Argument: AIG bonuses are an insult to suffering taxpayers

Issue Report: AIG bonuses


“AIG Bonus Scandal Spotlights the Bankruptcy of Wall Street’s ‘Greed is Good’ Values”. Huffington Post. March 15, 2009 – Taxpayers deserve to know that their money is being used to help the economy as a whole, not the bank accounts of a few — and that’s clearly what has happened here. Everyone agreed that financial institutions needed help, but to give them a blank check with no strings attached — not a wise move.

Tulsathit Taptim. “The AIG bonus scandal and Americans’ ambivalence”. The Nation. March 18, 2009 – Federal Reserve chairman Ben Bernanke recently had this analogy to defend the massive bail-out: You have a neighbour who is a risk to everybody because he smokes in bed. One day he sets fire to his house, and you may say to yourself, “Let his house burn down. It’s fine with me.” But then, what if your house is made of wood, and is too close to his house. And what if the whole town is made of wood? Well, the right thing to do is put out that fire first.

That sounds reasonable, until the Americans realised that they are not only helping put out the fire, but also making sure the man has a nice new house plus a swimming pool and, more likely than not, will now take Cuban cigars to bed.

Some critics have called it a betrayal of democracy, a sad example of how Wall Street’s greedy few can pull the strings on the government “by the people”. It remains to be seen what really caused Obama’s about-face yesterday, when he described the bonus issue as a question of values and vowed to leave no stone unturned in search of a legal way to beat AIG’s “contratual obligations” to give the extra payout. Was he a leader reacting angrily to an important detail that had escaped his scrutiny, or did the anger demonstrate belated realisation about moral drawbacks of the overall bail-out plan?

Republican Rep. Dave Camp of Michigan – “At the end of the day, this insult to taxpayers cannot, should not and will not stand.”[1]

Senator Chuck Grassley of Iowa – “‘I don’t want to dictate how business should operate, but these companies have accepted massive infusions of public dollars, and the outrage against the bonuses is justified,’ he said.”[2]

House Speaker Nancy Pelosi – “While American workers see their wages decline and face record job losses, it is unconscionable that AIG would permit such extravagant executive compensation practices without any accountability to the taxpayer.”[3]