re: #669 Sabnen

[Link: news.yahoo.com…]
(Liddy is the go-between AIG and the government, overseer in a tough position …)

In a letter to Geithner dated Saturday, Liddy informed Treasury that outside lawyers had informed the company that AIG had contractual obligations to make the bonus payments and could face lawsuits if it did not do so.

Liddy said in his letter that “quite frankly, AIG’s hands are tied” although he said that in light of the company’s current situation he found it “distasteful and difficult” to recommend going forward with the payments.

Liddy said the company had entered into the bonus agreements in early 2008 before AIG got into severe financial straits and was forced to obtain a government bailout last fall.

The large bulk of the payments at issue cover AIG Financial Products [with Offices in London], the unit of the company that sold credit default swaps, the risky contracts that caused massive losses for the insurer.

[Link: www.washingtonpost.com…]
More than $34 billion of the money went to trading partners of AIG Financial Products, the small subsidiary whose exotic derivatives brought AIG to the edge of collapse. In recent years, the firm had written massive numbers of credit-default swaps, insurance-like contracts that other companies bought as protection against the default of mortgage-backed securities. When the housing boom began to go bust, banks that had purchased the swaps demanded collateral from AIG, burying the company under a tidal wave of debt.

So, if the bonuses are going to the people who gave the company big losses, either they should be able to find a loophole to deny them, OR it should come out of the pockets of the people who wrote a contract that allows bonuses for losses.