Monday, March 16, 2009


Senator Arlen Specter (R.-Pa.) was interviewed shortly after 1:00 p.m. this afternoon by Mrs. Alan Greenspan on MSNBC about, primarily, the bonuses American International Group has given to many of its executives. There has been a confident, almost blithe assumption on the part of some government officials (such as chairman of the White House Economic Council, Larry Summers) and that the government cannot recoup any part of the bonuses- a contract is a contract, period.

Many of us who are not lawyers suspected this is an overly simplistic, even fatuous, argument. And so, we now know, does Specter, former District Attorney of Philadelphia and ranking member of the Judiciary Committee. While acknowledging it as an extreme example, he likened it to a contract for distribution of marijuana- hardly enforceable, as he emphasized. (A contract signed for proceeds of a winning, illegal bet, I would expect, also would not be enforceable.) Although Specter did not note it, contracts also are open to interpretation, and the letter from Chairman and Chief Executive Officer Edward M. Liddy (any relation to G. Gordon?) to Treasury Secretary Timothy Geithner did nothing to dispel the notion that AIG was not contractually obligated to pay the bonuses. At the very least, the Justice Department could file suit to try to recoup the bonuses. As Specter concluded, "stop all the talk; go to court; they're unenforceable."

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