AIG execs don’t want to talk about the bonuses they continue to pay themselves, but they did release a list of the banks and financial institutions that received federal bailout money through AIG. This is, I assume, their way of saying they are putting most of the money to good use.
Still, what about those bonuses? Robert Reich said,
Had AIG gone into chapter 11 bankruptcy or been liquidated, as it would have without government aid, no bonuses would ever be paid; indeed, AIG’s executives would have long ago been on the street. And any mention of the word “talent” in the same sentence as “AIG” or “credit default swaps” would be laughable if it laughing weren’t already so expensive.
More significantly,
Apart from AIG’s sophistry is a much larger point. This sordid story of government helplessness in the face of massive taxpayer commitments illustrates better than anything to date why the government should take over any institution that’s “too big to fail” and which has cost taxpayers dearly. Such institutions are no longer within the capitalist system because they are no longer accountable to the market. So to whom should they be accountable? When taxpayers have put up, and essentially own, a large portion of their assets, AIG and other behemoths should be accountable to taxpayers. When our very own Secretary of the Treasury cannot make stick his decision that AIG’s bonuses should not be paid, only one conclusion can be drawn: AIG is accountable to no one. Our democracy is seriously broken.
Put another way, AIG already has failed. The question in front of us is not whether AIG should be “allowed” to fail, but what role government should play in softening the broad economic fallout of the failure. It’s not about rescuing AIG, but about rescuing everybody else. It may be that propping up AIG somehow is a sensible move, but the execs who took it into failure need either to be removed or made to understand that they are no longer in charge, and everything they do is now open to public scrutiny.
There is talk of a “bailout backlash.” Showing the AIG execs the door would be a hugely popular move right now, I think, and would reassure the public — well, that part of the public that thinks, as opposed to the brainless part — that the Obama Administration isn’t just throwing good money after bad.
Paul Krugman has some interesting comments about the financial crisis in Europe. In a nutshell, Europe is facing the same financial meltdown, but it’s doing even less than we are to deal with it.
Europe’s economic and monetary integration has run too far ahead of its political institutions. The economies of Europe’s many nations are almost as tightly linked as the economies of America’s many states — and most of Europe shares a common currency. But unlike America, Europe doesn’t have the kind of continentwide institutions needed to deal with a continentwide crisis.
This is a major reason for the lack of fiscal action: there’s no government in a position to take responsibility for the European economy as a whole. What Europe has, instead, are national governments, each of which is reluctant to run up large debts to finance a stimulus that will convey many if not most of its benefits to voters in other countries.
Strictly speaking, Europe is not a confederacy, but in some ways it acts like one. Confederacies of sovereign states have a long track record of quickly crumbling apart. Sometimes “big government” is a big advantage.
Update: Josh Marshall writes,
What’s really driving this forward — and what makes it such a dangerous moment for the White House — is the jarring image of the administration’s impotence.
Secretary Geithner found out about the bonuses. He told AIG CEO Edward Liddy it wouldn’t fly. And Liddy, in a curiously imperial letter, tells Geithner that much as he is pained by the situation — to blow it out his ass. Which he apparently proceeded to do.
I think the Obama Administration needs to take this situation in hand before public support for the President’s economic policies melts away.
I don’t want to show AIG exec’s the door.
I want to take them to the top floor, show them the open door to the elevator shaft, and tell them your bonuses are at the bottom. But you have to jump to get your money.
Elevator’s are for the taxpayer’s.
And yet, despite the costliness of institutions being “too big to fail,” the government is creating more bigger institutions by taking over (nationalizing) small ones and folding their assets into the already large ones. So the ones that are now large but not “too big to fail” will become larger and eventually will become “too big to fail” as well. How does this make any sense?
It’s important to remember that the government appointed Liddy to his position, so removing him would be more like repudiating the government’s own handling. Which may be appropriate, given the administration that was handling this at the time.
I think as far as these bonuses go, Liddy should be made to understand that this is unacceptable in spite of any contracts, and the word should go out to those who are contractually entitled to receive them that they may do so only on penalty of losing their employment, to which they have no contractual guarantee. The idea that these bonuses should be used to help retain the assholes who created this mess is insane.
I agree with Josh Marshall’s assessment..Obama’s top economic advisor has been saying that greatest obstacle to be overcome is a crisis of confidence— which is accurate in large measure. If Obama fails to exert control over this situation he’ll end up with a lot less confidence in his ability to gain control over the situation.
If Roosevelt could order the internment of Americans of Japanese descent, or Reagan could fire all PATCO union members in the name of protecting our national security or vital national interests, then why can’t Obama order a freeze of bonuses from companies who utilized bailout monies.
The issue to me is one of who is in control..not the bonus money itself. And it’s imperative to gaining the confidence of the American public for Obama to beat down the arrogance and sense of entitlement being displayed by AIG.
I’ll go back to my cloudy, but apt cliche to express the dynamic at work here. ..A child learns what they live.
They talk about the public anger as if this is some irrational response that they must work around to continue on the path that is making people angry, and rightfully so, rather than address that anger. To do this would be a huge mistake on Obama’s part. If they continue to see the problem this way, Obama could lose support from the public on the bailout and worse, provide a huge opening for the GOP.
