Contracts and bonuses

We're all in an uproar over the obscene $165 million in bonuses paid to AIG executives for driving the company over the cliff, only to be rescued with tax payer money. And now the focus is on the contracts that were written long before the Obama administration was in charge, and there's plenty of fighting to go around on what's to be done and who's to blame.

But here's a side-light. In our outrage, we should stop and think: why did we expect them to do anything different? It was in their financial DNA. Here's Barney Frank, who has been studying the contracts:

Frank translated the language. "It means that if in fact they have a net loss for the year, they still get the bonuses. This is the problem. This is the problem with the contracts," he said. "So they give themselves contracts that effectively insulate them from losses."

Well, duh ! That's the business they were in with their credit default swaps and derivatives and hedge funds:

They were in the business of making money out of other people losing money.

Why would we think that they would think any other way when it came to their own compensation?

Ralph