The Crotchet’s Corner

My perspective about all things inconsequential

Are they all guilty??

American International Group (AIG) was the world’s 18th largest public company according to the Forbes Global 2000 list, and was the largest insurance company in the U.S. One of the most prominent companies to be affected by the economic meltdown. AIG reported a whopping $61.7 billion loss in the first quarter of 2009.

 

A significant part of the company’s business came out its London office, and about half of the company’s employees work in Asia. The main centre for AIG’s credit-defaults swap business, that nearly doomed the company, was the financial products office in London.

 

The U.S. Government, using public funds, has bailed out the ailing company through infusion of over $ 150 billion and acquisition of almost 80% of its shares.

 

No surprise, then, that there was widespread outrage and indignation when AIG paid out $ 165 million as bonuses to some of its senior executives – 73 of whom got in excess of $ 1 million each.

 

The U.S. Treasury Secretary, Timothy Geithner, has said that AIG would have to pay back the $165 million, as lawmakers debated ways to make the executives pay back the bonuses or face public revelation of the their names.

 

It now appears that some of the senior executives have decided to pay back their bonuses amounting to around $ 50 million, and it is expected that a total of $ 80 million might eventually be returned. But considering that approximately $ 85 million was paid to executives working outside the U.S., a major portion of this amount might not be returned.

 

Viewed in totality, it would appear that paying such fat bonus is a travesty, and makes a mockery of the efforts put in to bail out companies using public funds. However, not all recipients of the bonuses are connected with the devastating meltdown of the financial products business, and, therefore, not guilty of undermining the system.

 

Jake DeSantis, an executive vice president of AIG’s financial products unit has decided to quit, and wrote a detailed letter Edward M. Liddy, the chief executive of company. He has decided to return almost all his post-tax bonus amount. Not to AIG, though.

 

Go to http://www.nytimes.com/2009/03/25/opinion/25desantis.html?_r=1 to read this letter – it’s interesting.

 

The financial system worldwide is in such a huge mess. Hard to tell when things will rebound.

 

The sheer greed of some individuals and institutions has caused so much agony for millions of innocents. There are many who feel that companies that acted irresponsibly should be allowed to sink, and not receive bail-outs. That is a narrow view, though. For, this will only erode confidence further, and place untold more millions of people, worldwide, in jeopardy.

 

All we can do is to pray that things turn around … and soon!!!

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March 26, 2009 - Posted by | About this and that | , , ,

3 Comments »

  1. Hello!
    Very Interesting post! Thank you for such interesting resource!
    PS: Sorry for my bad english, I’v just started to learn this language 😉
    See you!
    Your, Raiul Baztepo

    Like

    Comment by RaiulBaztepo | March 31, 2009 | Reply

  2. Hello !!!! 🙂
    My name is Piter Kokoniz. oOnly want to tell, that your blog is really cool
    And want to ask you: what was the reasson for you to start this blog?
    Sorry for my bad english:)
    Thank you!
    Your Piter

    Like

    Comment by PiterKokoniz | April 8, 2009 | Reply

    • Thanks for your comment. Much appreciated. I started this blog to share my views with others, and if I this has happened, and others have read what I have to say, my purpose has been achieved.

      Do vist my blog again, and read updates.

      Like

      Comment by Crotchet's Corner | April 9, 2009 | Reply


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