What a weekend, wherein we were treated to more of the same from the beloved banking class.
Turns out one of the continuing lessons of the global financial catastrophe is that if you’re a high-finance worker — say, one of the big brains at AIG’s infamous Financial Products Group — and you just keep demanding bonuses no matter how bad you are at your job, everyone will simply agree that you deserve them and that, in fact, there’s no legal way not to pay you — your million-dollar “bonus” is really your “salary” and apparently, that is like a birthright.
That’s the kind of received knowledge on Wall Street that’s no longer being very well received.
Yet, AIG and the Obama administration have told the outraged American people that they are obliged by contract to give out $100 million in bonuses to AIG’s incompetent high-flying derivative traders.
But if you have a real job, you well know that employers can retract bonuses and pretty much everything else whenever they want to — and especially when the company they’re running has utterly failed in its business and has had to have been bailed out by the government.
U.S. autoworkers, of course, haven’t just agreed to give up bonuses. They are being forced to give up cost-of-living raises and make concessions on work rules and benefits and all the rest. The government had no trouble asking the Big Three auto execs who came to D.C. for bailout money to demand those kind of sacrifices from their employees.
But it’s up to voters to demand the government not give out our tax money to the toxic-asset makers at AIG. Here’s Salon’s constitutional law blogger Glen Greenwald on the “sanctity of AIG’s contracts”:
As any lawyer knows, there are few things more common – or easier — than finding legal arguments that call into question the meaning and validity of contracts. Every day, commercial courts are filled with litigations between parties to seemingly clear-cut agreements. Particularly in circumstances as extreme as these, there are a litany of arguments and legal strategies that any lawyer would immediately recognize to bestow AIG with leverage either to be able to avoid these sleazy payments or force substantial concessions.[…]
Legal strategies aside, just as a business matter, one of the first steps taken by every company in severe distress is go to its creditors, explain that it cannot make the required payments, and force re-negotiations of the terms. That’s as basic as it gets. To see how that works, just look at what GM and other automakers did with their union contracts – what they were forced by the Government to do as a condition for their bailout. Obviously, if a company goes into bankruptcy, then contracts to pay executive bonuses are immediately nullified, but the threat of bankruptcy or serious financial distress is, for obvious reasons, very compelling leverage to force substantial concessions. And the idea that, in this economy, AIG executives (of all people) will be able simply to leave and go seek employment elsewhere unless they receive their “retention bonuses” (even assuming that’s an undesirable outcome) is nothing short of ludicrous.
It’s no surprise, of course, that the alleged unbreakable bonus contracts at AIG have yet to be disclosed. When they are disclosed, it will surely be clear that they are indeed breakable, their validity riddled with questions and our taxpayer commitments to honor them null and void.
Read more here and sign a citizen petition here to ask lawmakers to subpoena those AIG contracts. The “No More Dough Till We Know Where It Goes” petition will be delivered to the House Financial Services Committee, which is holding a hearing Wednesday on the AIG payments.