AIG and spending

The American government should take full responsibility for this economic downturn. They should have better regulated the financial sector, so that if one company failed the whole financial system failed. The government has placed too many eggs in one basket, and in return is paying the price for it. The stock market is plummeting almost everyday, due to a lack of investor confidence.

When you invest $170 billion as a federal bailout into one company you are very committed to that investment. It seems like the government just handed over the money to AIG without any regulations on how it should be used. Why is this if they continue to do what got them in financial distress in the first place.

The $165 million in paid bonuses was part of a larger total payout valued at $450 million. Although AIG reportedly lost $61.7 billion for the fourth quarter of last year (the largest corporate loss in history), the financial products division felt this bonus was needed as compensation for their good work. Most of AIG’s losses came from the financial products division, which sold risky credit default swaps. If AIG was contractually obligated to pay these bonuses, future bonuses should directly account for the performance of the company. By giving these bonuses it has hurt the public’s image of the company, and because of this customers will shy away from doing business with AIG in the future.

So why should taxpayers pay to bailout a company that is so focused on greed, that it lacks the sense for what it right or wrong. Why would you even accept a bonus, when you know that your company isn’t doing well and that it received money from the government in order to survive.

With this said taxpayers should have a say in where bailout money should go, instead of the government investing in companies that could eventually fail (AIG and GM). In order to survive both companies need to restructure and have more regulations. With these two companies being in the news so often, we are depending on them to get us out of this economic crisis. However, I feel that the public’s perception of these companies hasn’t changed and AIG and GM will have trouble recovering.


Links:http://www.foxnews.com/politics/2009/03/16/lawmakers-target-aig-executive-bonuses/