This makes me wonder if they really what working people are faced with as a result of this crises.
That might be the most frightening three sentences I’ve seen in print in a while. What would make me less frightened would be nationalizing AIG and showing the whole executive suite the door. Yep, that would make me feel much better about a great many things.
Aside to Bill H: Don’t make the mistake of thinking that government will hold these assets forever in some huge asset ball thing. They are going to sell them at some point when they can get a reasonable price, hopefully to a collection of smaller buyers. And, btw, if government fails, we’re all toast anyway, right? So chill.
What’s needed is some reasonable reform on the process of approving mergers to avoid this too-big-to-fail syndrome. Yeah, I get that companies want to merge to have a larger capital base so they can take on bigger jobs. But maybe it’s time to say, hey guys, more smaller is better than fewer bigger and we’re just not going to approve any more mergers in this area. If $100 billion in annual revenue isn’t enough for you, well then get over it.
Tax payers own 100% of all publicly traded companies. It isn’t the fact that the Federal Government gave them 170 Billion of the bail out dollars. Even without that, its 100% owned by tax payers. The stock market is down, wiping out a couple trillion dollars worth of gains, meaning less taxes to the government, because the Democrats refused to stop playing politics and letting people believe that owning a home is a right, even if the owner doesn’t pay for it. The executive officers are due the money, its owed them. Tax dollars are not. The only way to legally prevent this from happening is to not have required the banks to give the loans to people whom they knew couldn’t pay them back. If you think the banks were stupid enough to do this on their own, I think you’re missing what really caused this problem. GSE’s crashed meaning Government Supported Entitities of Fannie Mae and Freddie Mac and it started this snow ball effect because the fact the tax payers through tax dollars owed Fannie Mae and Freddie Mac and Fannie and Freddie owe the other banks money. Franklin Raines, a Crony of Barack Obama was CEO of Fannie Mae and made 96 million in bonuses. Why aren’t you complaining about that? The GSE’s and the New Deal failed this country in a big big way. If this Congress and this President want to solve this problem, Major changes to the New Deal need to be made. NO MORE GSE’s! Not more, but less regulation. And let the strongest survive and the weakest die, speaking of the big companies. That way it won’t hurt anyone but the stock holders of the failing companies instead of hurting everyone like Obama’s policies are doing.
“Tax payers own 100% of all publicly traded companies.”
Since when?
I think Micky really means “the stockholders have stock in publicly traded companies.” The rest of what he’s saying is just anti-progressive gibberish.
It sounds just like what all the other Libertarian nutjobs want. No regulation,
let the strong survive. How Obama’s policies are hurting people is beyond my understanding.
Did someone slip a mickey into micky’s kool-aid? And a house is not a home!
Many years ago I was an owner in General Motors Corporation under the uniform gifts for minors act..and I was no taxpayer…I wasn’t old enough to have a job at the time, let alone pay taxes.
The bonus payout excesses at AIG are just the tip of the iceberg of what is happening with the other Wall Street bailouts including Bank of America. Working productive Americans are bailing out the same crooks that destroyed our economy along with 45% of the wealth in the world and now the American taxpayers and our children will be forced to live a far lower standard of living with reduced prosperity and opportunities due to this but only we pay the price.
Washington has bailed out the banks, Wall Street & their Washington special interests and much of the cost is added to the national debt to by paid by this and future generations while real estate and investments continue to fall. Find out what a growing repudiate the debt movement could mean for treasuries, the dollar, gold and the stock market and how this is a better alternative than Washington’s plans to monetize the debt in future years and tax and destroy our remaining wealth by depreciating the dollar.
[Remainder of post deleted by Maha]
Ron, dear, you’re an idiot. You’re providing a prescription for Great Depression the Sequel. I’m deleting the facebook address because I don’t want to be responsible for destroying the world. I’m sure anyone who wants to find you can find you.
Micky,
Whoa, boy!
It’s not St, Patrick’s Day yet. Put down the double Irish Whiskey and stout!
What did you major in when you went to college? Gibberish? Because that’s what I’m hearing from you. Typical Libertarian, right-wing gibberish. I congratulate you. You’re fluent in it.
If you ever have a lucid thought, please feel free to contact us again.
Ron,
Stop hanging out with Micky. You two make “Dumb and Dumber” sound like Huntley and Brinkley.
In 1974, AT&T was broken up in an Antitrust suit brought by the Justice Dept. The result was increased competition, greater innovation, and reduced cost for the consumer. Frankly, I think there is room to expand the legal rationale for antitrust legislation to include breaking up business entities who start to approach the threshold of ‘too big to fail’. In and of itself, that behemoth stature is a threat to the citizens it should serve.
The concept of ‘too big to fail’ has fascinating reverberations. Is God too big to fail? If God started to fail, then would we have to bail God out? Or even nationalize God?
Or take a Buddhist perspective. If Nirvana be blissful nothingness, then is Nothing too big to fail? And again, should we bail out Nothing? Nationalize Nothing? After all, we paid for it!
Of course it’s all nonsense. Failure is _always_ a possibility – though never an option.