The AIG bonus scandal gives new meaning to the phrase "toxic assets." In this case, the dubious assets are American International Group (AIG) executives and key employees who are deemed essential as the company tries to dismantle the complex financial derivative schemes that helped push the world in an economic maelstrom. The fact is, these bonus recipients include the very folks who crafted the schemes; many of them have since left the firm, and now they're being rewarded with millions of dollars, courtesy of the taxpayers.
AIG is starting to find out just how toxic that set of circumstances might be.
The Washington Post reported this week that the company has had to post guards at its Connecticut offices as angry phone calls and e-mails - even death threats - flood in. Some employees, fearing for their safety, have resigned or simply not shown up for work.
The public and the politicians are screaming mad, and with good reason. They want to rescind the bonuses, although the Obama administration professes that such a move is not likely. The experts say the negotiations to revise the contracts - and the lawsuits that would ensue - could cost twice as much as simply paying out the bonuses. It seems the AIG whiz kids were as good at their own contract negotiations as they were at risky derivative investments.
To be sure, the tab for the bonuses - $165 million for this round - is small compared to the overall AIG bailout tab of $170 billion so far. That's not likely to ease the heartburn among people who have lost their jobs, their homes, or their retirement funds in the economic crisis. To a growing number of people, AIG personifies the greed that brought our financial system to its knees.
The irony is that 'we the people' are now invested in AIG, and its tentacles still stretch deep into the corners of the financial world, affecting the stability of many other institutions. Yet if the financial giant is counting on that interdependence to bring it through the bonus scandal, it may be sorely disappointed. A growing cross-section of the public is out for blood in this case, and they may not care if they wing themselves in the foot while taking aim at AIG.