Stock Market for Beginners

AIG, once the nation’s largest insurer, have caused extreme outrages regarding bonus payouts to its executives. Have people already forgotten about the $173 billion bailout funds they received from the government just a couple months ago? Now, according to AIG’s legal contracts mandating that bonuses be paid, which are deals claimed to have been made before the bailout last year, AIG plans to pay its executives $165 million in bonuses as their retention pay. With taxpayers’ money! (We must not forget that us, taxpayers, own nearly 80% of AIG and without us, the contracts will essentially not be worth anything) As if the situation could not be any worse, this is just after AIG had reported that they had lost $61.7 billion for the fourth quarter of last year, the largest corporate loss in history.

President Obama and Secretary of Treasurer Timothy Geitner are aiming to propose any legal action possible to block the bonus payouts since it is rather hard to believe that these executives actually deserve bonuses after the giant had failed last year. However, they still do not have a list of the recipient of the bonuses. Also remember that most of these executives are the same ones that took part in selling risky financial contracts that had caused huge losses for AIG. To say that they deserve a reward after all that’s happened is certainly judged as outrageous by taxpayers, economists, Congress, etc.

Obama states, “This isn’t just a matter of dollars and cents. It’s about our fundamental values. All across the country, there are people who work hard and meet their responsibilities every day, without the benefit of government bailouts or multimillion-dollar bonuses. All they ask is that everyone, from Main Street to Wall Street to Washington, play by the same rules.”

Another reason why this issue has caused such commotion is something that many of us have neglected to realize. If the Obama administration proceeds with their legal actions and succeeds to prevent the executives from receiving the bonuses, it might inject an idea for future companies to use the same legal measures to break contracts that they themselves might find inconvenient. As Pearl Meyer states, they will be “raising a whole new question about the trust and commitment organizations have to their employees.”

Finally, on another note, Federal Reserve Chairman Ben Bernanke announced that the recession might end as early at this year’s end. He has also stated that government has no intention of nationalizing banks, which is a relief for the market, alleviating many of our investors’ worries.