"We cannot attract and retain the best and brightest talent," AIG says, unless they pay those bonuses — $165 million. Barney Frank had the best and brightest reply: on the Rachel Maddow Show Monday night, he said: "I don’t want to retain them."
He’s talking about the people at AIG who brought down the company and then the financial institutions and then the rest of the world economy. "If you are trying to undo mistakes," Frank said, "it‘s very often not a good idea to keep the people who made the mistakes in there."
But that $165 million is only the latest in outrageous payments to "the best and brightest" talent at AIG. The disaster was rooted in AIG’s Financial Products Group in London. In 2008, when the unit was collapsing, "they were still paying the head of the unit a consulting fee of $1 million a month," according to Gretchen Morgenson of the New York Times, interviewed Monday on "Fresh Air with Terry Gross."
That man’s name, for the record, is Joe Cassano. He left AIG a year ago, and these days he is not giving interviews; Morgenson said he is "lawyered up."
And the claim that AIG needs to pay bonuses to the people who brought the company down is only the latest in outrageous arguments. AIG was collapsing because it didn’t have sufficient capital reserves to pay the insurance claims on the risky financial instruments it insured. Normally insurance companies are required to have sufficient reserves to pay claims, but the people AIG was insuring against loss — Deutsche Bank, Barclays, BNP Paribas – did not require it to put aside any reserve for future potential losses, Morgenson reports. That’s because AIG had such a high credit rating from Moody’s and Standard and Poor’s.
But when people have tried to sue the rating companies for incompetence, Morgenson told Terry Gross, the companies claimed their ratings are "opinions, just like a newspapers opinions," and "are therefore protected by the First Amendment." The courts thus far have accepted that argument.
The Obama Treasury Department apparently has accepted AIG’s argument that it is contractually obligated to pay the bonuses – because the government cannot order a private company to break its contracts. Barney Frank had a good idea: the government wouldn’t have to order a private company to break its contracts; the owners of the company could do that. "I want the American government to assert its right of ownership in this company," Frank told Rachel Maddow. "We own 80 percent. We should run the company."