Those AIG bonuses: how to break the contracts
So Obama tells Geithner to do something, anything, to make sure the gov can get back the AIG bonuses. Who knows if this is real or a pose? I’m now leaning towards the latter, especially after getting this from a friend who works at a hedge fund:
In the financial industry, reneging on contracts is, not quite SOP, but certainly not rare. From the company’s perspective, two things can happen. One, the employee eats the default. Free money. Two, he (more rarely, her) has a lawyer call you. At that point, you have the option of saying, oh yeh, my mistake, here’s the money. If you don’t, the employee may or may not sue you. If he does (and it is a tremendously risky proposition for him), you can always cave in right there, and you end up no worse than before.
Also, there is always the option of firing the guy for cause, which almost always negates the guaranteed payout. If you rummage through his emails, chances are you will find something that you can show the judge. Maybe he went shopping during company hours, sent an off-color joke, whatever.
I really don’t know whether they are bullshitting or just plain weak. My bet is the former.
Yeah, the sums involved are small change in the context of this enormous bailout, but still, what a symbol this is. Bonuses to retain a gang that drove the company into the ditch, and threaten to take the rest of us with them? Acting powerless despite an 80% ownership stake? Reluctant to stomp on toes and twist arms to remain “market friendly”? The excuses just aren’t credible anymore.