The Washington Post reports outrage on both sides of the aisle at failing insurance giant AIG’s payment of nearly $165 million in bonuses. Leading the charge of indignation is none other than His Highness, King Barry the Hopeful One.
King Barry’s anger is pretty hollow, however, since AIG would be contractually obligated to pay these ridiculous bonuses to these failing giants. We all know how dedicated he is to the rule of law (see: people who blew up innocent American’s must be released from Gitmo & are hereby called Unicorns of Happiness rather than “enemy combatants”). Since no one thought to renegotiate the contracts before we handed a failing, fiscally irresponsible company billions of tax payers dollars, AIG is legally bound to honor them. It’s a similar situation as that in the still failing auto industry bailouts late last year. After taking billions of dollars, GM is back, asking for more than they got last time. You can throw money at companies of all stripe, but unless you fix the problem (in the Auto situation a major problem was the exorbitant UAW contracts that weren’t renegotiated, in AIG’s case, the bonuses are such a negligible part of the whole need, that the outrage is mostly symbolic. Not misguided, just not amounting to much that would make a real difference).
What chaps my chorizo most is that George Bush and Hank Paulson, Secretary of Economic Destruction and Chaos were the masterminds of this. AIG is firmly on Dubya’s tally board. We were told they were “too big to fail,” and it turns out that they’re still failing. AIG is just the latest indication that bailouts don’t work. Here’s what I learn from this.
- Government intervention kills the free-market – if AIG hadn’t received billions of OUR money, this would simply be another story in missing the point. We would be mocking their foolishnes, guffawing as they fiddle while Rome burns, then we would watch the competition swoop in and fill the gap left by the defunct entity. As it stands now, however, my kids and grandkids who aren’t even born yet have a tax payers stake in a failing corporation. If we don’t let the weak or foolish ones die off, the very fabric of our economy is weakened, as it is right now. Rather than already beginning the recoverp process from AIG’s failure, we’re still on the wrong side of it .
- The government is incapable or unwilling – The government won’t handle this because their greatest value is political expediency. Government doesn’t have the chutzpah to make the hard decisions that will make this work, because they aren’t motivated by profit, but by position. They think in terms of election cycles. What we need is a few greedy players who sustained this crisis by making good decisions who will make the hard decisions and bring fresh capital. As it stands now, AIG (Fanny & Freddie too) will forever be government entities at best. If this were private capital that swooped in and “bailed out” AIG (buy buying out AIG), I guarantee those execs wouldn’t be getting bonuses, they’d be getting new jobs.
- King Barry is all locked up, and change is coming – he’s stuck. He needs to inject more capital to keep the mess afloat, but he can’t do it because he’s burned political capital. His anger and that of those closest to him (Geithner, in particular) will only fuel the fire. He pins the problem on Bush, and rightly so, and then turns around and does similar (although not exactly the same) things by propping up companies that shouldn’t be propped up (i.e. He practically begged G.W. Bush to bailout the Auto Industry, and if Dubya had listened to me, he’d have let Barry do it himself.)