There are a lot of people who are really mad about the AIG bonus situation. While I agree that it is pretty laughable that people who managed to bankrupt AIG think they deserve some kind of bonus I think that this is distracting a lot of people. Lets take a look at the situation.
AIG supposedly received $170 billion in bailout money. It gave out $160 million in bonuses to a number of executives. First lets do a little math. Sure $160 million sounds like a lot of money to the average person on the street who will see less than $50,000 per year and will probably never have a net worth of even 1% of the bonus amount. But when you start dealing in billions and trillions; millions are not that much. 160 million is but 1/10 of 1% of the total bailout money that AIG got. divide 160,000,000 by 170,000,000,000 and multiply that number by 100. That would be .094117%. To put that in perspective That would mean if I gave you 100 bucks and you had to bonus someone out of that you'd be giving them $1 buck. And even that would be too much.
So in terms of the amount of capital we're talking about this is a drop in the buck. But we have another interesting thing here. Since this is realized income (taxable) these execs will be subject to Federal, State and City taxes on that windfall come 2010. So it's likely that 30% of that $160 million is coming back to the treasury. That's 48,000,000 leaving $112,000 more or less in actual expenditure (say 70 cent on every 100 bucks loaned out).
Now personally if I were one of those execs I would be more concerned with the attention my assets were going to receive by the IRS than with the bonus. I bet that if the IRS looks hard enough there is going to be evidence of tax evasion found in some of these execs. You don't run the kind of scam that AIG's financial arm was running and not try to put one over on the IRS as well. So if I was one of these execs I would turn down the money simply so that I could avoid the IRS getting in my financial business. Anyone who has dealt with the IRS knows they can get very grab happy.
But even so this whole bailout is simply a distraction. The big news that came out was how AIG had to pay on policies to banks out of the bailout money given to them. So in essence the institutions that were AIG clients got taxpayer money via AIG. I believe that was some $43 billion. That number is way larger than the mere $160 million the AIG execs got. Can we say 268 times larger? The NY Times has a list of institutions that it paid tax dollars to,
Bank of America received another half billion bucks of tax payer money via AIG among other institutions, some not even so called "American." I use the term loosely because anyone who still thinks of these large institutions as somehow beholden to or could give a damn about "Americans" is in complete denial. So don't let yourself get distracted by the small payout to some rogue execs at AIG, that's like worrying too much about the pawns on a chess board and neglecting to notice that your king is being cornered.
(17 years of informed commentary)