AIG - QUESTIONS AND ANSWERS

Surely, someone (Paulson or Geitner?) should have known about the compensation contracts that has resulted in this bonus mess and required their unraveling before the bail out money was released. Negotiation: The employees could well have been persuaded to negotiate because of the alternative might have been bankruptcy and loss or drastic reduction of bonuses.

It is a mess and an embarrassing distraction for the Obama administration. It is, however, important to realize that these sordid payments total a relatively small sum when compared to aggregate bail out money. Also, the bail out is not really forAIG but for the counterparties to is unwise insurance contracts, and for the financial system as a whole. The government owns 80% of AIG so the stockholders have been losers. (But why not 100%?)

Negotiation: It seems that the counterparties are getting full payment under their contracts. Why? Reductions would be in order given that otherwise they could be dealing with a company in bankruptcy.

I don't know if these contracts can be broken, but I would say let them sue for their money. Wouldn't incompetence and causing company ruin be a defense?

Question: Much is being made of the mysterious deletion of a legislative provision that, it is said, would have prevented unreasonable bonuses. But, according to what I've seen in the media, all this provision did was to tax at 35% bonus compensation in excess of $100,000. But wouldn't such a bonus, on top of a salary, already be taxed at this rate?

A related point. Many say, and it is true, that Wall Street contracts are being treated differently from blue collar union contracts in Detroit. And that is unfair. The difference is that any individual contract makes little difference whereas the requested changes in the union contracts may well save thousands of jobs.