What's wrong with this picture?

Seems the folks at AIG have found something to do with the money that American taxpayers have kindly given them:

American International Group Inc., whose bonuses and perks drew fire from lawmakers after the insurer accepted a federal bailout, will make special retention payments that more than double the salaries of some senior managers, according to a person familiar with the matter.

Some executives among 130 recipients will get more than $500,000, about 200 percent of their salaries, to stay through 2009, said the person, who declined to be named because the information hasn’t been publicly disclosed. An undetermined number of lower-paid employees will also get cash awards to dissuade them from quitting, the person said.

“It seems like more than what you’d need to pay to get people to stick around,” said David Schmidt, a senior consultant at executive pay firm James F. Reda & Associates. “Nobody’s hiring, so where are you going to go?”

Chief Executive Officer Edward Liddy is encouraging top employees at AIG subsidiaries to remain so the units retain their value while he seeks buyers. The New York-based company is selling businesses, including its U.S. life insurance and retirement services operations, to repay loans in a $152.5 billion government rescue of AIG, which had a record $37.6 billion in net losses so far this year.

From Bloomberg. They don't blush easily, do they?

More comments on the financial crisis

Heather Mallick has this to say about the current crisis:

"The cost of a funeral can be more than $10,000," American International Group was telling – OK, threatening – Canadians in a TV commercial on the same day the memorial service for its U.S. parent was held courtesy of the Bush administration. The cost of the funeral for the world's biggest insurer was $85 billion. Even as they expired, the insulated Canadian branch that shares the AIG name was trying to sell low-income Canadians insurance to pay for their own coffins.

These huge, shambling gambling firms haven't caused enough trouble for their sentient customers; now even the corpses are headed for a pauper's grave.
But what does one say to a fallen giant? Shame on you? You Lehman boys go straight to your rooms and think about what you've done!?

So the Lehman lads are weathering it out upstairs because they didn't technically do anything wrong and they won't suffer. They created jewels out of old chunks of sewer brick and played them in a casino. The laws that sent Conrad Black to jail were ye olde obvious ones that anyone would have been a fool to break. What Wall Street did en masse was greedy and stupid, but there are no rules against that. Quite the contrary: everything in our modern ethos encourages it.

Some people find Mallick irritating, but she definitely has a way with words.

And as to how to pay for such a huge bailout, independent Senator Bernie Sanders (from that island of civilization, Vermont) has some ideas:

Amid one of the worst financial crises in American history, Senator Bernie Sanders (I-Vt.) today laid out a four-part plan to cope with the collapse of financial institutions and avoid future failures of businesses “too big to fail.”

First, Sanders proposed a surtax on the very wealthy to pay for bailouts of Fannie Mae, Freddie Mac and American International Group.

“The wealthiest 400 families in America saw an increase in their wealth of $670 billion since President Bush has been in office. They have seen extraordinary benefits under Bush’s reckless economic policies. The middle class, whose standard of living has declined, should not be paying for these bailouts. Rather, we need an emergency surtax on those at the very top in order to pay for any losses the federal government suffers as a result of necessary efforts to shore up the economy,” Sanders said.

He has other ideas too, notably this:

Third, he said giant businesses like Bank of America should be broken up so no company in the future could bring the American economy down with it. Said Sanders, “This country can no longer afford companies that are ‘too big to fail.’ If a company is so large that its failure would cause systemic harm to our economy, if it is too big to fail, then it is too big to exist.”

Thanks to Atomicat for the link.

Since when did the right like to nationalize corporations?

When they realized there was no choice, it seems:

American International Group will get an $85 billion bridge loan from the federal government in exchange for an 80 percent stake in itself, sources have told CNBC.

Sources said the loan, which will allow AIG to avoid bankruptcy, will be secured and include incentives for quick asset-sales by AIG.

Government warrants for most of AIG’s equity will severely dilute existing shareholders.

AIG has been racing the clock to avoid a bankruptcy filing on Wednesday, making efforts to work out a deal with the Federal Reserve to shore up its finances.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke met with Senate and House leadership Tuesday night to discuss how to assist AIG, sources said.

The Fed's financial aid to the troubled insurer marks a reversal of its decision on Monday to refuse a bridge loan to AIG.

The Fed met with the company's advisers throughout the day and came to a better understanding of what is needed to help the company through its current crisis, people familiar with the negotiations told CNBC.

From here, via The Outback Oracle at iTulip. Don't get me wrong; there may not have been any alternative. It's funny, though, how laissez-faire capitalists are suddenly willing to socialize losses. Of course, if and when AIG returns to profitability, the US government will probably sell it off rather than keep it as a source of revenue. After all, it wouldn't do to have an example of how continued public ownership could be good. Instead, the American taxpayers, having absorbed the enormous losses, will be spared the indignity of actually turning a profit later.

In any case, one does have to ask one thing. How long can they continue doing this? If they keep bailing out every company that's too big to fail, they'll have to do one of three things -- raise extra revenue through taxation, cut back on spending on other things (such as their military adventures overseas) or run the printing presses like crazy. The first two would be the best policy of course, but somehow I suspect the third will be the way they actually do it. Of course, such a policy is insanely inflationary, but they may be hoping that other countries will devalue their own currencies so the Yanks can keep buying what they're selling. Unfortunately for them, this won't continue indefinitely.

And, in spite of everything, the prices of gold, silver, and other traditional hedges against inflation remain fairly reasonable. If you can afford to, consider buying them while you can; things might get exciting quite soon. Like, any time after the 4th of November.