On March 12th I suggested that the British government could get back the pension of the ex-boss of RBS, Sir Fred Goodwin, by passing an Act of Parliament with retrospective effect that would entitle them to do so.
And I gave precedent in English law for Acts with retrospective effect.
But the U.S. government thought of an easier option – just tax AIG’s payments to the hilt at 100% and claw it all back that way.
In the end they taxed AIG at 90%. I wonder why they didn’t go to the full 100%? Was it a sop to the AIG people so they would feel that at least they came away with something?
Well that’s that. But at the same time that story of the AIG bonuses broke, reporters were complaining that AIG had paid much larger sums to its counter parties.
The argument was that because the U.S government had saved AIG from going under, it was free to tear up those contractual obligations, for without the intervention of the U.S. government there would have been no money in the kitty to pay anyone.
Well no. The reason that the U.S. government gave at the time for saving AIG was that its continuance and its ability to fulfill its insurance obligations underpinned the system. So AIG had to be saved.
And if that was the reason that was given, then the U.S. government had to allow, no require, AIG to fulfill its obligations to its insured parties.