Senator Jeff Sessions (R-AL) gave a great speech putting the AIG bonus issue in perspective today on the Senate floor.
The bonuses for thousands of employees of AIG – the huge insurance company to which the government, the taxpayers of the United States, have shoveled $170 billion into to keep afloat – recall the Sessions maxim, announced about 20 years ago when I was U. S. Attorney attempting to faithfully enforce a host of federal regulations. It is stated: “Oh, what a tangled web we create when first we start to regulate.”
The more we proceed with policies whereby the government owns 80% of the stock of a private insurance company – having poured $170 billion of our wealth into it – the more we are inevitably compelled to direct how the company operates, to the point of deciding who their executives should be, what the company’s salary scale should be, or what aircraft it can or cannot have or where or what kind of corporate retreat they may have, and whether or not it can pay bonuses.
The size of this investment – an absurd term when used to describe the reckless, gargantuan commitment of our citizen’s money to AIG – puts us, the American people, into the insurance business. Not long ago, I had occasion to meet an official of a healthy insurance company and in jest, I asked how he liked competing with a company supported by the deep pockets of the taxpayers. He replied that it was no joke, AIG was their top competitor in several insurance markets. At bottom we extract tax money from this businessman to keep afloat his reckless competitor. The size of this commitment cannot be lost on us. The entire Alabama state budget, a state well run by our fine Governor, Bob Riley, including the state education budget for all our thousands of schools and teachers, amounts to about $7 billion per year. How big is $170 billion?
The entire federal highway budget, for our interstate system, all our pork projects added to it, and the billions we send to states is $40 billion per year. How big is $170 billion?
So, like an unwise banker, we face the dilemma. Do we pour more good money in to revive this corpse in a desperate effort to recoup our improvident “investment’? Investment is the wrong term since no legitimate investor would have invested in this company. The bullet was already in its heart, only the government would do so.
Senator Sessions referred to a New York Times article that discussed how Treasury Secretary Tim Geithner had a “difficult” conversation with Edward Liddy about the notorious AIG plan to award $165 million in bonuses. It is interesting to note that if reorganization of AIG had happened in bankruptcy under Chapter 11, these contracts would have surely been invalidated. It is truly rewarding failure to give executives a bonus when they work in the business unit that almost crashed the company, and if you believed former Hank Paulson's assertions, the economy as a whole.
Senator Sessions in criticizing the "Masters of the Universe" who crafted the bailout strategy and the so called Troubled Assets Relief Program makes a strong point that the United States should not be promoting big government ideas that have not worked to our European friends.
You see, we own nearly 80% of AIG. We paid $170 billion for this controlling stake. It is ours. Yours and mine. Who, then, is to run AIG? Secretary Geithner, that Master of the Universe, just now returning from Europe where he upbraided the governments of Germany and France for not doing more to invade the private sector, and not going far enough in debt? I suspect that running AIG might be a bit distracting even for this Master of the Masters of the Universe, because he has taken on the duty of advising not only the President and our Congress on how to fix our economy, but he is now advising our big government friends in Europe that they are too concerned about “taking on” more debt and must intervene even more aggressively in their economies. The world is his parish it seems. All the while, the proud people of the United States watch this spectacle unfold in total mortification.
Thank you Senator Jeff Sessions for standing up tall for the taxpayers and for what remains of free market capitalism in the U.S.