The recent scandal about executives at AIG receiving bonuses of $165 million reminds me of the backdrop to the French Revolution. In a breathtaking moment of "let them eat cake" oblivion, these people have continued to leech the taxpayer's money. Only in this case it's even more repugnant, because the money they seized was a benefactory lifeline -- a privilege accorded by the government's triage as the financial markets collapsed.I'm fearful of how much money has lately been sunk into companies run by people without principle. I understand too why there's a desire for bloodshed in the public outcry. What's come to light is the fact that even in a society founded on democratic ideals, capitalism enables every industry to develop its own monarchy--leaving the financial and economic fate of the populous in the hands of those who are entirely self-guided. We don't expect our fellow man to sabotage millions of his peers. But we also don't live in a culture that fosters ethical thinking or civic duty--both of which are essential to tempering the excesses of free market capitalism. At this juncture the government is our only ally, and, guillotine-style, we want them to bring a fist of justice crashing down.
It looks as though there's some progress being made: 9 top AIG executives have been persuaded to return their bonuses, totaling $50 million so far. But there are others overseas whom the government may not reach, and who in any case may be insulated from US jurisdiction. We also have to consider the fact that several executives have either refused to return their bonuses or have resigned in the wake of giving them back. This is a damning flip-off to the sufferings of the populous, as it signifies that those who've brought us to financial ruin haven't ceased to profiteer.
Nonetheless, as the furor has grown, I've realized that this is a moment when what we need is a temperate hand - not a Robespierre - at the helm. In his February 24th speech to Congress, President Obama said that he would not "govern out of anger." Although this may not satisfy our carnal desires to see executives carried to execution in a tumbrel, it's the only way to get out of this mess without dessicating the economy.
Nonetheless, as the furor has grown, I've realized that this is a moment when what we need is a temperate hand - not a Robespierre - at the helm. In his February 24th speech to Congress, President Obama said that he would not "govern out of anger." Although this may not satisfy our carnal desires to see executives carried to execution in a tumbrel, it's the only way to get out of this mess without dessicating the economy.
I realize that Obama himself has condemned the executives in question. This doesn't mean we get to see their heads roll. We have to follow the legislation that's in place to protect and manage our society, even if it means we can't legally block or tax these bonuses. The AIG issue is too dangerous and sensitive to mismanage at a time like this, when the public (and that includes me) is severely wound up, and the opportunity to bypass legal obligations for the sake of retribution is tantalizing close at hand. We saw what excesses that led to in 1789.What we do need is to get on with it and find a plan that works. Paul Krugman doesn't think the administration is on the right track; he's probably right. But he's also right to say that "the public want Mr. Obama to succeed." I am anxious and angry about the financial situation, but rectifying it isn't in my hands. All I know is that at least I have a President I can finally trust. I trust Obama because he has the insight to see how quickly the winds are changing these days, and to pull back from potential missteps. I trust him because - unlike our French predecessors - he's trying to balance the people's needs with a plan to get our economy out of the ICU. Ultimately, we need these banks to function and we need credit to flow again.
I obviously don't have the answer. What I do know is that 1789 is a long way off but dealt some important lessons. We won't save ourselves if we govern out of anger.
I obviously don't have the answer. What I do know is that 1789 is a long way off but dealt some important lessons. We won't save ourselves if we govern out of anger.
AIG received $85 billion from the government. That is $85,000 (eighty five thousand) million. $165 million is less than 0.2% of that. People do not have the perception for comparing these huge numbers, everybody could imagine a million or ten million, but handling 85,000 million would be way too much for most of the population to handle.
ReplyDeleteIf you get a loan of $2,000 and then go to Starbucks to buy a coffee for $4, nobody is going to complain despite the fact that it is 10 times more than what a coffee should cost.
People also tend to forget the difference between cause and correlation. Just because these managers were there when the crash happened, it does not mean they were the cause of the problem. So why not go and sue all former managers of AIG for every bonus they ever received? I guess nobody would like to do that either. And if you analyze the problem, you will eventually find that the cause is some hard to understand socio-economic mass phenomenon whose regulations require thoughtful handling.
Nevertheless it is more important to handle the 85,000 million wisely, than stigmatizing 0.2% that cannot be reversed at this time anymore. Yes, it might be an important step to calm down the masses, but it is not as important as the collective brain of the society (aka Blogosphere) thinks it is.
I totally take your point, and I think one of the biggest problems around is that the legislation that passed this money over to AIG back in November didn't come riddled with enough restrictions. Congress dropped the ball, and now we're all paying for it.
ReplyDeleteIn terms of this being 0.2% of $85 billion, OK, that's like skimming the cream off the top. But the principle stands. With all of the lack of ethical credibility that's coming to light (Madoff, hello?), even $165 million, which for most households in this country is itself unfathomable, matters.
I agree with you that making an example of these executives shouldn't be the big point - as I say above, I'm not in favor of the 'head-rolling' mentality because I think it's pointless. Plus, to be fair, you're right in the sense that there's a bigger problem in this society wherein if you drop $100 on the ground, someone's going to pick it up and instead of putting in the bank, going to pop out to buy a $6.50 latte. And we wouldn't blink an eye.
The point is that this is bailout money -- funds that should have been kept intact and pre-emptively restricted in its uses. But taxpayers also entrust companies like AIG with a high level of fiscal responsibility -- if we thought they were run by 'everyman', we wouldn't safeguard our money to them. That's that. But they continued to make use of taxpayer money to line their own pockets -- money that they were supposed to use in order to CHANGE - not repeat - flawed practices!
Congress should have been clearer in their November legislation, but it's disappointing and even loathsome that these executives (20 or however many) didn't pick up the ethical slack. Government needs to get itself together but it would help if the people at the top cooperated, even to the tune of stopping short of helping themselves to $165 million--which to them is apparently just a drop in the bucket anyway.
i agree, it might not be a lot in percentage terms but it is morally wrong, and with that amount of money, mortgage conditions could be improved for a thousand families. besides, does it really take bonuses for retention? where are the execs going to go in this economy?
ReplyDeletein principle, i agree with krugman on this but if Obama did anything more drastic, the cries of "socialism" from the repubs would be deafening.