AIG Reality Check

With all the hype and hysteria coming from Congress (both sides of the aisle, unfortunately), we should take a look at the facts around the AIG bailout controversies.

First of all, there has been much outcry that “bailout funds” were being “laundered” becaused they are being paid by AIG to various banks and financial institutions, including some – gasp! – foreign banks.  The outcriers are ignorant.  AIG is an insurance company, right?  And they sell . . . insurance!  Now, we are bailing out the company not because their portfolio has been “marked [down] to market” alone, but because this means they cannot procure even short-term credit to cover current claims.

Now, unless you are a complete idiot or an Obama voter (but, I repeat myself), you know that policyholders who pay their premiums on time are entitled to have their legitimate claims paid.  If that policyholder is a bank, even a foreign bank, so what?  If they have a legitimate claim, and we supplied billions to make sure AIG could pay its claims, what the hell did we expect would be done with the money?  (Again, let’s exempt Obama voters from these tougher questions, lest they get headaches.  Perhaps a nice NCAA bracket would be more their speed . . . )

The other, and bigger, controversy is over the bonuses paid out to AIG executives for business retention and new business.  The myth coming out of Congress is that this money goes to “the people who bankrupted AIG in the first place,” which is clearly untrue.  (We presume, of course, that this refers to the executives who allowed the company to rely disproportionately on mortgage-backed securities whose value was not transparent, instead of the actual culprits in Congress).

Most of those executives have already bailed.  The people getting the bonuses are the people who stayed on or came aboard to clean up the mess in exchange for a healthy bonus for success.  Succeed they did, reducing net liability from $2.6 trillion in August (when the bonus program was initiated) to about $1.7 trillion in February – saving the taxpayers almost a trillion dollars of potential liability.  For this, they earned a bonus of a little over .02% of the amount saved, as their contracts specified.

For this great service, we should be thanking them, not allowing ignorant Congressmen to release their home addresses and family members’ names so their barbaric minions can harass them.  These folks are being rewarded for doing their job by being threatened with death and having to hire security for themselves and their children.

WHY were they offered such bonuses anyway?  Because they are the best qualified people of a very limited pool who possibly could pull this puppy out of the pond and, if AIG wasn’t willing to pay them, someone else in the industry would happily cough up big bucks for such talent (which is obviously in high demand right now).  And if they quit and take other offers, as any sane person might after being demonized by moronic Congressmen and threatened by Obama’s ACORN brownshirts, then AIG will surely fail.

An AIG collapse, my friends, would make the Lehman Brothers’ failure look like a day at the beach.  The economic repercussions worldwide could be worse than the Great Depression, even without the other missteps and wasteful spending by the Obama Administration.

When you hear a loud noise from Congress, remember that the more vociferous and frenetic it sounds, the more likely it is completely untrue.