I don’t think AIG execs should be the scapegoats that Congress has turned them into. Of course, I also strongly disagree with how AIG has handled the bonuses. It doesn’t make sense to me that you would give people bonuses, when those people have not saved the company from bankruptcy; that’s where the company would be, if it weren’t for the bailout. And I think that’s where it should be. Our economy was in a credit bubble that collapsed. Why are we trying to sustain a bubble? Doesn’t that make for a very shaky foundation?
One of my biggest concerns with this situation is how riled up people have been about $1.65 million dollars worth of bonuses, which amount to about 1% of the total that the government (representing we the people) gave to AIG. Do we really think this is the only misuse and waste of taxpayer dollars that this and other bailout companies will cause? I think there’s a bit of blame that could be shared with our elected officials for so hastily passing such massive debt spending, without spelling out the stipulations. Interestingly there was some language about using the bailout money for bonuses, but that was removed before passing the bill.
Also, I don’t like the idea of coming up with ways to retroactively punish the company and its employees. I particularly don’t like that the House passed a bill trying to impose a tax on those employees. A lot of people will say, “But we can’t have them stealing our money.” I’m quite irritated by that as well; however, I’m quite concerned when I see our elected officials rousing the people into a mob-like fury against a small group of people. The laws of our lands should be equitable for all. If we target this group this time, it sets a bad precedent. Then the next time somebody is doing something we don’t like, we just rile up the people and impose taxes or other forms of punishment on that group.
Rather than being so quick to punish these people who were not acting illegally (Irresponsibly? Yes, but not illegally), and implementing taxes that we would find extremely unfair if aimed at ourselves or other minority groups, we should make a ruckus and simply clarify how bailout money is to be handled going forward.
What’s interesting is that we are stuck with this company. In normal conditions, our disgust could be demonstrated by not buying the company’s product, causing it to fail or severely stumble. That would be a strong lesson to the company and other company leaders, helping them to avoid such poor decisions. However, in this case with AIG, because we have bailed them out and won’t allow them to fail, it will only cost us more as the government has to pump more money—our money— into the company to make up for people not wanting to do business with them. That means we end up paying twice for a product we don’t want.
There are problems all around with this AIG case specifically and plenty of blame to be shared, but my biggest concern is that we allow ourselves to become so focused on this one instance that we lose sight of the bigger long-term implications. Wouldn’t we be in much better shape, if we, including our representative government, behaved more responsibly with our money and kept in mind the defense of our fellow citizens, recognizing that allowing one group to be targeted makes defending another group more difficult?
All that being said, two good pieces of news are emerging: 1) at least a third of the bonus money is being returned, and 2) the tax bill that passed the House last week seems to be losing steam and likely won’t make it past the Senate.
I’ll readily admit that while I have followed this pretty closely I may have missed some important details and am open to additional insights others may have. Please share your two bits, so that we can learn and potentially avoid making such huge mistakes at the federal, state, and personal financial levels.
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After publishing this post, I ran across a post on the Weakonomics blog that covered this same topic, with some additional interesting points. “AIG Bonuses Have You Pointing the Finger in the Wrong Direction.”
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I'm Michael Crowther, and I'm passionate about sharing the peace of mind that comes from budgeting, saving (including debt elimination), and investing.