Congress and the Obama administration seem to be in a bit of a tizzy over the $165 million of bonuses being handed out to A.I.G. employees. How a measly $165 million managed to garner quite so much attention in times like these is beyond me. Nonetheless, there are two important points that I found myself pondering after reading a few of the articles on the bonus scandal.
1) Bankruptcy is very useful. The problem with not letting firms like A.I.G. go bankrupt is that they are still bound by their contractual obligations, even when that means paying lavish bonuses to executives. Had the government allowed A.I.G. to go bankrupt, such contracts could have been suspended. And the government could still have stepped in to pay those of A.I.G.'s obligations that it deemed important to the American economy.
2) Treasury Secretary Geithner is willing to stretch the truth pretty far. In his March 17 letter to Nancy Pelosi regarding the Treasury's handling of the bonus situation, he proclaimed, "We also want to insure that taxpayers are compensated for any monies we cannot recover. Therefore, as part of our provision of recently announced taxpayer funds, we will impose on AIG a contractual commitment to pay the Treasury from the operations of the company the amount of the retention awards just paid." Am I taking crazy pills? The United States government owns A.I.G. And the company has just received another government lifeline. So, a candid translation of Geithner's statement would be something like: In order to pay back the taxpayers, we will take money from the company owned by the taxpayers (which, by the way, does not have any extra money) and give it to the taxpayers. Nonsense.
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AIG gets $173 billion and then doles out $165 million in bonuses. Though %wise the sum is insignificant, the point is the story told by the bonuses: while the company holds out one palm to the taxpayer, with the other it gives at $1 million+ to each of 73 employees. Amid the talk of billions and trillions and bailouts and stimulus and meltdown, these are some numbers that people can actually comprehend and direct their frustration toward.
ReplyDeleteGood point Gabe. There is something easy to grasp about this part of the story that makes it a useful rallying point. I erred in saying that it was "beyond me" how $165 million could garner so much attention. I think it is good that Americans are voicing their displeasure. I just wish some of the bigger wasteful bailout expenses would get as much attention.
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