Thoughts About The AIG Bonuses
Here are a few of my recent thoughts on this whole AIG (and other financial behemoths) bonus thing:
First, I hate AIG and the other financial behemoths for making very poor decisions for a long period of time, recklessly and in total disregard of the risks, and I want them to get what should be coming to them.
I really hate the Congress/Fed/Treasury’s joint decisions to give hundreds of billions to these bufoons. As Chris has pointed out repeatedly, it is a massive looting operation.
Therefore, I take a lot of offense when Congress/Fed/Treasury expresses "outrage" at the bonuses. It is nothing more than a dog and pony show put on for public consumption. As an attorney, I can tell you that the bonus deals, whatever they were, are binding contracts. They are simply a liability of the company and in that sense they are no different than the absurd derivitives contracts that AIG was writing that ended up bringing them down. Add to that the fact that these contracts (as I understand it) were negotiated sometime before the bailouts, that they were disclosed, that Congress/Treasury knew about the bonuses, the fact that they put in legislation allowing the companies to pay the bonuses, the fact that only bankrupcty would have voided these contracts, and the fact that the using government money to pay out about $200 million on bonuses pales in comparison to governement money to pay out $200 billion for purposes of paying off derivitive contracts. The whole thing is kind of like stealing.
The public does not understand why any of this was done or what it is all about. We are made to believe that our lives depend on giving all our money over at gunpoint. But it is offensive to the general public when they find out that employees of the financial behemoths, including AIG, got a lot of money in bonuses. So there is an outcry. And Congress/Treasury feel the need to put on a dog and pony show to show just how much they share the public’s outrage, when they are the ones who made this whole thing possible.
So now they decide to go even further, and TAX the bonuses 90%. Retroactively. Another very bad move. It is unfair. Everyone knows it is unfair. It is being done out of actual or feigned outrage. And it has the potential to backfire as hundreds of employees at big companies suddenly find themselves saddled with a 90% tax on bonuses that comprised the majority of their salaries and that they have probably already spent.
It’s one of those things that can have unpredictable consequences. Just like all those reporters and angry members of the public milling around the homes of AIG executives who have hired bodyguards.
What SHOULD have happened was AIG went bankrupt, and the employees’ bonuses were discharged.
What blows my mind is how effective the diversion tactic has been to draw attention away from real issues. The bonuses are 165mm against 160bn, or exactly 0.1%!!!
This is exactly analagous to the following:
- I steal a $100 bill from your wallet in broad daylight, making no apology for doing so
- You learn about it and start to react angrily
- I make it very clear and very public that I spent TEN CENTS – ONE DIME – of that $100 on a contribution to the Nazi Party.
- You and everyone else become so outraged that money was spent on Nazis that you become obsessed with getting justice for the LOUSY DIME I paid to an offensive recipient.
- After being publicly chastized, I reluctantly agree to pay back one half, or FIVE CENTS of the money I stole from you to give to Nazis
- Eventually, I will probably be forced (thru unconstitutional ex post-facto taxes) to give up the other NICKEL.
- Everyone forgets about the other $99.90 that I STOLE from you and spent on equally useless but less controversial expenditures.
What has our country come to? I don’t even blame the politicians any more. This is blatant, flagrant financial irresponsibility, and WE THE PEOPLE are standing by and letting it happen. We have only ourselves to blame for our tolerance and failure to act.Our government is out of control, we have a civic duty to impeach at least 1/2 of Congress, but we are so affected by fear and lack of comprehension of financial matters that we as a nation stand by and let these people bankrupt our once-great nation. It makes me want to cry.
As an attorney, I can tell you …
Wow – I’m having a hard time matching your picture to your statement. Do you guys clown around a lot at your office?
Last I heard, it’s now $218 million – but then who’s counting?
I agree with you guys that this is a surface manifestation of the underlying pattern of crime on the part of corporations and government. For example, AIG is a veritable criminal enterprise whose actions were fundamental to crashing the global finance system, and is now holding America and the world at gunpoint demanding ransom. It is philosophically incoherent to submit to this and be willing to pay the ransom largely in full (and probably be making payments in perpetuity) but become enraged over one particular detail.
The bonuses (whose amount, as Sam mentioned, they were still lying about; this scum really is incorrigible; they just can’t help themselves; you cannot rehabilitate them, you can either let them continue to commit their crimes or not) are not an aberration and they’re not an "abuse", they are typical, they are in character.
You will the continued existence of a fundamentally larcenous system, you will its petty muggings as well.
(I do of course disagree that, however silly and demagogic this legislation is, there is anything "unfair" to the creeps at AIG about it. Yes, when you have a mass murderer you should hang him for the murders. But if you instead hang him for insulting your sister, that may have shown a confusion regarding priorities on your part, but it was not unfair to the criminal.)
