Almost everyone is furious, to say the least, over the reported $165 million in bonuses paid or about to be paid to executives and derivatives traders at AIG. The firm has already received some $170 billion in government rescue money.
The House, Senate and even President Obama chimed in with expressions of outrage, along with countless millions of Americans suffering the pains of our economic downturn.
But former AIG vice president Ron Shelp, writing recently in The Wall Street Journal, says the bonuses are justified.
"The real reason the bonuses are justifiable is because the executives in the financial unit are trying to undo and wind down very difficult agreements," Shelp wrote.
Yet in his own explanation of why the bonuses are necessary, Shelp himself has reservations.
"While these bonuses stick in my craw, there are reasons to proceed with them as part of the breakup and restructuring of a once-great insurance company," he wrote.
Difficult as the bonus medicine may be to swallow, the result will be curative, insists Shelp.
"This [the bonuses] will allow AIG to stop losing money on derivatives and related products and get out of the financial units business that wrecked the company."
Not so fast, says the Obama administration. Moves are now afoot to "claw back" the bonus money.
Treasury Secretary Geithner told Congress in a recent letter that he planned to recover the cash through a provision of the stimulus law which allows recovery if the payments were "inconsistent with the purpose of TARP" or "contrary to public interest."
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