Why Barney Frank’s Phony AIG Outrage is Worse Than the Bonuses
by Byrne Hobart
It’s an outrage — handing someone millions of dollars when his employer is nearly bankrupt? It’s ridiculous — larding paychecks with taxpayer dollars? It’s unacceptable — paying out a giant bonus in the face of a huge recession?
It’s just business. Even though Barney Frank expressed outrage over AIG’s recent bonuses, people are (deliberately?) forgetting that AIG is a massive company, with over 100,000 employees in 130 countries. And the team responsible for most of the offices was a remarkably tiny group of remarkably arrogant traders.
If AIG’s structured products team is collecting these bonuses, it is, indeed, an outrage. But it’s much more likely that the bonus recipients aren’t the same team at all. AIG has a huge variety of insurance businesses, and it invests the proceeds from its insurance in an incredible array of assets. Even at a time like this, there are numerous AIG employees who are capable of making the company millions of dollars (and this would be a good time for them to have some extra money).
But think about those people: how happy would they be to work for AIG? If they got stock options for good work in past years, those options are worthless; if they invested their savings in AIG stock, their retirement account just blew up. It’s a wild guess, but I’d bet that the average AIG employee has lost far more (as a percentage of their net worth, and in absolute terms) than the average American worker.
So what are those AIG employees thinking right now? Their first thought is probably something along the lines of “Who’s hiring?” Many of them won’t be able to get jobs. The ones who can demonstrate that they’re good at what they do will be able to get jobs. If AIG doesn’t do something to keep them on board, the company will be reduced to a pile of liabilities managed by mediocre employees, and constantly hoovering up your tax dollars.
When the economy is good, it’s easy to say “You have to spend money to make money.” Now that the market is in the tank, we should at least be able to agree: you have to spend money not to lose it so fast. Retaining good employees for millions is better than losing them — and losing billions, too.