Sunday, March 15, 2009

AIG to pay $165 million in bonuses

By Creature

I understand the systemic risks, I understand the legal reasoning, but giving bonuses to the exact people who took the entire world economy to the brink is ludicrous. With the taxpayers' $170 billion investment in AIG, do we not have have the power to simply spin off and destroy the Financial Products division of AIG (again, the group that made these bad deals and are receiving the bonuses) and leave the well-run insurance division intact?

Larry Summers today reminded us that we must respect the law and the weight these contracts (which provided for these bonuses) have. Yes, we must preserve, respect, and not set new precedent for the abrogation of contract law in the future, but these are novel times and any precedent set by breaking these contracts would certainly be limited to the extraordinary circumstances under which they were born (and hopefully destroyed).

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