Here’s a few of my recent forum topics on the subject:
However, I hope that maybe this paroxysm of rage (on the part of the public, not the phony displays from Obama and Congress) is not just a tantrum but the beginning of a more sustained, fundamental anger and awareness.
Maybe we’re reaching a tipping point in the non-linear system, where it’s been stressed so far by such big blows, that one more small tap can shatter it.
With all due respect, hanging anyone for insulting your sister is an extreme travesty of justice. It’s not about the criminal. It’s about rule of law. If you make it OK to make a mockery of the legal system just because the person being penalized deserved to be penalized, you’re regressing to barbarianism.
The guilty party here is Congress, for authorizing the bailout that made it possible for them to do this in the first place. We should be responding with articles of impeachment against Frank, Dodd, Pelosi and Rangel. The people at AIG behaved exactly as any prudent person would expect them to behave. They are Wall Street bankers, and are widely known to be the greediest people on earth. If you give them a hundred billion then act surprised that they spent some of it on themselves, YOU not they are the idiot. The current witch trials are nothing more than a stage show designed to distract attention from the real culprits, the Congress and our new President. Sadly it appears to be working flawlessly. The ignorant American public has been successfully distracted by outrage at AIG execs, and has been duped into not seeing the real issues.
We have become such a lame and easily manipulated society. It’s really pathetic.
Erik, it would seem you and I then have a fundamentally different view of the alleged "rule of law" in this country.
You believe there still exists an intact system of law and good faith enforcers of that law, and that what we have here are just atypical abuses of it. I believe the evidence clearly shows the law itself is fundamentally broken, and we do in fact exist in a state of nature where the nominal law is just another weapon.
It is the finance industry (and corporatism in general) which has eradicated any rule of law in America. For decades they have acted in bad faith, against the people, against the country, against the very concept of law. Each and every political action has sought to (1) strip away all purview of law in the first place, (2) render any vestigial law or regulation which does nominally exist toothless, (3) even if there remained any actual law or regulatory enforcement, they sought to evade it, (4) as a social and political matter, if it comes down to it they flat out lie.
Here’s a few examples of what I mean. (These are just finance examples, but I could multiply them with examples from the environmental, detainee, food and drug, and consumer protection realms, to name a few.)
1. Obliterate rule of law de jure: At the turn of the century Clinton/Bush cadres, at the behest of the industry, repealed the prosthetic Glass-Steagal law (meant to prevent lawless situations which contributed to the Great Depression) and enacted a "law" which formally placed the CDS industry outside the law. This (the CFMA, I think) was not an action of law, but an action of anarchy. These actions were meant to place the finance industry in a Hobbesian state of nature where might (their money and political muscle) would make right.
2. Preventing enforcement: Under Clinton, when Brooksley Born wanted to enforce the law, she was shunned and fired. Many would-be conscientous regulators had the same experience under Bush (not to mention private whistleblowers like that guy, I forget his name, who tried to warn the SEC about Madoff for years). Now under the Bush/Obama bailout expedition we have the administration stonewalling on transparency law, refusing on principle to give the public its rightful information on who has received taxpayer money, who did the administration launder money to through AIG, etc.
3. Evading enforcement: How exactly (if we live amid good-faith actors) does a corporation like AIG which has benefitted so tremendously from the very existence of the American system and is asked to contribute so pathetically little in return still decide it has a right to evade even those meager taxes by offshoring operations? (And if we do live amid the rule of law, why does the so-called law allow this? This also goes back to (1).) Yet AIG’s actions here were so egregious even the Bush IRS balked at them. And today, hoping for better treatment under Obama (better than under Bush!), they’re suing to get a refund on prior enforcement of what was an absurdly low tax bill in the first place. That goes back to (2).
4. As if all that weren’t enough, now we learn AIG was lying about the amount of those bonuses. It wasn’t $165 million, it was $218. While this change to what was a relatively minor # isn’t important, that even here they couldn’t help themselves, they had to lie, it’s so engrained in their corporate culture, is important, because it’s typical and indicative.
(It should also be an embarrassment to any apologist who’s been arguing that people shouldn’t make a big deal about this because the number is so small. Evidently AIG itself doesn’t agree with them.)
Another lie which has been hinted at: I don’t have the link handy, but I’ve seen quotes to the effect that the vaunted "stress tests" are not in fact to be reality-based assessments of the solvency of the banks, but rather propaganda exercises which already have the predetermined result that the banks are fine and the public should have confidence in them and in whatever the administration says should be done for them.
This culture of the lie is endemic not only to a particular company. It’s endemic to the industry, to these administrations, to corporatist America as a whole, and to the existing system of law.
So we already have systemic "barbarism". Even a literal lynch mob could not be anywhere near as lawless or as barbaric as the system itself.
And if anyone were to treat these persons as outlaws in the classical sense, we’d only be treating them as they always sought to be treated, and have in fact been treated, all along.
It would just be in a different sense than what they wanted.