Friday, April 19, 2024 -
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Blessings in disguise: the fat AIG bonuses

Question: If Bush was wrong on bailouts, why is Obama repeating the same mistake?

Bush did not know what he was doing last September with his $700 billion bailout, and Obama doesn’t know what he’s doing, either. Proof: these obscene executive bonuses at AIG — for failed executives. If the Obama administration didn’t know about them when it affirmed the latest bailout to AIG, then it has no one to blame but itself.

But of course it didn’t know. It couldn’t. Just like Bush couldn’t. Because no one can know the details of billions in sudden bailouts — the operative word being sudden. There is no way intelligently and effectively to spend that kind of money quickly.

Not to mention, neither Bush nor Obama even knows where the money is going. Just now are a few basic details of the true addresses of the AIG bailout money coming out. And this, only after months of pressure.

The blessing in disguise behind the contractually obligated bonuses at AIG is the wrath in the public and, more important, the wrath on Capitol Hill. People are finally waking up to the absurdity of tossing around trillions of dollars without proper preparation, without basic rules in place as to how the money is to be distributed, and to whom — and to whom not.

Congresspeople are finally looking at the alternative to massive bailouts, and that is bankruptcy. We see no other way that the ridiculously high contracts at GM will be undone and rewritten ($73 dollars per hour at GM as opposed to $47 per hour at Toyota, total compensation). We see no other way to control massive companies (if that’s even the word) such as AIG. Hand them money, and they will do with it as they wish, the public be damned. Only bankruptcy will force a change. Because only bankruptcy will put all the cards on the table, and break all the unwise or greed-based contracts.

The idea that executive bonuses are needed to keep the expert personnel to save companies like AIG is absurd. It was these supposedly expert personnel who are responsible for the losses. To keep them on is to put the fox in charge of the henhouse. Failure is not to be rewarded by executive bonuses. Save us, however, Mr. Obama’s outrage. It was he and his administration who were supposed to know about these bonuses before awarding new, massive bailouts. But they couldn’t know because they acted in haste.

We noticed that gasoline was over $4 per gallon not so long ago, and now it is roughly $2 per gallon. No massive bailout solved the problem. We are becoming ever more skeptical that massive bailouts, as opposed to a clean and supervised bankruptcy, will solve any problems with failed banks, insurance companies and industries. Everyone talks about how terrible it is that Lehman Bros. failed. Terrible for whom, and in comparison to what? Terrible for the shareholders, to be sure; but against the massive framework of the national economy, not so terrible. And compared to the bailout of Bear Sterns and, by now, the bailout of countless other entities? Why, it seems that far more resources have been expended on bailouts than their failure or supervised bankruptcy would have entailed.

It is time to rethink. Bush’s original (and, at the time, “only”) bailout was not well thought out. Secretary of the Treasury Timothy Geithner has given no more evidence of thinking things through, only of acting on instinct — he doesn’t even have his major assistants in place! That’s not government by research and policy; that’s government by the seat of one’s pants. And it doesn’t work. Exhibit A: the sudden surprise of AIG executive bonuses.

Repeat question: If Bush was wrong on bailouts, why is Obama repeating the same mistake?

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