Macro Tsimmis

intelligently hedged investment

Time to get mad about the AIG bonus brouhaha

Posted by intelledgement on Fri, 27 Mar 09

The sanctimonious pillorying of the AIG employees who received bonuses earlier this month by our elected “leaders” looks more like a scene out of The Ox Bow Incident than Mr. Smith Goes to Washington. And it is wrong. It is stupid. And it is hurting us.

The basic rant goes, it is outrageous that tax dollars collected from hard-working Americans transferred to AIG have been used to pay bonuses to fat cat bankers who contributed not only to the downfall of the company but the systemic risk that threatened the whole system—and now being rewarded for their malfeasance.

However, the reality is, most of the bonus money went to folks who are manning the sinking ship on behalf of us (U.S. taxpayers who have an 80% interest in AIG), trying to unwind the mess and minimize the damage. Very few of them had anything to do with writing the credit default swap contracts that crippled AIG and threatened us all with systemic failure. They agreed to do this work—many with reduced salaries and some turning down offers from healthier companies—with the understanding that these bonuses were safe, and indeed they were agreed to under Bush and confirmed under Obama (the oft-discussed amendment Senator Chris Dodd added at the behest of Treasury).

Now that the bonuses have become a big tsimmis, the politicians are either running for cover or competing with each other to come up with ways to demonize and torture these folks, ranging from retroactive confiscatory taxes to threats to publish their names and addresses so their spouses and children can enjoy the fear and loathing.

Not only is this behavior unethical, mean-spirited, and a good example of poor leadership, but it is not in our own best interest. Check out this letter from an AIG employee published earlier this week in the NY Times. In driving folks with the expertise to ameliorate this crisis out of AIG, we are not only putting our $80B investment at risk, not only hurting our own company, but we are counteracting all we have done to avert systemic risk.

Our political leaders need to stop worrying about the $160 million and focus on the $80 billion. We expect leaders to help us make tough choices, to explain difficult circumstances to increase the odds good decisions will be made…in short, to lead, not to egg on a lynch mob. This political theatre is not just wrong, not just unseemly, but is actually deleterious to us all. What happens with our $80B will mean much more to all of us—and our children—than what happens to $160M in bonus money.

This effects you, and all of us. Your elected representatives are feeling the heat from know-nothing blowhards expressing their own fear and anger. Take the time to make sure your Congressman and Senators are not part of the problem here, and contact them to praise them if they have kept their cool, or give them what for if, in order to score some cheap shots, they are acting against yours—and everyone’s—best interests.


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