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When the financial storm hit the United States, many of the companies involved in the monstrous debacle fell one after another. In that time, the issue was how to compensate the people who lost their jobs and livelihoods in the aftermath of the global credit meltdown. The concern of compensating the officials of the companies that fell in the onslaught of the collapse was not even on the table so to speak. Recently though, the United States Congress became embroiled in a heated debate whether to give bonuses to one company, the American International Group, particularly to its executives. It behooves the question-why give additional compensation to people who probably ran their company inefficiently that they collapsed?

The Bonus Issue: Taking the American... TOPICS SPECIFICALLY FOR YOU

The issue of the bonus scheme that the stimulus package has caused quite an uproar in the halls of power on Capitol Hill. The matter revolved on ways to prevent a former financial and investment giant, the American International Group, from having to shell out approximately $160 million in additional compensation (Edmund Andrews, Jackie Calmes, 2009). The bonuses would have been directed at the employees of a division of the giant business concern that nearly destroyed the company (Andrews, Calmes, 2009). The issue found its way into the halls of Congress since the company was getting money from the Federal government to tide it over and save the clients from further losses (Andrews, Calmes, 2009).

 A brief background of the collapse

Many media outlets and newspapers have carried the banner story of what President Barack Obama calls the corporate value of wanton speculation over the values of accountability and hard work (Associated Press, 2009). But Obama did not express approval of the proposed measure on the stopping of the pay-out scheme to the AIG employees (Associated Press, 2009). Obama calculated his response to the proposed measure and accompanied that by waiting for the final composition of the measure (Associated Press, 2009).

Sources for the report:

Associated Press. (2009). House passes bill taxing AIG, other bonuses.

Andrews, E.L., Calmes, J. (2009, March 19). Many in government knew weeks ago about AIG bonuses.

The American financial giant, American International Group, collapsed under a staggering weight of debt that was incurred in the conduct of the banking and financial concern in the business of selling complicated financial items that were anchored in securities that were again secured by mortgages (Andrews, Calmes, 2009). To date, the company has received approximately $170 million in new capital, loans and credit coming from the Federal funds (Andrews, Calmes, 2009). The company is expected to get an additional financial life line from the Federal government in the amount of $ 30 billion (Andrews, Calmes, 2009). After all the financial compensation that the company has received from the Federal authorities, the company paid out bonuses to the employees of the Financial Products Unit, the same department in AIG that led to the collapse of the financial giant (Associated Press, 2009).

In the report of Edward Andrews and Jackie Calmes, the insinuation is that the Federal government, or at least some of the officials, knew that AIG was going to allot money for bonuses that was coming from Federal aid money (Andrews, Calmes, 2009).

Under questioning at the House Ways and Means Committee, solons asked Treasury Secretary Timothy F. Geithner what steps could be undertaken to stop the collapsed financial giant in shelling out bonus money given to their employees (Andrews, Calmes, 2009). Treasury officials claimed that, after the hearing, the Secretary did not have any knowledge of the scheme of the failed company (Andrews, Calmes, 2009). AIG officials stated that they informed the Federal officials that they were going to spend some of the taxpayer’s money in handing out bonuses to their employees (Andrews, Calmes, 2009).

In normal conditions, particularly economic conditions, companies that hand out bonuses to their employees is not unusual fare. If the companies made it good for the business year, then it is usual for the companies to reward their employees, be they deserving of it or not. But what is unusual in this case is that the company has already collapsed under suspicion of irregular and illicit trading conduct. Then the company had the idea of asking money from the Federal government on the premise of saving the company; instead, they used the money to reward incompetence in their ranks.

The view here is that it is alright to operate almost in an illegal manner and risky conduct if there is the premise that the company went under by its own conduct. The federal government should have been astute and shrewd enough in safeguarding the money of the people, their taxes, that was used by this company that collapsed because they were engaged in nefarious activities, say not illegal, but highly irregular transactions. It is even more compounded when the Federal officials who are supposed to do their duty is still feigning innocence in the wastage of the people’s money.

Solons were right in calling this issue as a blatant wastage of the money of the people (Associated Press, 2009). The government seems to be seeking retribution against the companies that used the people’s  money in handing themselves perks for operating in this way and let the people’s whose money they have used in the premise of aiding them. By instituting a tax on the bonus, the government seems to be saying that they will not stand for this abuse. Or are they saying that we made a mistake in passing the bonus provision in the first place, trying to cover up their own misgivings.


Andrews, E.L., Calmes, J. (2009, March 19). Many in government knew weeks ago about AIG bonuses. The New York Times.

Associated Press. (2009). House passes bill taxing AIG, other bonuses. Retrieved March 20, 2009, from http://www.msnbc.msn.com/id/29771499/

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