Tuesday, March 24, 2009

Greed and Morality at work

The AIG bonus issue is no longer a news. It was widely discussed in coffeeshops locally even though its not our money. AIG, fresh from a US$170 billion bailout pays out $165 millions to largely members of the financial products division thats almost solely responsible for AIG's fate today. In the final quarter of 2008, AIG posted a US$61.7 billion loss, the largest quarterly loss ever recorded in the United States. I enjoyed reading the news because I am interested to see the effect of greed and morality at work. It was greed and recklessness that such contracts was drafted in the first place. Bonuses that can be paid regardless the profitability of the company.

$165 million actually represent just 0.1% of the total bailout funds but the media and internet certainly pay a major role in inciting outrage among the Americans. Anyone of sound mind will agree that these people, especially from the Financial Products Division don't deserve the money at all. However do note that those who accepted the money are not actually wrong too because its simply a loophole in the system of capitalism. The government cannot void a commercial contract as they like.

Obama said,"Under these circumstances, its hard to understand how derivtive traders at AIG warranted any bonuses... How do they justify this outrage to the taxpayers who are keeping the company afloat. If the US government do nothing, their will lose the trust from the people. Its also interesting to watch how the government outwit the system such as imposing a 90% tax.

As of today, some of these executives in AIG have agreed to pay back US$50 million in bonuses. Lets us make a guess on how much of these $165 will eventually be returned. See if greed or morality will win.

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