AIG bonuses are ‘an outrage’ says President Obama, and he speaks for us all. How can the senior executives in AIG be so out of touch with reality that they rely on legal niceties to do what is so morally wrong? Perhaps that lack of judgment and apparent unawareness of how the real world functions explains their appalling track record. Well they seem to have shot themselves in both feet this time:
Barack Obama is vowing to pursue â€œevery legal avenueâ€ to stop a clutch of top executives at American International Group Inc. from pocketing multimillion-dollar bonuses, including some to employees who designed the risky credit instruments that helped topple the insurance giant.
The U.S. President joined congressional leaders and state regulators on Monday in demanding that the failed insurance giant, which has so far received more than $170-billion (U.S.) in government bailout cash, roll back $165-million in bonuses paid to employees over the weekend. Outrage was the word of the day as news spread of the payouts, some reportedly as high as $6.5-million.
Not surprisingly, the Bonuses overshadow foreign bank payments, which could have drawn equally violent reactions.
When it emerged on Sunday that foreign banks had received more than $50bn of US federal funds as part of the AIG bail-out, big beneficiaries such as Deutsche Bank and SociÃ©tÃ© GÃ©nÃ©rale must have braced themselves for an outcry in Washington.
Any senior executive of any financial institution should have a keen awareness of what is going on around the world and consider carefully the most appropriate reactions. In the UK, the Financial Services Authority (FSA) will set out a banking clampdown.
Britain’s financial regulator, the FSA, plans to clamp down on risky mortgage lending and City bonuses in a shake-up of banking rules due this week according to the British Sunday newspapers.
The FSA is planning a crackdown on management bonuses that reward short-term risk taking and will propose new rules on how banks should be run, including forcing them to hold more capital against risky trading, according to the Financial Sunday Express. The regulator will also table new vetting procedures to ensure bank bosses are qualified to run financial institutions.
This follows up on assertion by the UK Prime Minister, Gordon Brown, that We won’t pay for bankers’ one-way bets. He laid out a four-point plan to end the excesses of the bonus culture
Everywhere I go in Britain, I sense and share the anger and dismay of millions of hard-working people who have watched in disbelief during a year in which irresponsible practices in global banks have brought the world’s financial system close to collapse. Only bold action to protect those endangered through no fault of their own will do.
Responsible senior bank executives should not need to have the politicians clamp down on them in this way. It goes beyond the issue of legality, it is a simple question of morality. President Obama has a massive popular movement supporting him as he tries to do whatever it takes to re-establish this in the financial world.