Throughout much of the last week, the U.S. media has been obsessed with the bonuses that American International Group (AIG) was planning on paying its executives. Corporate bonuses are regularly scrutinized by the media as a way of the richer getting richer, but these carry with them special weight due to the fact that AIG has received over $170 billion in government bailout funds due to the financial crisis that began last September. With bonuses over $100 million set to be rewarded to executives who have been ridiculed for their incompetence during the crisis, the American people are outraged that some of their taxpayer dollars may go to filling the pockets of Wall Street executives as opposed to people who are without employment or who might lose their jobs in Detroit’s automotive plants.
The government response to the AIG debacle has been one of backtracking on initial promises and overreactions with hurried through Congressional legislation. Chances are that when the dust settles and smoke clears, much of the bonuses will not be paid out. Yet this incident has caused the American public to lose more trust in the ability of the federal government to resolve the financial crisis appropriately and has been a public embarrassment for the Obama administration.
Considering these ramifications, this brief will break down why AIG’s is in such bad financial shape, the response of Washington and the American people to the bonus payments, and what implications these bonuses will have for the American economic and political scene.