There is a lot of fuss over the fact that AIG is paying millions in bonuses while receiving billions in bailout, but I'm not sure I understand the commotion. Or at least I still want much more information. Here are the big facts thus far (drawn loosely from the Times, Post and Journal):
1. AIG is paying several hundred million dollars in bonuses to executives and members of its financial products unit (the exact number varies), and roughly $1.2 billion in total bonuses.
2. Some portion of these payments, if not all of these payments, were agreed upon in early 2008, before the bailout. AIG's lawyers have advised that they are contractually binding.
3. Timothy Geithner is upset about the state of the bonuses and has put pressure on AIG's CEO, Edward Liddy, to adjust them downward.
4. Liddy and Geithner had an awkward conversation.
But it seems to me that it's only worth getting upset over the AIG bonuses if there are clear answers to the following:
1. How do these bonuses compare to previous years and other firms? (Are AIG executives being paid less or or more than in previous years? And are they being paid less or more than executives at other firms?)
2. Are these bonus payments actually contractually binding? What happens if those contracts are broken?