Bumper British bank profits and AIG to pay $450 Million in Bonuses
As the economy seems to be recovering in the UK, the banks are first in line to reap the benefits. According to Stephen Beard’s article, “Bumper British bank profits reignite bonus debate,” about a year ago Britain’s largest banks were on the verge of collapse. Now as the conditions are improving, head hunters like John Purcell are saying that good times are just around the corner – mostly for the top bankers also known as “rainmakers.” The forthcoming bank profits have also ignited the bonus debate once again. Bob Diamond, head of Barclay Capital, recently hired two hundred staff on guaranteed bonuses. People in opposition like Jack Dromey believe that these outrageous bonuses are one of the reasons for the economic crisis in the first place and that the banks have not learned their lesson. I for one agree with Dromey in that these bonuses seem to be out of hand. The banks argument is that these bonuses are a “necessary evil” in that they need to pay their employees well in order to keep businesses going which in turn help the economy. The ironic part is that these bonuses actually hurt the economy.
AIG (American International Group Inc.) will reportedly pay $450 million in bonuses to employees of their financial products unit, the same unit that was at the core of their collapse last year. There are two other bonus programs in effect which brings the total to a whopping $1.2 billion to be paid to AIG employees. Chief Executive Edward Liddy says that these bonuses were agreed to be paid to employees before the $173.3 billion bailout plan went thru. He goes on to say that “honoring contractual commitments is at the heart of what we do in the insurance business.” The bonuses seem unjust in that AIG looks as if they are rewarding their employees for their failure but in fact it is just a contract that the company is obligated to obey....