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aig-benefits-of-the-bailout

After much pressure from the United States of America’s taxpayers and government, the insurance giant American International Group (AIG) finally disclosed the names of the financial institutions that benefited from the fall bailout. Among the names were the likes of Goldman Sachs, Merrill Lynch, Deutsche Bank, Barclays, among others. These companies received indirect multi-billion dollar payments from US taxpayers.

Aligned with the actions of other financial executives’ actions in the past 18 months or so, AIG’s leaders (including chief executive Edward Liddy) have been criticized for taking irresponsible risks on investments based on dodgy credit derivatives. Federal Reserve Chairman Ben Bernanke has been quoted on the issue as saying: “Here was a company that made all kinds of unconscionable bets. Then, when those bets went wrong, they had a — we had a situation where the failure of that company would have brought down the financial system.” Not only has it made grand payments to financial institutions it was indebted to with taxpayer money, AIG was recently discovered to be rewarding their executives with multi-million dollar bonuses.

It is appropriate to say that not all of the executives receiving bonuses at AIG are responsible for the current state of the insurance company. The innocent executives may have been completing fantastic work over the past 18 months and should be rewarded in some way. But the fact of the matter is that the company does not have the funds to do so. After reporting a recent historical US corporate loss, AIG is a failing company in a turbulent economy. With many Americans out of work and tons of other companies struggling to pay their employees average salaries, it simply isn’t on the cards for any AIG executive to receive a bonus from US tax dollar funded subsidies. This may serve as a major lesson for the US government, that bailout packages are not always in the best interest of the citizens, the economy, or the government. When companies receive money they have not earned, they will dispense the funds as they feel is appropriate for the company, not what politicians think is best for the economy.