Looking for Outrage in all the Wrong Places: Steve Foley and John Hinderaker Take the AIG Minority View
“The other lesson of this story is the futility of having the federal government running the world’s largest insurance company. When the salaries earned by derivative traders at an insurance company can become a major political issue, you know the government has gotten way too deeply involved in the private sector.”
As I explained last night and John talked about this morning… We’re all Capitalists here!!! There’s nothing wrong with bonuses – those who received them should keep them whether or not the money came from tax payers or not.
Here’s why, according to AIG CEO Edward Liddy (and as of yet there’s no reason to question the accuracy of his responses):
* All of these payments, as to AIG’s troubled financial products division, are retention bonuses, not performance bonuses.
* The money is not going to anyone responsible for the implosion of AIG—those people, who were in the credit default swap area, are gone.
* These retention bonuses were promised to AIG employees who are responsible for winding down the company’s financial products division. At the beginning, this division had a potential exposure of $2.7 trillion. Winding down AIG’s book of business in this area was a dead-end job, and there was a great likelihood that the people responsible for the work, who knew the most about the products involved, would take jobs elsewhere.
* In late 2007 or early 2008, AIG made a deal with these employees: if they would stay at AIG until specified conditions were met, i.e., either certain business was wound down or a given period of time had elapsed, they would receive a specified retention bonus.
* As to all of the employees involved, they satisfied the terms of the bonus by wrapping up a portfolio for which they were responsible and/or staying on the job until now. As a result of the efforts of this group, AIG’s financial products exposure is down from $2.7 trillion to $1.6 trillion.
There is no legal principle that would justify not paying these bonuses. If you make an offer to someone along the lines of, if you do X I will pay you Y dollars, and he does X, it’s too late to change your mind. You’re on the hook for Y dollars, and you should be.
You see, focusing on the bonuses is distracting everyone from the bigger problem and the bigger picture. The fact is, we should have never allowed these bailouts in the fist place and we should have demanded that Congress (which btw does still work for us!) abide by it’s own rules and given ample time for these bills to be read and studied before calling a vote.
This is our fault for electing a people who desire power and influence over the betterment of the country. Now that it seem people are awaking to the fact that they made a horrible choice, it’s too late, and now need some else to blame.
John called his stance a Minority View… I join him in that minority view due to the fact that Republicans in Congress seem to be focusing on these bonuses too. While the Republican alternative offered to recoup these bonuses may be better than the Democrats ridiculous plan… in my opinion neither are worth the time or energy.
John says about the Democrats plan:
The legislation introduced by the Democrats today to tax these bonuses (and possibly a few others, although it isn’t clear that any others have been or will be paid that are covered by the statute) at a 90 percent rate is an outrage. It is, in my legal opinion, obviously unconstitutional. It is evidently intended to calm the current political firestorm and not to achieve any real objective.
The Republican plan is only slightly better:
The Republicans’ alternative, which basically just demands that AIG give the money back, somehow, is better but still silly. No doubt one could deduct $165 million from past and future bailout payments to AIG and thereby make the taxpayers “whole.” But that just illustrates the foolishness of concentrating on these bonuses rather than the larger picture.
Big Picture is… these companies should have been allowed to go into bankruptcy. This is what happens when Government gets involved with the market and way too heavily involved in company business. Government has no business diving into the inner workings of companies such as AIG especially when it (the Government) was one of the main reasons we’re in this mess and in some cases directly caused aspects of the crisis we all find ourselves in today.
Politics and the reintroduction of failed liberal philosophies and social engineering policies have been, are, and need to be our main focus here so problems like these are not repeated — not retention bonuses! The quicker we realize that fact, the better off we’ll be!!!
I’ll leave you with a quote from John Hinderaker which accurately sums up the issue:
“What is happening in Washington is a scandal and an outrage. Barack Obama, Harry Reid and Nancy Pelosi should not be allowed to divert attention from the disastrous policies they are pursuing by focusing on the sideshow of AIG bonuses.”