what’s different

I don’t like federal interference in private industry.  Have I made that clear enough yet?  That means I would have been opposed to former Treasury Secretary Paulson, acting (I assume) on the orders of President Bush,  putting heavy pressure on the head of AIG to step down after AIG received one of their many sacks of bailout cash.  But somehow it doesn’t register quite the same way with me as President Obama forcing the GM CEO to resign.  Maybe I didn’t pay as much attention to AIG’s internal employee shuffling as I have been to what’s going on with the auto industry.  It’s just that the failure of AIG, while terribly detrimental to the economy (and many 401ks) in the short term, wouldn’t have nearly the impact of GM or another one of the Big Three closing up shop.  The Big Three are American institutions, and it would be harder to imagine an America without them than without one of the many insurance companies we have in this country.  Sentimentality aside, if we continue to interfere with the free market the way former President Bush has done with his bailouts,  and  the way President Obama continues to do with his multi-million dollar taxpayer gifts to various entities,  the economy will not improve.

Neither President had (or has) the expertise to make personnel decisions at insurance companies (Bush) or to make the right choice for the next GM CEO(Obama).  Thank goodness President Obama says he has no intention to run GM, and that he will draw the line at forcing their CEO to step down.  GM and Chrysler owners can also be thankful that their warranties are now guaranteed by the United States Government.   What a slippery slope it is for companies who take their fair share from the federal money tree — now the feds pretend to have the right to exercise direct control over these companies.   It’s a painful lesson to learn — next time the feds come with the offer of cash — the correct answer is: Just Say No.

I rarely link to Wonkette, due to the fact that it’s not exactly (hardly ever, in fact) family-friendly, but this quote is priceless:

Hmm, so this auto bailout problem, is it a good thing or a bad thing? Good, because the government should continue to withhold money from GM and Chrysler until they get their acts together. Bad, because GM and Chrysler cannot get their acts together without money, plus the demise of the manufacturing sector etc. President Obama assures us, however, that no matter what happens “we will not let our auto industry simply vanish.” This is liberal socialist code for “we will raise taxes on the wealthy and give everyone a free Geo Metro.” [Washington Post]

Awesome.   But see, Wonkette’s got it all wrong.  President Obama will give us all free bicycles, since he doesn’t want us using more fossil fuels, even in a tiny car like the Metro.   Just can’t wait for all my free stuff that my taxes are paying for…

the department of slow learners

NONE OF THESE BAILOUTS ARE WORKING!!!! So what does this clown want to do? That’s right. He wants to throw more money at the problem we aren’t fixing (in addition to the 50 zillion other bailouts we as taxpayers have already funded, and the bonuses paid to other companies as well as AIG). No second stimulus. We must draw the line somewhere. This guy is worried that AIG’s behavior may jeopardize support for a second stimulus. If Liddy and his government-appointed pals at AIG can wake up the American people to the giant mistakes we are making with all these bailouts, they don’t deserve a public flogging. They deserve to be left alone for performing this public service to the American people. Unfortunately, some drones will remain happily unaware of what’s going on in this country. Fast forward to about 1:43 into the video clip.

what a joke

You know all this fab populist outrage at AIG’s behavior from our President, Senator Schumer, Senator Dodd,  Senator Grassley, and Barney Frank? Well, Congress knew about these bonuses before now. WAY before now.  If any of these guys supported any of the bailouts, but especially the AIG bailouts,  with no strings attached, then they are also partly to blame for the current problems we have.  So spare me all this moral outrage.  They are also to blame because the requirement that these contractual obligations must be paid is in the stimulus bill, thanks to Senator Dodd.

From Politico:

AIG disclosed its retention-bonus program more than a year ago, including bonuses directed to those handling the exotic derivatives that got the company and the country into this mess.

The bonuses were essentially a nonissue when AIG got its initial bailout money, almost $150 billion under President Bush in the two months surrounding the presidential election. Joe Biden, then the vice presidential nominee, came out strongly against the bailout. Obama did not.

Timothy Geithner, then at the New York branch of the Federal Reserve, was a huge proponent and architect of the AIG bailout. So if Obama had strong private opposition to the idea it did not affect his pick for the person who would oversee all bailouts.

