Meh Culpa

Get Your Populist Rage Here: AIG to pay $165 million in bonuses

(UPDATE below)

Under Geithner and Summers, the government claims helplessness, but I don’t think they are helpless.  And they had to know this was coming.  The government–meaning we taxpayers, y’all–owns 80% of AIG, so how could they not know?  It was back in the day that these bonuses were set up for the same guys who played with swaps and derivatives and left AIG  teetering on the brink of disaster. The company was essentially bankrupt.

But that’s not all.  According to the NYT:

A.I.G. had set up a special bonus pool for the financial products unit early in 2008, before the company’s near collapse, when problems stemming from the mortgage crisis were becoming clear and there were concerns that some of the best-informed derivatives specialists might leave. It locked in a total amount, $450 million, for the financial products unit and prepared to pay it in a series of installments, to encourage people to stay.

After this, two more bonuses are to be paid in July and September to the tune of $220.4 million.  AIG’s CEO, Edward M. Liddy, has written to Geithner saying the salaries of these execs in the Financial Products Division have been trimmed to $1, but who the heck cares?  AIG was brutally mismanaged and this sort of payoff, this heinous payoff, is part and parcel of that folly. Of course,  Liddy argues that AIG is contractually obligated, and furthermore without bonuses these “talented” execs who caused the problem would walk.

I say: let ’em go.  Liddy’s position is morally bankrupt and pretty stupid.  There are more talented execs where those came from.  MBAs are everywhere, dontcha know.  Look in the unemployment lines.

I also say the government should take over AIG–because taxpayers aren’t getting their money’s worth when shareholders aren’t wiped out,* execs earn hundred of millions in bonuses and get to keep their jobs.

When will we ever see a return on OUR investment?

Like, never.

We’re going to be asked to give up portions of so-called entitlement programs, such as Social Security, which income is the only thing between many elderly women and bone-scraping, marrow-sucking poverty. In early January Obama said he wants to overhaul both Medicare and Social Security.  So we get Universal health care, but not really?  How does that work exactly?  Whence comes the money?

Don’t get me wrong, I think health care is a human right.  We citizens have made a contract with our government** in which we give up some rights (say, by paying taxes) and by doing so receive something in return from our government. The old theories considered that receiving social order was enough, but they imply that everyone acquires equal benefit, or as Hobbes would say: the “right to all things.” (Ha.)  If health care is a right, I don’t think government is working as well for everyone in the United States as it is in other industrialized nations.  Last year, about 75 million people in the US didn’t have enough insurance or they didn’t have any at all.  Imagine what that statistic is now that so many people are unemployed.  (<—- Scary, but elegant graphic.  Makes me want to move.)

So, yeah.  I don’t think AIG has a right to exist as an autonomous entity any longer. I think the leviathan has gorged itself aplenty and should be absorbed by the government. We have more important ways to spend our money–by taking care of our own.

UPDATE: Robert Reich on AIG, an excerpt:

The bonuses are part of employee contracts negotiated before the bailouts. And, in any event, Liddy explained, AIG needs to be able to retain talent.

AIG’s arguments are absurd on their face. Had AIG gone into chapter 11 bankruptcy or been liquidated, as it would have without government aid, no bonuses would ever be paid (they would have had a lower priority under bankruptcy law that AIG’s debts to other creditors); indeed, AIG’s executives would have long ago been on the street. And any mention of the word “talent” in the same sentence as “AIG” or “credit default swaps” would be laughable if laughing weren’t already so expensive.

This sordid story of government helplessness in the face of massive taxpayer commitments illustrates better than anything to date why the government should take over any institution that’s “too big to fail” and which has cost taxpayers dearly. Such institutions are no longer within the capitalist system because they are no longer accountable to the market. To whom should they be accountable? As long as taxpayers effectively own a large portion of them, they should be accountable to the government.

But if our very own Secretary of the Treasury doesn’t even learn of the bonuses until months after AIG has decided to pay them, and cannot make stick his decision that they should not be paid, AIG is not even accountable to the government. That means AIG’s executives — using $170 billion of our money, so far — are accountable to no one.


* Funny how that works.  In a normal capitalist world, shareholders would lose their investment when the company goes under.
** Remember John Locke and Jean-Jacques Rousseau?

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March 15, 2009 Posted by | bailout(s), Economy, Executive branch, Obama administration, politics, recession, social theories, Treasury, unemployment | , , , , , , , , , , , , , , , , , , , , , , , , | 8 Comments