A Few Thoughts on the Aig Outrage

Lynne Kiesling

It’s gotten to the point where I just can’t believe the whole freakin’ thing. My disgust, anger, and cynicism in buckshot form:

Here’s an idea: If you stop nationalizing banks, there will be no need to engage in phony-baloney indignation over bonus payments anymore. …

These same senators who voted to nationalize banks with nary a precondition are also, apparently, stupendously talented actors. After all, most of these senators voted for a bill that contained a provision that specifically protected bonuses that were agreed upon before Feb. 11 in the bank bailout legislation. It was put there by Sen. Chris Dodd (D-Conn.), who is the chairman of the Banking Committee. [although note the correction in the Reason post comments to this contention -ed.]

  • Seriously. There’s no way the members of Congress took the time to read that bailout bill, or the previous ones that they passed under the Bush administration in the fall. They have no one to blame but themselves for their own failure of due diligence. But hey, it’s my money, and your money, and my mother’s money that they’re pissing away, so why bother with this due diligence crap when there’s rent seeking booty to be had?
  • With the federal government owning 80% of AIG, as a taxpayer I want some executives who have institutional memory and experience as well as the financial expertise to unwind the counterparty cluster#$%& that their predecessors created. It’s not the most clear and intellectually satisfying definition of “being paid for performance” … but if the alternative is that a bureaucrat appointed by Barney Frank takes on the work of unwinding AIG’s counterparty contracts, I choose the tainted and fallen financial expert over the government functionary any day.
  • Speaking of Congress … if we think pragmatically about the magnitude of the AIG bonuses relative to the amount of taxpayer money that Congress wastes routinely, year on year, the AIG bonuses are the saline eyedropper going into an ocean. I challenge you all to be as pissed off about that as you are about these bonuses, and to sustain your ire as Congressional waste continues, and to do something about it, as we move forward. Assuming we can dig ourselves out of the debt-lined trench that Congress has bulldozed for us …
  • If I were Edward Liddy, who came out of retirement to become AIG’s CEO in September, is being paid an annual salary of $1 and no performance bonus, and is receiving death threats, I would have pointed out that many members of Congress are lawyers and can interpret the legal status of the contracts into which they have entered on behalf of the American taxpayers, if they had read them. I would then have resigned. If the politicization of this issue leads to individual death threats (not to mention Senator Grassley’s crass reference to Japanese executive suicide), and all of this outrage, how is this a better alternative than just having let them declare bankruptcy, gone through the bankruptcy court, and get on with the reallocation of assets to more productive uses at more realistic asset values?

I did not think it was possible for me to get even more disgusted with politics than I usually am. But apparently it is.


3 thoughts on “A Few Thoughts on the Aig Outrage

  1. The feigned outrage over “bonuses” to AIG employees is like a three card monte game. The real purpose is distract the spectators while the card players confederates pick their pockets. AIG was a conduit for over $170 billion to its counter-parties like Goldman Sachs. The “bonuses” were 1/10th of 1% of that amount, and what is worse, 1/100th of 1% of the $1.5 trillion that Congress has appropriated since Jan 20. The spectators are the taxpayers. The three card monte players are the politicians.

  2. I think you’re forgetting that it was the free-market executives who you seem to idolise who got the world into this mess, not the politicians or bureaucrats. The politicians fell into the trap of believing the completely free-market ideals peddled in the interest of the bankers’ short-term bonuses and declined to do their job (and empower bureaucrats to do their job) properly. The real outrage is that the federal government did not use its position as majority shareholder to prevent these bonuses being paid.

    There are countries where the banking system is in much less of a mess, Sweden and Spain for example. It is no coincidence that these are also the countries with relatively strong regulation. And if you think that either of these countries are some kind of totalitarian socialist hell then you really haven’t got a clue what you’re talking about.

  3. It’s possible to be outraged by the AIG bonuses and also disgusted by the grandstanding we’re seeing in Congress. The bill of attainder approved by the House is unconstitutional. The lawyers on Capitol Hill know that, but they’re using it as a vehicle for populist pandering. The bill will die, because President Obama the legal scholar doesn’t want to be put in the position of having to veto it.

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