I wish I worked at AIG. The insurance giant, whose name I believe stands for something like “Arrogance, Inability and Greed,” is the poster child of much of the economic mess Wall Street got us into and has received an unparalleled, jaw dropping, Third World-nation-GDP-sized $170 billion in taxpayer dollars to keep it afloat. And it just doled out bonuses totaling $218 million in December and March.
Reward for failure? I can handle that.
It’s hard to defend such a misuse of taxpayer funds. One can be certain it wasn’t private funds that paid these bonuses. It was taxpayer dollars. And that is just wrong. But just as inappropriate is the talk this somehow compares to the federal government’s response to Hurricane Katrina. Further, the amount of rage-fueled energy Congress and the masses have exhibited towards AIG would best be directed elsewhere.
Outrage has been swift and widespread. Sen. Charles Grassley, R-Iowa, opined that AIG executives accepting the bonuses may want to consider suicide. The House hastily passed legislation that would levy a 90 percent federal tax on bonuses paid to bailed-out businesses. Add local taxes, and some employees would end up paying in taxes more than they had received in bonuses.
Congress hauled before them AIG CEO Edward Liddy, who had next to nothing to do with bonuses, agreed to buy a previous CEO before AIG was rescued by tax dollars. Committee members raked him over the coals for the $165 million doled out in March. They seemed to show very little interest in the rest of the $170 billion AIG had received.
But members of Congress aren’t the only ones upset. Populist rage is boiling over on Main Street. Citing death threats, AIG executives are warning AIG employees to hide AIG logos, or ID cards when travelling. Protestors descended on the Connecticut homes of AIG officials. People are coming up with clever and insulting meanings for the AIG acronym.
Meanwhile, the anger directed at AIG is revealing a disturbing tendency in our members of Congress: ignorance. If no one in Congress realized that private companies give bonuses, even bailed-out ones, then maybe it’s time we had less career politicians in Congress and a few more people who have actually had to work in private industry for a living. If Congress can demand auto manufacturers restructure the contracts they have with union workers, why not demand the same from white-collar industries?
A disciplined winding down of AIG, for all its financial tomfoolery, is essential. Congress is aware of that. And while Congress had little to do with AIG’s bailout — it was the Federal Reserve and the Treasury who put taxpayer dollars on the line for AIG — it must understand when you don’t allow a company to go into bankruptcy, you allow that company to remain in a position where it must honor its contractual agreements not just to the corporate entities it is beholden to, but also to its workers.
Couldn’t the Obama administration dispatch someone who can afford to say something unpopular — Vice President Joe Biden, I’m looking at you — to tell the American people the workers at AIG and other bailed-out firms are doing work that is essential to the health of the American economy? And companies don’t just owe corporate entities who hold their debt, but also the workers that run their company?
The hasty bailouts crafted by the Fed and Treasury aren’t flawless, but it would be self-defeating if populist rage were to effectively tie the hands of Congress in the unavoidable bailouts of the near future and effectively halt the nascent recovery of 2009.
Further, and I won’t be the first to argue this, but the $165 million that Congress is most infuriated with is a pittance compared to what we have already put into propping up AIG. It amounts to less than 1 percent of the bailout funds AIG has received. We aren’t just paying for AIG bonuses, we’re paying for AIG coffee mugs, pens, toilet paper. We’re paying the wages of AIG’s workers. That’s what happens when you own the lion’s share of a company. The people at AIG and Wall Street aren’t all saints, but making them into demons is unproductive. It’s time to move on.
Gerald Cox ([email protected]) is a senior majoring in economics.
