The sanctity of AIG's contracts
Larry Summers, Sunday, on AIG’s payment of executive bonuses:
We are a country of law. There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system.
Associated Press, February 18, 2009:
The United Auto Workers’ deal with Detroit’s three automakers limits overtime, changes work rules, cuts lump-sum cash bonuses and gets rid of cost-of-living pay raises to help reduce the companies’ labor costs, people briefed on the agreement said today.
The UAW announced Tuesday that it reached the tentative agreement with General Motors Corp., Chrysler LLC and Ford Motor Co. over contract concessions, as GM and Chrysler sent plans to the Treasury Department asking for a total of $39 billion in government financing to help them survive.
Concessions with the union are a condition of the $17.4 billion in government loans that the automakers have received so far.
Apparently, the supreme sanctity of employment contracts applies only to some types of employees but not others. Either way, the Obama administration’s claim that nothing could be done about the AIG bonuses because AIG has solid, sacred contractual commitments to pay them is, for so many reasons, absurd on its face.
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