Bailouts, Bonuses, and the Return of Unjust Gains

10 Pages Posted: 11 Feb 2010

See all articles by Tracy A. Thomas

Tracy A. Thomas

University of Akron School of Law

Date Written: October 19, 2009


In March 2009, ailing insurance giant American International Group (AIG) triggered a national outcry when it paid out $165 million in government bailout funds for employee bonus incentives. President Obama called the bonus payments an "outrage" and promised that his administration would "pursue every single legal avenue to block these bonuses and make the taxpayers whole." He chastised the firm for its audacity of using borrowed taxpayer monies to reward financial recklessness and greed. This was the same company, of course, who within days of receiving its first infusion of government cash in September 2008, sent its executives on a half-million dollar boondoggle retreat at a fancy desert spa. And just several months after the initial fiasco, AIG tried to award $265 million in further bonuses, adding to performance bonuses of $454 million paid to employees and executives in 2008. It was just over a year ago when AIG turned to the government for its survival. The government stepped in to assist AIG when the company faced imminent death from its risky financial derivative products that were backed by precarious mortgages. Fearful that the toppling giant would trigger a cataclysmic domino effect, the government authorized the bailout funds to keep AIG, and the entire U.S. financial sector, afloat. The government agreed to loan AIG the money, now totaling over $173 billion, collateralized with AIG’s assets and an 80% equity ownership of the company. The first infusion of cash to AIG was authorized by the Federal Reserve in September 2008, supplemented with funds authorized in October by Congress in the $700 billion bailout bill, the Emergency Economic Stabilization Act (EESA), which established the Troubled Assets Relief Program (TARP).

Keywords: litigation, corporate, AIG, bailout

JEL Classification: K1

Suggested Citation

Thomas, Tracy A., Bailouts, Bonuses, and the Return of Unjust Gains (October 19, 2009). Comments, Washington University - St. Louis, 2009; U of Akron Legal Studies Research Paper No. 09-14. Available at SSRN:

Tracy A. Thomas (Contact Author)

University of Akron School of Law ( email )

150 University Ave.
Akron, OH 44325-2901
United States
330-972-6617 (Phone)
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