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…

ringing endorsements

First, we have EU President and the Czech prime minister, Mirek Topolanek, and his comments about the stimulus:

From the New York Times (which has sounded rather sensible on fiscal issues lately)-

The European Union’s crisis of leadership during the economic downturn was thrown into sharp relief on Wednesday, as the current president of the 27-nation bloc labeled President Obama’s emergency stimulus package “a way to hell” that will “undermine the stability of the global financial market.”

But perhaps this guy is an outlier, and all the other Europeans are on board with this new massive spending — that takes the bad precedent set by the Bush administration and explodes the deficit by an outrageous amount.  Or maybe not.

More from the Times:

Mr. Topolanek is not alone in his concern that Mr. Obama’s stimulus package, which will push the United States budget deficit this year to 10 percent or more of gross domestic product, will put a huge strain on global financial markets. German officials have also criticized the evolving American program, and many other European nations have declined to create fiscal stimulus programs anywhere near as large as that of the United States, arguing that too much extra money will lead quickly to inflation.

If even some of the European countries – some former Communist countries, some not — believe that this stimulus is a bad idea, and that more state interference in the economy is an undesirable thing, maybe we should rethink President Obama’s grand plan.
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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.

reason reviews the “stimulus”

From Reason mag’s original analysis by Veronique de Rugy:

There are many more bad policies and spending decisions in the Senate stimulus bill, but even a cursory glance at the parts outlined above give a good sense of the overall legislation—and what is likely to be signed into law by President Obama.

And here is one more thing to consider: There is absolutely no evidence that any stimulus package in the past 80 years has goosed economic activity—not FDR’s during the Great Depression, not Japan’s during the 1990s, and not George W. Bush’s in 2001 and 2008. If anything, the economic evidence suggests that such spending packages actually intensified and prolonged misery.

Instead of rushing through legislation that will likely have no short-term effect on the economy, is guaranteed to have negative long term ones, and that serves the traditional interest groups that politicians are always busy catering to, the Senate should have cut spending like Ireland is now doing and cut marginal tax rates across the board. That would not only have stimulated the economy, it would have been fiscally responsible considering the massive entitlement crisis that is coming our way. But such legislation, alas, will have to wait for another day. Or another crisis.

Her analysis on the final bill is here, appropriately subtitled “The final stimulus package is the final insult to taxpayers.”


67% Say They Could Do A Better Job On The Economy Than Congress, and 44% believe that “a group of people selected at random from the phone book would do a better job addressing the nation’s problems than the current Congress”, according to the latest Rasmussen poll.   I suppose you can make polls say whatever you want them to say, but those numbers don’t look like a vote of confidence in the stimulus / porkulus bill.

Another Rasmussen poll: 62% Want Stimulus Plan to Have More Tax Cuts, Less Spending.

It’s clear to me which side the American people support in the stimulus battle.

better to remain silent

But no…Chuck Schumer must speak and say something stupid.

Here he is:

Why else would the American people oppose this bill?  This stimulus bill will NOT fix the economy for a variety of reasons. One of those reasons is that most of the new spending projects won’t provide any immediate benefit to the average person.  At least with Bush’s stimulus, taxpayers (along with non-taxpayers) got a tangible benefit in the form of a check as a result of that plan. The Republicans (and President Bush) spent too much taxpayer money on previous spending bills.  That’s been acknowledged many times.  But what President Bush started,  President Obama has spent much more taxpayer money on all this new stimulus legislation than even I expected him to do.  What do we get with the Democrats and President Obama? Money for special interests and ACORN.


All of the House Republicans voted against the stimulus package.  Good for them.  President Obama doesn’t need their support, and he shouldn’t expect it when the legislation being proposed doesn’t achieve (or come close to achieving) what should be the primary objective — stimulating the economy.  This is pork-laden legislation as well as some tax cuts to people who don’t EVEN PAY taxes (otherwise known as welfare).  Bad proposals are bad proposals.  It does the Republicans no political good to go along with all of President Obama’s plans, and it might continue to hurt them with the conservative base.  In addition to that, if this stimulus fails to get the job done (and it will),  the blame will be solely on the president and the Democrats.  That is, unless the Senate Republicans fail to follow the lead of their colleagues in the House.