by Big Dog on Mar 16, 2009 at 18:37 Political
Today the world is in turmoil because AIG is paying out 165 million dollars in bonuses that it is contractually obligated to pay. People are being whipped into a frenzy about this because AIG received about 170 BILLION dollars in taxpayer money as part of the bailout. The problem is, the government placed no restrictions on the money and now wants to dictate terms over existing contracts. If the government had provided proper oversight instead of handing out money like candy at Halloween then there would be room for this indignation but since it did not, oh well.
To be fair, the deal was made by the Bush administration and Obama inherited it but it was crafted by a Democratically controlled Congress. Many of the members of Congress (from both parties) who worked on this are still there and this is on them.
Barney Frank is claiming that the bonuses amount to rewarding incompetence. I think Frank’s pay is a reward for incompetence because he was instrumental in giving us this mess. In fact, nearly all of Congress gets rewarded for incompetence because people keep reelecting them.
The New York Attorney General, Andrew Cuomo, wants the names of all people getting bonuses. Cuomo is going to investigate whether any of the recipients had anything to do with the decline of the company. What does it matter? They had contracts and contracts are legally binding.
Barack Obama said this can’t be justified. It can if you go by the rule of law and see that Congress and the Bush administration allowed Hank Paulson to write the rules and gave him blank checks to hand out. These are the same people that forced solvent banks to take the money so that the ones who needed it would not be singled out as failing thus causing more problems. Wells Fargo paid lower dividends and owes a fortune in interest because money they did not need was forced upon them.
Regardless of all this I want to know what the big deal really is. My understanding is that the companies have to pay back the bailout money. If that is the case what does it matter how they spend it especially if there were no rules?
Additionally, I have heard a number of members of Congress defend the earmarks they added (to the stimulus and the omnibus) by stating that they are a small percentage of the overall sum. Commenters at this site have made the same claim in justifying the spending. If that is the case, the money AIG spent on bonuses is only a small percentage of what it received in bailout money and it is even a smaller percentage of the overall amount spent to bailout all banks.
If the Congress can justify 9000 earmarks by claiming they are a small amount of the total package why can’t AIG do the same with regard to the bonuses?
The bottom line is, both expenditures involve taxpayer money. There is no reason AIG should not be able to live by the same rules that Congress sets for itself.
The other reality is that Congress did a poor job of overseeing this. For all their whining about oversight and checks and balances, they certainly dropped the ball on this one.
Of course, they dropped the ball in the first place and that allowed the collapse to happen. Thank the indignant banking queen Barney Frank and his partner in crime Chris Dodd for that. The subprime problem and Freddie and Fannie toppled the financial world. The other problems were collateral damage.
Suck it up Obama, Frank (maybe that is not the right phrase to use with Frank) and the rest of you whiners. I did not like the idea of the bailouts to begin with and your lack of oversight in the process makes it even worse.
But, those folks had contracts and since you did not address them then it is unlikely you will be able to address them now.
A contract is a contract and all the bluster from Obama, Frank, and Cuomo can’t change that. They can say it amounts to rewarding incompetence but who allowed it to happen? Not providing proper oversight is the definition if incompetence.
As an aside, the government has given AIG the bailout money in about four installments. Do they expect us to believe that they could not have set some kind of rules on any one of those occasions?
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