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.