March's Trip to the Perspective Store

Greetings from the Left Coast, where we here at Left Coast Blues do the heavy thinking for those who just can’t be bothered.

Golly, the government, from President Obama on down, are sure twisted up about the fact that AIG actually honored their contractual commitments to employees who were due “retention bonuses.” The grandstanding is over the top. Congress is looking for ways to actively punish the employees who received those bonuses. Harry Reid and Chuck Schumer are breathing out personal threats against them.

Did anyone ever think that maybe, just maybe, some of those employees actually deserved the bonuses? That things would have been worse if they hadn’t done whatever they had to do to qualify for their bonuses? Of course not – not when there’s political gain to be had in demonizing the evil corporate giant.

Here’s the thing: AIG is a gigantic company. You probably can’t even imagine how gigantic it is. At the end of 2007, according to their annual report, they had over $1 trillion in assets. Yes, they lost roughly $38 billion dollars in 2008, according to the “adjusted net loss” number publicly available on their Web site. Honest people can differ on whether they were truly in danger of failing as a result of this loss – because by my calculations that would still leave them with about $962 billion in assets – or whether any business should be viewed as “too big to fail,” but the bottom line was that the government invested somewhere around $170 billion of your money to make sure they didn’t.

The bonuses that everyone is so twisted up over totaled about $165 million. That may sound like a lot, but it’s only one tenth of one percent of the $170 billion the government pumped into them. And it’s less than two one-hundredths of one percent of their remaining assets, if my calculations are correct.

And have you noticed that you’re not hearing much about how many people received bonuses? If you do a little digging, you’ll learn that 73 people got $1 million or more, and the top recipient got $6.4 million. But we don’t know how many people overall were in that bonus pool. What we do know is that if companies are forced to break their contractual obligations to their employees, it’s going to make it more difficult for them to find the quality employees they’ll need to succeed in the future.

This should also point out, to other CEOs, the dangers inherent of taking money from the government –you can no longer just tell them to go pound sand when they start telling you how much you should pay your employees.

Thanks for listening.