AIG uses bailout money to pay employees.

[KSig RC]

Originally Posted by srmom

And, contracts are made to be broken (or renegotiated)- When I worked in the oil & gas business back in the 80's, our company got involved in what were called "take or pay" contracts (simplified - we contracted to take the gas at a set price and quantity or pay for it anyway). Well the gas market crashed and we were stuck with take or pay provisions that would have bankrupted the company - these were with companies ranging from Mom & Pop org.s to Shell, Exxon & Chevron.

We HAD to renegotiate or go under. So, that's what we did.

In this case, those contracts, if AIG had gone bankrupt, (which for most of us business owners out there without govt bailouts is what would have happened), would be worthless.

How about, in good conscience, renegotiating the provisions??

Because this is a gross oversimplification?

In order for a renegotiation, there has to be an incentive on both sides - usually that incentive has to be more than goodwill, too. In your example, the incentive for your side was to stay afloat - the incentive (for either Shell or Mom'n'Pop) to renegotiate was to keep your money flowing to them, instead of getting a small portion of your assets split among all your various creditors.

In the AIG scenario, what incentive does the employee have to renegotiate? Public outcry? Goodwill (over an amount of money that is essentially a rounding error in the grand scheme of this CF)?