![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
A Few Thoughts on the AIG Rage
Mar. 21st, 2009 02:58 pm1. AIG isn't the best target for the outrage. But they are a good target, and they are 80% owned by the US government (aka we, the taxpayers). So when they pay vast bonuses, or use government bailout money to sue the government to get more money from the government (taxes they think they overpaid), the rage comes easy. Some of it's overdue, the ratio of executive to line-worker pay has gone up by orders of magnitude over the last few decades. Yes, this is explained by competition for the best management, who make a company a lot of money. It's also explained by the decline of unions and the fact that competition for workers on the floor is virtually nonexistent.
2. It's also about the culture of greed and irresponsibility that has grown up around our corporate and financial systems. Conservative pundits speak of the "moral hazard" of bailing out poor homeowners who foolishly viewed their home as just a financial investment and bought beyond their means. People love focusing on the "moral hazard" of giving to the poor, someone asks you for change on the street and you wonder if they'll spend it on drugs. But it wasn't bums (or even those "average, working-class Americans") who wrecked the economy.
3. AIG set themselves up as a single point of failure for the entire financial system. Which is a good thing for the financial big-wigs, assuming (correctly) that they only give a damn about their own personal gain. AIG is "too big to fail", which ensures they'll be bailed out, which means they can pay off those insurance claims on investments they of course thought were safe (wink wink), billions go to Merrill Lynch and Goldman Sachs (Treasury Secretary Geithner is closely asociated with GS, Mark Patterson (Geithner's chief of staff) is a former GS lobbyist, their CEO was the only CEO invited to key bailout planning meetings), all the rage stops at the doors of AIG (GS and ML paid their exorbitant executive bonuses already without a peep). Of course, there's some risk associated with being the fall guys, things could yet go badly for AIG and their executives.
4. AIG, a year ago: They see the writing on the wall. They know bad things are going down. They fear that just in the middle of said crisis all the people who know where the bodies are buried are going to flee for the hills, leaving behind naught but devastation. AIG management didn't want that, so they promise that the bonuses will stay as high as previous years even if things go bad. Understandable, but this sort of behavior could be illegal "looting" if the company anticipated financial disaster and yet agreed to pay money that they didn't have. This is why the NY attorney general subpoenaed the records about what bonuses AIG paid, and to whom.
5. The "but... but.. contracts!" bit is BS, of course. But if only we'd made them apply for bankruptcy protection before giving bailouts. Then there would be plenty of power to renegotiate or abrogate contracts. But no, we can't let them go bankrupt, they're "too big to fail". That's what Chapter 11 is for!
6. The US government doesn't need AIG to pay bonuses to retain those people because they know where the bodies are buried. We have another, more effective method of retention for that:
2. It's also about the culture of greed and irresponsibility that has grown up around our corporate and financial systems. Conservative pundits speak of the "moral hazard" of bailing out poor homeowners who foolishly viewed their home as just a financial investment and bought beyond their means. People love focusing on the "moral hazard" of giving to the poor, someone asks you for change on the street and you wonder if they'll spend it on drugs. But it wasn't bums (or even those "average, working-class Americans") who wrecked the economy.
3. AIG set themselves up as a single point of failure for the entire financial system. Which is a good thing for the financial big-wigs, assuming (correctly) that they only give a damn about their own personal gain. AIG is "too big to fail", which ensures they'll be bailed out, which means they can pay off those insurance claims on investments they of course thought were safe (wink wink), billions go to Merrill Lynch and Goldman Sachs (Treasury Secretary Geithner is closely asociated with GS, Mark Patterson (Geithner's chief of staff) is a former GS lobbyist, their CEO was the only CEO invited to key bailout planning meetings), all the rage stops at the doors of AIG (GS and ML paid their exorbitant executive bonuses already without a peep). Of course, there's some risk associated with being the fall guys, things could yet go badly for AIG and their executives.
4. AIG, a year ago: They see the writing on the wall. They know bad things are going down. They fear that just in the middle of said crisis all the people who know where the bodies are buried are going to flee for the hills, leaving behind naught but devastation. AIG management didn't want that, so they promise that the bonuses will stay as high as previous years even if things go bad. Understandable, but this sort of behavior could be illegal "looting" if the company anticipated financial disaster and yet agreed to pay money that they didn't have. This is why the NY attorney general subpoenaed the records about what bonuses AIG paid, and to whom.
5. The "but... but.. contracts!" bit is BS, of course. But if only we'd made them apply for bankruptcy protection before giving bailouts. Then there would be plenty of power to renegotiate or abrogate contracts. But no, we can't let them go bankrupt, they're "too big to fail". That's what Chapter 11 is for!
6. The US government doesn't need AIG to pay bonuses to retain those people because they know where the bodies are buried. We have another, more effective method of retention for that:
