America's Bailout, Bonuses, and Broken pieces

By Jaya Spier

The US media this past week was flooded with reports about the financial corporation American International Group Inc. (AIG) as taxpayers protested the large bonuses AIG employees received as part of a retention plan. Unfortunately this backfired as many people left the company after getting their bonuses.

On March 19 the House of Representatives passed a bill to tax 90 percent on bonuses paid, not just by AIG, but also by any company that had received more than $5 billion from the government in “bailout funds.”  AIG had already requested that their employee’s return 50 percent of their bonuses and some even volunteered to return 100 percent of the money they had received. Some employees had received death threats. Apparently American taxpayers are not willing to let this pass, understandably as it is their money that is being pilfered away on the guys who got the company into this mess in the first place.

The $30 billion that AIG received from the Federal Reserve at the beginning of March was only one of many “interventions” that the company has received to avoid bankruptcy. “Given A.I.G.’s size and the complexity of its deals, federal officials decided that a bailout was preferable to the havoc in international markets that would likely follow bankruptcy” (NY Times).

While some truly believe that the loss of AIG would really hurt international markets others feel that the government should allow these large companies to go belly up so that the money from the Federal Reserve can be put to better use. Taxpayers want to know why we are buying out the guys that screwed us over in the first place. It is because our economy cannot stand the loss of so many. The scandals and the relative poverty that people are experiencing is overwhelming the domestic sphere and the government is trying to provide a sense of stability. America is seen as the world’s superpower, the United States must at least appear to be fixing the cracks in the structure, otherwise it will all fall apart. 

Even though the taxpayers are angry and the government has switched from approving to disapproving, others say that taxing the bonuses may prove to be counterproductive. “If US businesses start worrying that the government will force them to break inconvenient contracts, it will set the financial system on an even more slippery slope” (BBC).

President Obama is stuck between a rock and a hard place. “He needs to convince Americans he shares their mounting fury over the hundreds of billions of taxpayer dollars being pumped into companies like AIG. At the same time, he needs the executives and employees of those companies to help the government untangle the current financial mess” (WSJ).

It sure seems like the world economy is spiraling downwards as countries get stuck in debt or in some cases, like Iceland, bankrupt. But people haven’t lost hope, they’re still strong enough to get angry so they will be strong enough to pick up the pieces and eventually put it all back together.