AIG Follies

March 20, 2009 by Lisa Krempasky  
Filed under Politics

Never let a crisis go to waste. That is the unending theme of the Obama administration. And if your poll numbers are going down create a crisis. Play into people’s fears and prejudices. That, and that alone, is exactly what happened with AIG.

First let’s start with the obvious. AIG paid out $160M in bonuses. That is, no doubt, a lot of money. But it is miniscule in comparison to what our government directly lost in AIG. In all of its wisdom the federal government of the United States of America has so far given AIG $173B. At the time I am writing this post AIG has a market cap of $3.39B and we, the taxpayers, own 80% or $2.71B. So in a few short months our government has just thrown away over $170B of we, the taxpayers, money. Where did that money go? Why is no one screaming about it? That is 100x the bonuses which the media and president have hyped into a frenzy, yet there is nary a mention of it.

Second let’s move on to basic business management theory. We, the taxpayers, should want as many AIG employees as possible to be earning obscene bonuses. Rewarding employees for performing tends to encourage performance. It is in our best interests as the shareholders of AIG to have performing employees. We should want them to perform exceedingly and abundantly beyond where they presently are. The key to performance bonuses has always been picking the right benchmarks.

And what about our governments involvement? President Obama claims he did not know of the bonuses until they were being paid out. Okay, do we really want a president that knows that little about what is going on in his own administration? Additionally, in February Chris Dodd specifically inserted protections for the bonuses into the non-stimulus “stimulus” bill. It is disingenuous for Congress to now say they did not know it was in the bill. I am certain that every senator and representative knows how to read. In addition to our Congress, that bill was cerimonously signed with great fanfare by President Obama. If he did not know what was in the law or did not understand it, he should not have signed it. If we can’t trust our leaders to do what we want, can’t we at a bare minimum expect them to know what they are signing?

So why all the fuss? It’s because the wealthy are easy targets. They are easy bad guys, easy villians. People love to hate the rich. It used to be we wanted to emulate the rich…to become rich. Now we just want the rich brought down. We are angry. So remembering the mantra to never let a crisis go to waste President Obama, our leader, comes after the very people who got the very bonuses that he just weeks before had made it the law that they keep. Do you want a president that will turn on you when it is politically popular to do so?

Now we come to congressional solutions. The first theory was just to break the contracts. That simple act alone would have undone hundreds of years of common law history. If the government can come in and unilaterally nullify any contract that willing people entered into because it wants to where does that leave any business. How could our leaders have even seriously considered this? Fortunately they chose against it.

The present solution is to tax the money back…but only for those making over $250k per year. I guess bonuses are okay if you are not rich…maybe because our leaders are not principled, they are political. I am very unclear as to whether this witchhunt is even constitutional. This tax bill is after the fact of the bonuses and after the fact that Congress required that the bonus contracts be paid. And again no consideration is given to this. They are bullying people who will have to spend hundreds of thousands of dollars in legal fees to challenge the law.

So really why all they fuss? Go back and read point one all over again. Our leaders are trying to get the focus off of them. They are doing the old razzle dazzle of smoke and mirrors and marketing. We are presently suffering from leaders that are grossly incompetent and just throwing billions and trillions around like they are pennies or we have leaders that are intentionally deceptive doing one thing and say another. But at least our president is cool.

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