A.I.G.’s Bonus Blackmail

[elleng]

'PRESIDENT OBAMA on Monday instructed the Treasury Department to “pursue every single legal avenue” to recover $165 million in bonus payments the insurance giant A.I.G. recently made to nearly 400 employees in its financial products unit. A.I.G. has, of course, received $170 billion in bailout funds and yet continues to incur extraordinary losses — some $62 billion last quarter alone.

A.I.G. insisted it was legally obligated to make the bonus payments and that failure to pay would breach its contracts with employees and expose it to penalties under state employee protection laws. The company also warned that breaching the agreements would amount to defaulting on numerous other business contracts, at staggering cost.

Amid this standoff, there has been an explosion of outrage against perceived excessive compensation to those who precipitated the financial crisis. Some lawmakers have threatened to impose a 100 percent tax on the A.I.G. bonuses and Senator Chuck Grassley, Republican of Iowa, even wildly suggested that the company’s executives consider suicide for their culpability. But moral outrage and public rebuke do not provide legal grounds for backing out of a contract.'

http://www.nytimes.com/2009/03/18/opinion/18cunningham....

[aquart]

1. How is this debatable? He states the grounds right here:

"There is also at least some chance, given A.I.G.’s functional insolvency and the government takeover, that these agreements may be rescinded either on the basis of impracticability or by virtue of unforeseeable and uncontrollable circumstances. A credible fact supporting both excuses is precisely the company’s huge loss last quarter. Courts excuse contract duties when governmental action essentially destroys the original purpose of a contract — and the taxpayers’ 80 percent stake in A.I.G. is a more extreme sort of governmental action than usually appears in such cases."