The AIG Bonus Mess: Let's Pick it Apart


I don’t pretend to be an expert on some of these things, but everyone seems to be all up in arms mad at AIG. Might I suggest that it’s not AIG, but our federal government, that deserves to have scorn heaped upon it for its actions? Here’s an article on Comrade Obama’s remarks, with comments from me interspersed:

WASHINGTON – Joining a wave of public anger, President Barack Obama blistered insurance giant AIG for “recklessness and greed” Monday and pledged to try to block it from handing its executives $165 million in bonuses after taking billions in federal bailout money. “How do they justify this outrage to the taxpayers who are keeping the company afloat?” Obama asked. “This isn’t just a matter of dollars and cents. It’s about our fundamental values.”

“How do they justify this outrage”, Obama asks. First, it’s not an outrage. Second, the answer is very simple: it’s called a contract. Look it up, liberal friends; it’s when two entities agree to act in a certain way, and it has the binding force of law. We may not like it; we may have our opinions about it. Those things are irrelevant; two parties, in this case AIG and certain of its employees, entered into contractual obligations to each other. What is outrageous is, first, that the federal government would intervene with taxpayer dollars in the first place, would second not have the common sense that God gave a bowl of rice, these contractual obligations coming to light only now, and third, would act all high and mighty, as though breaking one’s word was the moral thing to do.

“Our fundamental values”…oh, that’s just rich, isn’t it? My head is hurting. Never before in American history has government so readily entangled itself in the private affairs of businesses (some historian can correct me if I’m wrong on that); it’s not a “fundamental American value” to do so, nor is it a “fundamental American value” to break contracts. At least not in the America I know, love, and want to live in.

The bonuses could contribute to a backlash against Washington that would make it tougher for Obama to ask Congress for more bailout help — and jeopardize other parts of the recovery agenda that is dominating the start of his presidency. Thus, the president and his top aides were working hard to distance themselves from the insurer’s conduct, to contain possible political damage and to try to bolster public confidence in his administration’s handling of the broader economic rescue effort.

“A backlash…that would make it tougher for Obama to ask Congress for more bailout help”? We should be so lucky! Where can I further fuel the backlash? What can I do to keep us from throwing more bad money after good?

“This is a corporation that finds itself in financial distress due to recklessness and greed,” Obama declared.

OK…so remind me again…why is it we’re bailing AIG out? I’m a little stumped on that one…

And finally, there’s this zinger, that I cannot think up any better response to than derisive laughter:

He said he had directed Treasury Secretary Timothy Geithner to “pursue every legal avenue to block these bonuses and make the American taxpayer whole.”

No, thought of one: want to “make the American taxpayer whole”? Eliminate the IRS and the income tax, in favor of a consumption tax. Have the guts to actually veto pork-laden entitlement legislation instead of do everything you can to pass it (remember last week?). Better yet, just read the Constitution and do what it actually says.

That would solve a lot of our problems.


  1. Danielle on March 18, 2009 at 2:24 pm

    I understand they entered into contracts, but I just think it is unbelievable that they would be paying these people bonuses for driving the company into the ground. They claim in this video that these top people needed the money or they would leave, but I like the counter arguments in it much better- They don’t deserve bonuses, they deserve to be fired! Maybe bailing them out to begin with was a bad option, but allowing them to spend the money on new cars/houses/boats/designer clothes is ridiculous.

  2. Graham on March 18, 2009 at 4:52 pm

    I think, Byron, you’ve hit the nail on the head about this being a contract.

    We have had a similar fuss about the pension given to the Royal Bank of Scotland’s Sir Fred Goodwin, and the complaints from Labour politicians, such as how he should be stripped of his knighthood (erm, only ever done if Sir commits treason- as far as I am aware, having a large pension which makes socialists envious is not actually treason) or that it is simply not paid. The British Government is the major shareholder and has contractual obligations, like it or not.

    Am I over the moon that some of my taxes are going to Sir Fred’s pension? Not at all. But there is a contract.

    As for the idea from Labour’s deputy leader Harriet Harman (so politically correct that she is mocked as “Ms Harperson”) that such a contract is enforceable in a Court of Law, but is not enforceable in the “Court of Public Opinion”, I start to get worried. Who chooses the judges in the Court of Public Opinion?

    Once any Government indicates that it chooses not to be bound by contracts it either enters into or inherits, then there is one consequence- no serious company will do any business with it. Why sign a contract with a Government which then says “sorry, this contract is not enforceable in the Court of Public Opinion”?

  3. Byron on March 18, 2009 at 10:24 pm

    But the point is that they entered into contracts (and they didn’t pay people bonuses FOR driving the company into the ground; they paid bonuses because they were contractually obligated to). A contract is a contract. We can debate the wisdom of the contracts–and we might well be on the same side in that debate–but the fact is it’s not about what they deserve; it’s about honoring contracts entered into. Neither is it about allowing people to spend money on whatever; if the money is owed, by virtue of a legally-rendered contract, then the money belongs to those people, and they are free to spend it however they well please. We may not like it, but it’s not any of our business, frankly, and besides, our government should set certain ground rules before handing out money, not after the fact. I wouldn’t at all be opposed to the government putting as many strings on its money as it wants; in fact, I’m in favor of it. But it’s shoddy business on the part of our government–and hypocritical grandstanding of the worst kind by certain demagogues in our government–to come back now and complain after the government didn’t do its job.

    Further, do we know that these folks “deserve to be fired”? Is it possible that some of these folks actually prevented the situation from becoming worse? My point is that I think you’ve jumped to a lot of conclusions. Yes, I understand the frustration, because it looks bad, but I put the blame squarely on our own government before I do AIG.

    But of course, we shouldn’t have handed out money to begin with…

  4. Byron on March 18, 2009 at 10:28 pm

    Pip pip, tally ho, jolly good show ‘n all that, my good man Graham! Well put! If a government gets to the place where it is more concerned with the “Court of Public Opinion” than it is the actual courts, it’s time to toss that government out on its ear.

  5. Jack Brooks on March 20, 2009 at 9:57 am

    Madame LaFarge, knitting while the French dropped the guillotined heads of the nobility at her feet, is an example of someone who was quite happy with the Court of Public Opinion. Just like Barney Frankenstein wants the names and addresses of AIG executives published, in the hopes that mobs will attack them and thus distract attention from his own thievery.

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