President Obama and much of the country are outraged over AIG paying some $165 million in bonuses to their executives, considering that they've just posted the greatest quarterly loss of any corporation in history (something like $65 billion) and that the US government has handed them somewhere closing in on $200 billion dollars in bailouts. Plus, there'll likely be that much again.
"How do they justify this outrage to the taxpayers who are keeping the company afloat?" said President Obama. This violates "fundamental values" — as if a crooked demagogue Chicago politician would know a fundamental value if it bit him in his Hyde Park butt.
There's a pretty clear and irrefutable answer to the president's question: contractual obligation. Never having actually run a business, such things appear to mean little or nothing to Obama. Note the "cram down" rule he's trying to put through Congress to let judges arbitrarily rewrite mortgage contracts, for example. We won't have an economy at all if contracts are not legally binding documents but just suggestions that we might follow if they don't make anyone mad.
But he can't do a damned thing about it cause these executives have CONTRACTS. Those are legally binding obligations, and the company can't just decide not to pay them because it'll look bad if they do. If I were an executive that had a $500K bonus coming to me, I sure as hell wouldn't give it up just because it makes some people mad.
There's a strong general public sentiment against executive bonuses to companies getting government bailouts, but that's bad business going forward. If you've got a company that's in trouble, then they especially need the top talent. If you limit your company to paying execs a minimal wage, you ain't going to get the best and brightest you will desperately need to sort out the mess — though I grant you that this money obviously hasn't gone to any competent people at AIG specifically.
Then there's Senator Charles Grassley, who suggested that these executives should consider killing themselves to save face, like the Japanese. Really now — does Grassley have any room to talk? I don't know that we couldn't do without the AIG executives who've screwed the pooch, but I'm quite certain that the country would be better off if most of the Congress — definitely including Grassley — jumped off the top of the Washington monument to atone for their sins. They've screwed the pooch way more than even AIG — and they're the ones ponying up the money to keep AIG in business so that a bunch of European banks don't get screwed.
After all, if the Congress and the president weren't handing out the cash to AIG, the public wouldn't have any reason to be mad. The mad ones would be the AIG stockholders whose paper would be worthless — as it should be. They're the ones who picked the board and let them do stupid things that have destroyed the company.
By the way, you might note that using bailout money to pay bonuses like this was explicitly authorized in Obama's original stimulus bill, over the specific and repeated objection of house Republicans.
On consideration, I applaud the payment of hundreds of millions of dollars in bonuses to AIG executives. That's a drop in the bucket against at least 1000 times that much the feds have already given even to just this one company, but besides honoring contracts this serves a much larger public good. From the Washington Post story, "President Obama's apparent inability to block executive bonuses at insurance giant AIG has dealt a sharp blow to his young administration and is threatening to derail both public and congressional support for his ambitious political agenda."
If a lousy couple of hundred million bucks is all it takes to decisively turn the public against the whole bailout business, it'll be the best spent money in a long time. Besides running up huge, ridiculous government deficits, these bailouts are destroying the whole idea of the basic market economy on which our prosperity depends.
This seems like rather an obvious point. Banks, insurance companies, automakers, mortgage holders and every other kind of business have to be allowed to fail if they screw up, or you destroy the whole system. In an often used because beautiful and righteous phrase, it's the "creative destruction" of capitalism.
So I say, AIG execs should get their bonuses. They should in fact double their bonuses for next year, and use some of that bailout money to throw themselves a big ticker tape parade. Of course, they'd probably have to ride the parade in bullet proof popemobile type vehicles.
If that little chunk of change is enough to turn the public away from Obama's socialist agenda, and stop him from throwing trillions upon trillions more dollars down a commie rat hole, it'll be the best bargain the taxpayers have ever had.Powered by Sidelines