Bailouts, not bonuses, are the problem

March 27, 2009


If you wonder why the U.S. stock market now resembles a blue-light special at Kmart, look no farther than the churlish reaction to the news that insurance company AIG paid a piddling $165 million in bonuses to its employees earlier this month. Call me naive, but I agree with AIG boss Edward M. Liddy when he says his guys are “the best and the brightest.”

They work for a company that’s gambled in the securities market like a Vegas drunk, with about the same luck, and has admitted to writing its financial statements with the creative flair of a Stephen King novel. Yet they’ve nonetheless talked the U.S. government into bailing it out four times in six months.

And we’re not just talking about fleecing that universally-acclaimed-as-dumber-than-a-rock George W. Bush, either. Three weeks ago, AIG scored again off the smartest man in the known universe, President Barack Obama, whose government not only forked over another $30 billion but agreed to new terms that essentially mean AIG can pay the money back in buffalo dung.

In case you’ve lost count, that means AIG has extracted $180 billion from Washington in the past six months. Are we going to quibble about a 1 percent sales commission on a deal like that? Those guys could sell hurricane insurance in the Gobi desert — I’d want them working for me any day. Luckily, they are; taxpayers now own 80 percent of AIG.

To be fair, outwitting the government does not seem especially difficult these days, when so many officials are suffering from a rare disease that obliterates their short-term memories. Treasury Secretary Timothy Geithner said he was shocked, shocked to learn on March 10 that AIG was paying bonuses — even though he’d been questioned about them in an open hearing of the House Ways and Means Committee a week earlier, and had promised to do something about it.

And that paled before the tragic memory loss of Sen. Chris Dodd, D-Conn., who was so freaked out by the bonuses that he proposed a special tax to take them back, forgetting completely that he was the one who stuck an amendment into the stimulus bill the Senate passed last month that specifically OK’d the AIG bonuses. (Nobody’s asked him, but it’s a good bet that the $103,000 in campaign contributions that Dodd got from AIG and its executives during the last election have also slipped his mind.)

Nonetheless, the AIG people seem so clever that I’ve started to wonder if the bonus payments were part of a deliberate ploy. How else do you explain that Congress and the public as well are spending all their time screaming about what amounts to chump change compared to the money the government has dropped into corporate tin cups since September?

Since then, Washington has promised something in the ballpark of $900 billion in bailouts to blundering banks, mismanaged automakers and other various corporate deadbeats. And that was before Monday’s announcement by Geithner that the government wants to buy up to another $1 trillion in bad assets.

For all the anti-corporate rhetoric coming from Obama and his allies in Congress, they’ve yet to say no to a single one of these things, not even to repeat customers. A large part of the AIG bailout was to pay off its debts to Goldman Sachs, Citigroup and other financial institutions that had already gotten handouts of their own. We’re even bailing out foreigners: European banks, including Deutsche Bank, Societe Generale and Barclays collected $90 billon of the AIG package. Raise your hand — with your wallet in it — if you think the German, French or British taxpayers will be covering any of our losses.

Yet the same politicians who were fine with all that spending now are ready to kill over the AIG bonuses. (Literally: Chuck Grassley, the Republican senator from Iowa, said anybody who cashed a bonus check should commit suicide. And soon, before Congress raises the inheritance tax.) Sen. Chuck Schumer, D.-N.Y., called the bonuses “Alice in Wonderland business practices” and added: “It boggles the mind.”

Well, for sure, senator, somebody is through the looking glass here. But I don’t think it’s the employees at AIG.

— Glenn Garvin is a columnist for the Miami Herald. His e-mail address is .



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