They knew — and even knowing about AIG’s plans to award these bonuses, there were no serious attempts by Congress to hold these bailout recipients accountable to the taxpayers for the money they have spent.  It’s a fair bet that at this point Congress has relatively no clue where the money ended up, and they still want to take even more money to sink into a plan THAT IS FAILING to achieve its objectives. Stop the madness.

From the Washington Post:

The payment plan had been no secret.

Beginning in the first quarter of 2008, AIG disclosed the plan to offer retention awards at Financial Products. The unit had already begun to hemorrhage money, a problem that would later grow exponentially. The unit’s executives, fearing they might lose valuable employees in the tumultuous months to come, successfully negotiated more than $400 million for their workers, to be paid this month and again next year.

At the Federal Reserve Bank of New York, which has directly overseen AIG since its federal takeover in September, officials have studied the possibility of rescinding or delaying the bonuses. They even brought in outside lawyers for advice. The conclusion: If the bonuses weren’t paid, the AIG staffers would be able to sue the company and probably would win, not just what they were owed but also punitive damages that would make the ultimate cost perhaps two to three times as high as the bonuses themselves.

Moreover, Fed officials also hope to keep current employees with the company. The senior executives whose decisions caused the company’s collapse are long gone. Most of those left behind are trying to unwind complicated derivative contracts. Completing that process correctly is essential to preserving as much value as possible for taxpayers, officials at both the government and AIG have argued. If it is mishandled, it could expose taxpayers to billions of dollars in additional losses.

This argument makes sense, but AIG paying out these bonuses is still more than a little tone-deaf in the current economic climate.  No one is going to bail out the average American who pays his or her bills on time every month.  Our government will continue to reward the irresponsible and there’s nothing we can do about it.

i’m with the populists (sort of)

Let me preface my opposition to the AIG bonuses by acknowledging a few arguments made by my friends on the right. The government bailouts were not the correct response to our financial woes. The most basic economic and domestic lesson we can learn is that throwing money at a problem doesn’t automatically fix it. That’s what happened with the previous money we spent on banks, automakers, and insurance companies with virtually no accountability measures to keep track of how the money is being spent. Even after spending government money to bail out a particular company like AIG, the feds shouldn’t have the authority to tell a business how to distribute those payments or how to run that company. They don’t have the expertise or knowledge necessary to make wise choices about these things, so we should let the industries that we bailed out with taxpayer money decide how that money should be spent. I’ll get back to this argument.

My fellow capitalists and I agree that no private company should be too big to fail. This is something the Bush administration, and now the Obama administration, refuses to admit. The federal government keeps sinking money into private industry, and it interferes with the free market’s ability to pick winners and losers, as it has always done throughout our history. All of a sudden we are concerned about “rewarding incompetence” when discussing companies like AIG giving their employees bonuses. The federal government always has rewarded incompetence in the public sector — the free market generally deals with incompetence in the private sector. Look at all of the miserable losers in our Congress. They fail to do the people’s business, and there’s limited accountability for them. Occasionally they are voted out, but before that happens, they manage to vote themselves pay raises and largesse from the government’s “endless” pot of money. I think that in the years they underperform, they should give some of their salary back to the feds. That’s a pipe dream, to be sure. But wouldn’t it be nice?

I remain very sympathetic to the argument that the feds have no business attempting to run / control private industry or to tell people how much money they can make in a free society. However, by taking all this money from the federal government, AIG has opened itself up to the government interference that is now happening between their execs and the Obama administration. If they didn’t want the feds checking up on them, AIG shouldn’t have taken the bailout. It’s their own fault this is happening to them. It may be true that they are contractually obligated to pay out those bonuses, but as taxpayers who are now paying AIG’s bills, we are not obligated to be sympathetic to AIG. Contract bonuses are one thing, but there is absolutely no reason why the taxpayers should feel happy about supporting fancy vacations for AIG execs. AIG has squandered any goodwill it ever had, and regardless of their contractual obligations to their employees, they completely deserve the bad press for their overall attitude since becoming a ward of the federal government.