or any other bailout company receiving bonus payouts that were agreed to as long as the terms of the performance were met. Mr. Obama issued more of his rhetoric today, that Treasury Secretary, Timothy Geithner would be using any legal means necessary to stop or reverse these payments. This is the same Mr. Geithner that has yet to produce the plan for shoring up our financial and banking industry. The same Treasury Department that has yet to get a Deputy Treasury Secretary to assist Mr. Geithner. When is he going to have the time for this assignment? I'll wait......
That's my word! Please post yours!