Why Are AIG’s Contracts Sacrosanct But Not Union Workers’ Contracts?

[one...two...tree 2,762]

Yesterday on ABC's This Week, Larry Summers, head of President Obama's National Economic Council, called insurance giant AIG's plan to pay out $165 million in bonuses "outrageous" but insisted there was little the government could do about it. This despite the $170 billion in taxpayer funds that have been given to AIG. Summers cited the sanctity of contracts:

SUMMERS:

We are a country of law. There are contracts. The government cannot just abrogate contracts.

Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system.

Summers said that efforts by Treasury Secretary Tim Geithner had successfully "scaled back" the bonuses, but AIG chief Edward Liddy, defending the bonuses, told Geithner, "quite frankly, AIG's hands are tied."

Of course, not all contracts are sacrosanct. When Detroit's Big Three arrived in Washington last year to plead for federal bailout funds, the right wing demanded that the United Auto Workers ignore their contracts and accept "steep cuts in pay and benefits" — on top of the cuts they already shouldered in 2007. The UAW agreed to "make major concessions in its contracts," acceding to most of the right's demands:

UAW President Ron Gettelfinger emerged from the meeting to say the union would rework a retiree health care trust fund, eliminate the union's maligned jobs bank program…and cut additional measures that would loosen the union's trademark job-security protections.

Along with other commenters, the American Prospect's Robert Kuttner pointed out the government's double standard on contracts, telling George Stephanopoulos yesterday, "You don't think when the auto workers come in as part of the auto rescue deal, they're not being asked to abrogate contracts? Of course they are."

http://thinkprogress.org/2009/03/16/aig-sacred-contracts/

[Niels Bohr 72]

I have to agree with the right on this one.

As much as they have look down upon using tax payers' bailout as bonuses, the politician themselves have also pocketed pay raise, and bonuses. A double standard. I am against Barney Frank, and Gov. Deval Patrick on taking bonuses and pay raises after they themselves have lobbied toward bailed out companies not to take bonuses and pay raise. It's not right.

[peejay 327]

Crunch the numbers and figure it out for yourself. Billions vs millions.

[Niels Bohr 72]

Crunch the numbers and figure it out for yourself. Billions vs millions.

AIG has no choice but to take the lesser of two evils. If they denied the bonuses which are part of the contract, then, they'll get lawsuits that costs them more than 1 billion dollars I bet.

I'm just mad at those Dems who pocketed bonuses despite disapproving gov't bailouts used as bonuses.

Edited March 17, 2009 by Niels Bohr

[Trompe le Monde 1,107]

I don't think AIG would be getting bonuses if the government let them go under

quite amusing AIG's definition of "best and the brightest"

[Heracles 417]

Since we the taxpaers are the shareholders of the company, we should use our government resources and pull a Litvinenko on some of these guys.

[Pooky 3,794]

AIG's bonuses are sacrosanct because Geithner f***ed up and didn't tie their hands when he was working out the details of the bailout. Since the President's pick for Treasury Secretary received the lion's share of the credit for negotiating the $165bn deal, it would seem a bit petty to say "Oops, I made a mistake, can we stop paying executives their bonuses?" now.

How long has Geithner got? Can Obama afford to admit he was the wrong man (as should have been evident from his tax history) and fire him?