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Published: Monday, 2/2/2009

Other people's money

IT'S incredible, as well as downright infuriating, that an insurance company that received the largest single chunk of government bailout funds - $150 billion in all - would blow hundreds of millions of taxpayer dollars on employee bonuses, but there you have it.

It's one more example of what greed can do, especially when it's financed, in effect, with other people's money.

In this case, American International Group lavished $450 million on retention bonuses for just 400 employees in its financial products unit. These are the same folks who sold the infamous credit default swaps, the risky contracts that resulted in massive losses at AIG and were one of the main causes of last fall's economic crash.

On average, that's $1.1 million per employee. AIG initially received a government loan of $85 billion, later increased to $150 billion.

The AIG bonuses were among $18.4 billion paid in 2008 by financial-services firms even as that sector of the economy was tanking.

An angry President Obama correctly nailed the practice as "shameful" and "the height of irresponsibility," and noted, "There will be time for them to make profits, and there will be time for them to get bonuses. Now's not that time."

AIG spokesman Christina Pretto said that the firm's "contractual retention program" - supposedly bonuses for meritorious work - was adopted and disclosed months before the government provided support to the company. "We did so because it was clear, given the market environment, that we would need to retain employees to manage the complex issues arising in our financial products business, which we are now unwinding."

What nonsense. Given the current crop of layoffs on Wall Street, we're certain that plenty of qualified people could be found to do the job for less.

What's worse is that the outgoing Bush administration, in its haste to prop up the collapsing financial-services industry, didn't attach sufficient strings to the bailout money, and Congress was asleep at the switch. Payment of bonuses with the initial government cash was not prohibited.

Yes, we're aware that, on Wall Street, bonuses are considered merely part of the annual paycheck and, as one consultant pointed out, these folks are accustomed to "excessive amounts of compensation."

But such cavalier expectations about the use of other people's money are a root cause of the economic collapse. Taxpayers might be willing to subsidize survival so that an essential element of the nation's financial superstructure doesn't fail and make matters worse, but we don't believe they're in any mood to underwrite extravagance.

If there's a way to do it, the bonus money should be recouped from these pirates. The public has paid out enough.

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