Summers: 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.
Of course, "a contract is a contract" under certain conditions. When the conditions apply to CEOs, they're legally binding. When they apply to labor, they can be torn up. Perhaps Summers should be reminded of Republican demands that the United Auto Workers agree to "steep cuts in pay and benefits" before the automobile industry was bailed out. The UAW acceded to major concessions in a previously agreed-upon contract, including, according to UAW president Ron Gettelfinger, the "sacrifice [of] job security provisions and financing for retiree health care."
In contrast, little was demanded of the executives of the Big Three in Detroit. As Democratic Congressman Barney Frank of Massachusetts said of Republican Congressman Eric Cantor of Virginia, "It is striking to me that when Eric Cantor talks about concessions, it's only the workers." One hopes that Geithner and the Federal Reserve will find a way to demand that AIG abrogate its contract the way that the UAW was forced to concede items more basic than fat bonuses. It's fair to say that the actions of AIG executives have had a more disastrous effect on the economy than those of UAW members.