As a supporter of President Obama, it pains me to criticize him – but his recent political ploys have disturbed me somewhat. I’ve been troubled specifically by his trivial and image-obsessed overreaction last week to the distribution of bonuses by the American International Group.

On March 16, the White House and Capitol Hill exploded over the news that AIG had dished out nearly $165 million in employee bonuses. Bonuses were given to derivative traders at AIG’s infamous London-based Financial Products Division, which lost nearly $40 billion in 2008.

AIG, the largest insurance company in the world with over 74 million customers, has received in excess of $170 billion in federal bailout money to date. Clearly, the U.S. government believes that if AIG were to collapse, so too would the world economy – it is simply “too big to fail.” At this point, the government finds itself walking a fine line: the role of shareholder versus that of regulator.

Last week, however, politicians seemed shocked by AIG’s audacity in giving out bonuses. Obama labeled the bonuses an “outrage” and called upon Treasury Secretary Timothy Geithner to “pursue every single legal avenue to block these bonuses.” He also said, “Under these circumstances, it’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. I mean, how do they justify this outrage to the taxpayers who are keeping the company afloat?”

Obama was not the only one to voice his disgust – members in both houses of Congress called for the bonuses to be returned. The House of Representatives subsequently passed a bill levying a 90-percent tax on bonuses paid by companies receiving substantial amounts of federal aid.

First, it is quite surprising that lawmakers are so casually open to sidestepping legally binding employee compensation packages. Second, such outcries leave one wondering what is more important to the individual politicians: their public images or the recuperation of the $170 billion in taxpayers’ money invested in AIG. Frankly, the “outrage” would be to see the government’s investment fail.

AIG, as it struggles to stay afloat by unraveling complex credit-default swaps, needs all hands on deck. With a derivative portfolio of over $1.6 trillion, personal knowledge of the trades and the unique systems at AIG Financial Products is critical. Therefore, failure to pay required retention payments could have “very significant business ramifications,” as the company stated in a document sent to Geithner.

As a sign of appreciation, the 25 highest-paid active contract employees at AIGFP have already agreed to reduce their remaining 2009 salaries to a dollar. In total, the amount of bonuses owed has been slashed by 30 percent. Furthermore, appearing before a House subcommittee on Wednesday, AIG CEO Edward Liddy called for any employee who received more than $100,000 in bonuses to “step up” and return at least half of the payments. Still, politicians fail to understand why distributing bonuses is vital to the future success of AIG.

In any business environment, a strong, positive reputation is essential for firms that wish to survive (especially in the dire situation we face today). The public pummeling AIG took this week from lawmakers significantly hurts the U.S. government’s almost 80-percent equity stake. We hope that politicians worry more about retrieving the $170 billion rather than catering to short-term public whims, but that just doesn’t seem to be the case.

In distributing bonuses, AIG was simply complying with legally binding contracts and, at the same time, following through on a common business practice to ensure the future survival of the firm. The bonuses make sense and politicians need to understand that there are more ways to help than just by signing bailout checks.

ichael Connor is a senior in the McDonough School of Business.

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