Despite outrage, AIG bonus fiasco could happen again

[OhioChick]

20 Feb 2010, 0451 hrs IST, REUTERS

WASHINGTON: To many Americans, it's a matter of common sense: traders who failed so spectacularly at their jobs that they nearly brought down the global economy should be fired, not rewarded with handsome bonuses.

Yet AIG, the fallen insurer, paid out an additional $100 million this month, much of it to the very financial products division whose rampant risk-taking took the firm to the brink. And there's another $75 million coming.

So far, the government has yet to enact concrete steps to prevent it from happening all over again.

Regulators still lack the authority to wind down large financial firms, and the private sector continues to use compensation contracts that preclude renegotiation when performance sours.

Treasury Secretary Timothy Geithner has called on Congress to pass a tax on financial institutions, which he says could be used to help recoup the money.

But experts say this approach ignores a key lesson from the crisis: the need to ensure that contracts for executive pay are written in such a way that encourages prudent behavior and accountability, not unabashed risk-taking.

More: http://economictimes.indiatimes.com/news/international-business/Despite-outrage-AIG-bonus-fiasco-could-happen-again/articleshow/5595206.cms

[aquart]

1. "Could"?

There is NOTHING to prevent it.

[theoldman]

2. Actually the big banks on Wall Street are not much different from other companies.

The CEOs get paid big bucks regardless of whether the company makes or loses money. The stock holders have very little if any power over the board of directors. I don't know of any way that the government can change the situation.

[depakid]

3. The Obama administration's already signalled that even if this is "not OK" -they'll do nothing

to stop it, other than a finger wagging every now and then.

So why wouldn't they and everyone else just keep on as they've been doing?

Same holds true for the health insurers, big PhARMA and the corporate media.

And the next batch of torturers once the administration's out of office.

[OhioChick]

4. I love your pic in your sig line...

:)

[depakid]

5. Would that there were more of us...

The nation wouldn't have gotten into the mess its in- and Republicans would still be relegated to the fringe, rather than on the verge of knocking Democrats out of their majorities in Congress.

[OhioChick]

6. You're absolutely right. n/t

[Demeter]

7. AIG Is NOT a Company, It Is Government Owned

and the Government is permitting these bonuses. Because Ben, and Timmy, and Larry the Cable Guy, all made men of Goldman Sachs, have decreed it shall be so.

[heli]

8. It will happen again

They're making sure of it.