AIG is a perfect example…

Of what?  Well, one thing for sure.  With all the noise surrounding AIG paying bonuses with taxpayer money, I just can’t keep my hands off.  The AIG bonuses are certain to cause controversy and outrage.  But they are not an argument for governmental control of wages.  Rather, they are an argument for taxpayer money staying out of private business.

There is no reason whatsoever for anyone to be upset with AIG or any of its leadership for their payment of bonuses.  Here’s why: according to AIG’s most recent CEO, the bonus contracts were in place prior to the financial crisis.  So what does that mean?  Well, it means that taxpayers should be mad as hell about $165,000,000 of their money going to pay people they feel may be undeserving.  But it also means that the anger taxpayers feel should be directed like a laser a single target: their Government.  If these contracts were in place prior to the payment of any of these bailout funds then it was incumbent upon the government to do their due diligence and know how the money that they would be investing on behalf of the tax payers would be spent.  They clearly did no do that despite that fact that they held all of the cards and could have forced AIG to turn itself inside out exposing all details of every contract in place before any funds were distributed.   Be mad.  Be very mad.  But be mad at the incompetence demonstrated by the treasury and administration in their piss poor execution of a misguided bailout.  The blame for the payment of underserved bonuses rests squarely on their shoulders.  If the Treasury Department and the Administration did not want to pay executive bonuses with taxpayer money, they had the opportunity to avoid it.

 Furthermore, any suggestion that breaking contracts is the right thing to do in this situation is an unfortunate testament to our profound collective ignorance at best, but could possibly be deeply insidious.  The rule of law is precisely what makes a society free and great, and the idea that breaking contracts on an official, governmental scale is not a direct erosion of the rule of law is, again, either utterly foolish or betrays an underlying motive to do away with the rule of law.  Oh, and it would be awful for business and the economy.

 For color, I should add a note about the disgusting level of ignorance that is displayed on TV and radio by these churls who complain about this sort of thing without the faintest idea of how any of this business works, who is getting a bonus, why bonuses are being paid, what percentage of AIG’s total bailout funds are actually going to these bonuses for executives – based on the most recent payment of $30,000,000,000 it’s a mere 55 basis points, and it’s even less if you factor in all the money they’ve received – or anything else relevant.  (Don’t know what a basis point is, you rube?  Click here.)  What’s really scary about this component of the situation is the fact that such widespread benightedness actually blinds people to the simple facts.  Worse, it allows them to be manipulated by those whose ineptitude led to this outrage.  That manipulation could then lead to adulation and appreciation of the men who so swiftly squandered the poor sap taxpayers’ money in the first place.  And that could certainly lead to more failures of basic fiduciary responsibility that create the need for erosion of liberty, and the increased influence of those who, despite causing the problems, are consistently and repeatedly seen as the problems solvers and saviors.  Oh, what a little education would do.  And oh, how easy it is for an ignorant populace to be duped.  But we could start before education.  We could remain collectively ignorant and still solve this problem.  All we would have to do is think a little or ask a question.  That would be a start.



Filed under Grant

8 responses to “AIG is a perfect example…

  1. Even if the government had done its due diligence, a private company is ultimately responsible to leverage their money and resources as it sees fit, which barring insanity or legal manipulation is normally invested in ways intended to grow the business.

    Errant or not, AIG deemed doling out bonuses as the appropriate expenditure of its funds, which may or may not have come directly from the government bailout money – I mean taxpayer money – I mean your and my money.

    The bottom line is that the government entrusted AIG with taxpayer money to keep itself afloat, maybe even progress. Whether or not we as the taxpayers believe AIG to be fiscal responsible is entirely immaterial – it’s AIG’s money now and it is its own company. What isn’t so immaterial is whether or not we agree with the government handing AIG our money in the first place.

    The example of AIG reiterates the importance of keeping the government from unduly medding in the affairs of private business. If AIG’s business decisions cause it to go belly-up, then belly-up it should go. The most unfortunate thing in this event is that taxpayer money was already fed to a behemoth gone belly-up, exposing the umbilical cord of socialism.

  2. GCC

    Maybe this should’ve been a joint post.

  3. blraatikka

    This is funny– “The Stimulus Bill Explicitly Guarantees Contractual Bonuses Executed Before February 11”–

  4. stan

    You do know that the “administration” you are railing against is the (former) Bush Administration, right? They are the one’s who initiated the AIG bailout (and for good macroeconomic reason). Nevertheless, people ARE mad and those folks have already been held accountable through the political process. Let’s all hope the new administration can do better to clean up the mess.

  5. GCC

    Yes. The Bush Administration was an enormous cock-up too. No question about that. Their government was also playing an inappropriate, and ultimately irresponsible, role in the private sector (and beyond). The point is, the payment of these controversial bonuses is not AIG’s fault. Left to its own devices, AIG may very well be paying no bonuses. It has simply been governmental participation that allowed the bonuses to be paid. And if there was good macroeconomic reason to bailout AIG, which is certainly debatable, then one would support the government involvement and, by extension, the bonuses. If one supports the government involvement and not the bonuses, it remains government’s fault for not being prudent enough in their involvement to restrict or eliminate any bonuses. Again, the point is this: If you don’t support any bailout, or if you support the bailout but not the bonuses, it’s the government’s fault. If you support the bailout unconditionally there’s nothing to complain about.

    While this whole bailout fiasco was infuriatingly initiated by the previous administration, the current administration has given little reason for confidence – in fact, rather quite the opposite. Their management of all their “inherited” problems, well…”it’s like – it [is] like the Special Olympics, or something.”

  6. TC

    You know what is even more infuriating than the government transferring $165,000,000.00 of public money to the private sector with little or no regard for the ultimate destination of that money? That the government thought that the best corrective action was a 90% tax rate on the bonus monies in question.

    If the House felt that AIG bailout money should not be used to pay executive bonuses (and if that is the case, this article rightfully points out that such language should have been in the original legislation and actions towards that now may violate existing legal contracts), the correct course of action would be for Congress to take responsibility for their earlier failures and directly remedy them. Instead, they levy punitive taxes aimed at allaying public opinion while jettisoning any responsibility for the situation.

    As a taxpayer, I’m frightened that Congress would be so aloof about passing such an exorbitant tax to “fix” a problem that most everyone outside of their body agree they had a role in creating—it may not be my income this time, but I’m afraid that won’t always be the case.

  7. DR

    Education? Where? Surely your not referring to the same system that educated these pinheads in the first place. Our system is being catastrophically undermined by socialists who have infiltrated the entire educational system since the establishment of the Dept of education by FDR. Let’s get real here, the problem IS there education… we are being over taken by the so called intelectuals. Let’s de-educate these government loving fools.

  8. GCC

    It must be a sign of rampant dependence on government and other greater powers when one assumes that a mention of education is necessarily referring directly to any established “system” of education.

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