A.I.G. plans to let their $78 million sponsorship of Manchester United, which includes jersey-naming rights, expire in 2010.
First, let me stipulate that I actually received a bonus from my employer this year. That's really saying something, because not many people did.
I concede that it may have been obnoxious for me to have gotten a bonus when some other people on my team were being laid off, but that's the way corporations work these days. They operate on Darwinian principles that let the devil take the hindmost. Those already being rewarded the most get rewarded with more, and those appreciated the least get shown the door. If I stick with them, though, it's only a matter of time before they eventually whack me too. There are fewer and fewer people left on the rungs of the ladder below me to get devoured.
In any case, my employer still made money last year, and they didn't take any TARP money from the federal government. I'm sure I don't have to remind everyone what's been going on this week with insurance giant A.I.G.
AIG has received $170 billion in taxpayer bailouts and in the fourth quarter of 2008 posted a loss of $61.7 billion, the greatest ever for any corporation. Despite this, AIG announced that they were paying out $165 million in executive bonuses out of taxpayer funds. Total bonuses for the financial unit could reach $450 million and bonuses for the entire company could reach $1.2 billion. This quickly led to what many label a "populist outrage."Populist outrage... That may be putting it very mildy.
This is truly an amazing thing. After the first A.I.G. bailout, we all heard the stories about the executive junket to a California spa, which was even mentioned in the presidential debates. There have been at least two other additional A.I.G. bailouts, one of them coming after they lost nearly $62 billion in the 4th quarter of 2008, the worst quarterly loss ever reported by a corporation in the history of the world. Nevetheless, more reports trickle out about paid executive hunting trips to England and a trip to a resort in Phoenix. English bloodsports, eh? They ought to consider substituting some of those executives for the foxes.
I'm kidding, of course...
They say that Congress can't do anything about these bonuses because they are written into legal contracts. My understanding is that six of the recipients will be getting over $1 million, and that most of the 370 or so recipients are in the financial unit that actually tanked the company.
What I want to know is, where can I get in on a deal like that? I bet I could run a company into the ground just as well as one of these guys. Heck, I bet I could do it much faster and with more finality. Man, these executives with their parachutes and "pay-for-performance" deals that translate into "heads I win, tails you lose" are really something, aren't they? They sure take good care of each other. What kind of a contract allows you to pull a guaranteed bonus even when you post up the worst losses in corporate history? Would these bonuses have been paid out "contractually" if A.I.G. had actually gone out of business? As a taxpayer and an "owner" of A.I.G., I object to all this.
We've often heard this current economic crisis being compared to the Great Depression of the 1930s. Most commentators think it won't get that bad. I'm not so sure of that. Both collapses had more to do with the collapse of credit markets than with the collapse of the stock market. The credit markets are still a mess, despite all the money that has been poured into them... Furthermore, in the 1930s we still had the infrastructure for the world's strongest industrial economy, despite everything else. We still used to make things in this county back then. We also had a population that wasn't very affluent to begin with, and had a greater sense of solidarity. Most people were already used to dealing with hardship, and they knew how to stick together and help each other out.
Speaking of the bonuses and of the 1930s reminds me of...
The Bonus Army, 1932
After World War I, the federal government promised returning veterans that a grateful nation would pay $1,000 bonuses to their families, either in 1945, or upon the death of the veteran in question.
By 1932, the Depression had reached its greatest depths, and desperate WWI vets started asking the government to pay out those bonuses now rather than later. Congressman Wright Patman of Texas introduced a bill to Congress to that effect. In the meantime, vets started pouring into Washington DC in order to let their voices be heard. They set up a sort of squatters' village encampment near the Capitol.
The bill passed the House but was defeated in the Senate. The "Bonus Army" refused to pack up and leave. A nervous Herbert Hoover began to fear a potential revolution. He wanted the Bonus Army dispersed... In one of this country's most shameful episodes, the Army chief of staff, General Douglas MacArthur, donned his decorated uniform and showed up on horseback, leading his troops to push the veterans out by bayonet-point and to burn the shacks and tents in the encampment.
The late David Halberstam took up the story in his book The Coldest Winter:
At a meeting with top civilian and military advisors, including MacArthur, the Bonus Army leaders asked for permission, if the Army were to enter their little encampment, to march out in proper formation and with some measure of dignity. "Yes, my friend, of course!" MacArthur answered...
The orders to end the protest came down from Hoover himself. Dwight D. Eisenhower (MacArthur's aide), not wanting the Army too closely associated with what was sure to be, even if carried out skillfully, an odious political act, tried to keep MacArthur somewhat in the background...
Eisenhower was appalled when he realized that MacArthur intended to show up on location to lead the forces of suppression personally. Both he and MacArthur had arrived at their offices that morning in civvies. MacArthur promptly sent Eisenhower home to get his uniform and dispatched his own orderly to his quarters to get his - the one with all the decorations. Eisenhower argued valiantly that this would be a mistake, that a terrible stench would arise from it ("I told that dumb son of a bitch he had no business going down there. I told him it was no place for a chief of staff," he later said). The chief of staff, who often spoke of himself in the third person, replied, "MacArthur has decided to go into active command in the field." Then he added, "Incipient revolution is in the air." Eisenhower suggested that if both of them had to visit the scene, they should at least do so out of uniform. MacArthur vetoed the suggestion.
So off they went in full uniform to meet the Bonus army. Their orders from the secretary of the Army were quite specific. Hoover wanted the marchers tamed, but he wanted no riot. The suppression of the protest should be as restrained as possible. The Army troops were not to cross the river or go near the largest encampment of veterans, on the other side of the river. Eisenhower later recounted how he had told MacArthur that there was a messenger there with specific orders from the president. "I don't want to hear them and I don't want to see them. Get him away," MacArthur answered. He had decided that if he did not receive them, there would be no need to act on them, and thus no limits set to his movements. The river would be crossed, the encampment destroyed...
It was a devastating political moment for Hoover...
For millions of ordinary Americans, who in hard times sympathized with the marchers, it was a defining moment; MacArthur became forever in their minds the kind of military man who abused the rights of ordinary people, a man who was never to be trusted politically and was too militaristic...
He had made himself, however, the favorite general of a formidable, increasingly frustrated constituency that resented almost every initiative taken during the New Deal.
This was three months before the 1932 elections. Hoover was finished.
What do these bonus stories have to do with each other? In the midst of both these crises we can see that some people just seem to matter more than others. The government in 1932 wasn't able to deliver a bonus to alleviate the suffering of veterans, and it appears that the government in 2009 may not be able to stop the bonuses of the wealthy and powerful while others suffer as a result of their decisions.