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 employees.
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.
Retention 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.
Companies 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? Gone.
- 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.
Speaking 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.
© 2009 Pierre Tristam