A Modest Proposal For AIG

By Marc Ambinder

AIG claims that it promised bonuses to its derivative traders and that it can't break its contracts. Sounds like AIG is using legal formalism to avoid a messy court fight. Contracts, like promises, are often broken when premises change. Financial products brought the firm down; why hasn't AIG informed the people in that unit that if they want their bonuses, they're going to have to sue to get them?

In other words, if the collapse of the company is an insufficient condition on which to base the breaking of a contract, then the contracts themselves aren't worth anything to the company.

What's the worst that could happen?  The "bad guys" -- the derivative traders -- would take AIG to court. But forcing the traders to sue for the money they don't deserve turns them into the villians here, as they'd be named plaintiffs. In all likelihood, AIG would, at some point in the future, settle many of these lawsuits, but not until a good number of the plaintiffs were shamed to the point of dropping a chunk of them.

This article available online at:

http://www.theatlantic.com/politics/archive/2009/03/a-modest-proposal-for-aig/1529/