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AIG Scrutiny: Basic Questions for Media and Congress Alike

On the off chance that the media and Congress have no clue what to scrutinize, here are some basics.
 
 
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You know it's bad when even the WSJ's headline screeches about growing wrath toward AIG's bonuses.  

On This Week, Robert Kuttner made the point that auto workers take pay cuts while the big guys fund themselves bonuses -- watch and see if it doesn't piss you off, too.

Retention bonuses for companies on the brink of financial ruin are not new.

KMart paid them  when they filed restructuring bankruptcy a few years ago to keep upper management who knew how to run supplier networks or other crucial components from jumping to a healthier business.  Under certain stressed conditions, they can make good business sense.

But, as we reported yesterday , the AIG bonus issue is a bit more complex than simply "is this a retention bonus."

What is most horrifying about this is how little the government appears to have known before doling out the next ladle of public bailout fundage: Did treasury know about these bonuses before doling out TARP monies? How much did they know? We have no idea at this point.

Now THAT is troubling.

The House Financial Services Committee has a hearing scheduled on risk and fraud on Wednesday at 10 am ET. One thing that will need to be determined going forward is whether this is a regular AIG business practice or some sort of " fraud in the inducement " scheme to fund their own bonus payola with ginned up demands for taxpayer moolah.

On the off chance that the media and Congress have no clue what to scrutinize, here are some basics:

 

Christy Hardin Smith is a former attorney, who earned her undergraduate degree at Smith College, in American Studies and Government, concentrating in American Foreign Policy. She then went on to graduate studies at the University of Pennsylvania in the field of political science and international relations/security studies, before attending law school at the College of Law at West Virginia University, where she was Associate Editor of the Law Review.

 
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