From Iraq to AIG

Sometimes I wonder whether this country not only has lost its moral
compass, but does what it can to forbid its recovery. Then I remember:
of course it has. Iraq. Afghanistan. Black sites. Torture. Guantanamo.
AIG. Bear Stearns. George Bush. The gathering depression. Tim Geithner
turning courtesan for his old Wall Street pals. It's all of a piece.
There's no pretense of propriety or civility, let alone of anything
resembling moral behavior. There's greed. There's thievery. There's
more greed. Then there are apologies for the thieves and the greedy,
half of that compliments of the government we thought we'd elected to
clean house.

What brings it all in perspective is the scandal over the AIG bonuses,
and the lies surrounding the supposed contractual necessity of paying
them, or President Obama's revoltingly timid order to Geithner, of all
flaccid vertebrates, to do what he can to stop AIG from the paying the
bonuses. Don't taxpayers own this company? At last check, yes: 80
percent is U.S. government property, meaning you and me (and the
Chinese, given their stash of Treasurys) own it. But first, a little
clarity on the numbers, which even our dearly beloved Obama is getting
wrong. No, it's not $165 million in bonuses. It's $1.2 billion.

Here's how the Wall Street Journal broke it down today:

On Sunday, new criticism emerged about $450 million in bonuses paid to
employees of AIG 's Financial Products unit, which made a series of
bets on credit default swap contracts that drove $40.5 billion in
losses last year. [...] In his letter to Mr. Geithner,
dated Saturday, AIG 's Mr. Liddy said the firm's "hands are tied" on
making $165 million of the payments that were due Sunday.

The payments at AIG 's financial-products unit are in addition to
$121.5 million in incentive bonuses for 2008 that AIG will start making
this month to about 6,400 of its roughly 116,000 employees. Separately,
AIG is also making $619 million in retention payments to 4,200

Together, the three
programs could result in roughly $1.2 billion in retention and bonus
payments to AIG employees. At least some individual employees are
receiving millions of dollars -- at the financial-products unit, for
instance, seven employees will get more than $3 million for 2008,
according to an AIG document.

payments? To the employees who created the very mess they're being paid
to clean up? From a company owned by taxpayers? This is the company
Obama is putting silk gloves on before slapping around. The financial
crisis has exploded in his face. He couldn't do anything about that.
The political crisis now exploding about him is his own making, if he
doesn't demolish corporate moralists' claim that AIG is under
contractual obligation to pay these bonuses.

left and right facing tighter profit margins (not even bankruptcy) are
renegotiating contracts, firing people outright, imposing new wage
scales or, in some cases, shutting their doors. AIG is
bankrupt, and would have been so three times over had it not been for
three successive cash infusions from you and me. It has no contractual
obligations because it's no longer a company. It's in receivership. It
doesn't get to say what should be done anymore. It gets told what gets
done. Here's what.

  • Those
    400 employees at AIG's Financial Products unit who are mostly
    responsible for this catastrophe? Fire them. They're lucky they're not
    in prison. Then offer to re-hire them, if they're so crucial to fixing
    the mess they created. At Wal-Mart, meaning slave, wages. They'd be
    lucky to have a job. But here's the thing: they're not that
    crucial. Follow the money isn't just a reporter's trick. It's every
    financial regulator's and auditor's duty. Those derivatives AIG
    Financial Products gambled with weren't regulated. (Credit-default
    swaps, a speculator's wet dream for being entirely untracked and
    unregulated, were invented 10 years ago, and Congress purposefully kept
    them off the regulators' purview.) It's time to account for them. Why
    trust the crooks who embroidered them to unravel them?
  • For
    the rest of the company, it's not news to any of its 116,000 employees,
    if it still has that many left, that AIG is the mother of this
    recession, and that taxpayers own the thing. Nor is it news to anyone
    that when an individual or a company is in bankruptcy, it no longer
    calls the shots, especially not the sort of shots that drilled holes in
    a whole world's financial structure. Those bonuses for anyone else?
  • Tim Geithner? Fire him, too. No need for sorcery's apprentice on the job.
  • Last
    but not Lehman: Nationalize the goddamn thing and be done with it.
    Nationalize the banks, too. It won't make a difference: the catastrophe
    is already nationalized. Might as well be formally so, so time-wasting
    scandals like this week's bonus folly don't take up our time better
    spent polishing resumes and wasting time dreaming about jobs vanishing
    before our eyes.

of contractual obligation: it'd have been nice if our employers had
stuck to theirs while we did our part. But as always, it's never more
than a one-way street.

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