For the record, although I’m sure Ivan and I will talk about it on the next show… I think the AIG bonuses are crazy. But I think the proposed retroactive taxes to take them away from the people who got them are completely and totally wrong and misguided and a horrible horrible precedent. We want a government that feels free to decide after the fact that it doesn’t like that you made the money you made, and then change the rules so that they can take it from you… after you’ve got the money (and quite possibly after you have spent it, not knowing it would be taxed)? Really? We want that? Really?
These bonuses were written into contracts that AIG made. They were probably contracts AIG should not have made. But they were already done by the time the bailout happened. They were obligations, just like the other debt obligations AIG had. Of course AIG was going to pay its debts with the bailout money. That is what the bailout was for after all. Duh.
And no, we shouldn’t have put strings on the bailout saying that AIG should pay some debts but not others. If we really felt that way, we should not do a bailout at all. Let the damn thing go out of business, then if there are creditors we think deserve it more than others, bail THEM out.
All and all, with every turn of every screw in this whole saga, I’m more and more convinced that the “right” thing to do, going back all the way to last fall, is to not have bailed out a damn thing. Not one company, not one industry. Not the financials, not the autos, not nothing.
Would we have a worse recession right now if we had? Probably. I won’t try to argue against the folks that say these bailouts were necessary to prevent that from happening. I’ve always had severe reservations though.
And at this point I’m thinking that perhaps an extremely severe recession where most of the companies in most of these industries go completely out of business… taking with them all of the other companies… and yes regular people… who depended on them… is really the only way to get the bad blood out of the system. To completely and totally kill (for at least a generation or two, these things always come back) the idea that the bad practices that resulted in the mess are things NOT TO DO. Right now, I don’t see that lesson REALLY being learned. People are just waiting for the tide to turn and then they will go right back to where things were.
We need to get back to the point where if you are going to try something, you really do shoulder almost all of the risk for it yourself, rather than trying to bury the risk in layers of insurance products designed to make the risky not risky. Hey, guess what, things are still risky. You’re just moving the risk around and making it harder to see. It does not go away. And maybe insurance makes sense when it is against things which are actuarially highly predictable like death and disease and fender benders… but there should not be insurance against bad business decisions. It just distorts the whole incentive model and encourages people to take on very risky endeavors that are probably best left on the table.
How about a little caution and prudence instead? Sure, you don’t get as big an upside, but so what.
Anyway, I say bring on the damn depression. Let everything fail. Salt the earth. Perhaps there will be horrible pain for a generation. But what comes after that will be stronger because of it. Trying to prop this crap up MAY be helping things in the short term, but in the long term, it is just propping up businesses and business practices that deserve to fail. Let them die.
DIE DIE DIE.
Sam, you really don’t want a depression. You couldn’t fit all your old e-mails into the car you’d be living in if that were to happen.
Look… the base thing here is that the person (sam dodd) who put in the provision CLEARLY CRAFTED to support the payment of these bonuses needs to be strung up, covered in honey and dipped into an ant-hill. There’s no reason he’d have come up with this idea on his own ASIDE from being in the pocket of AIG and like-companies.
he’s as corrupt as the republicans have shown themselves to be over the last 8 years.
I’ll just have to scan them!
Dodd only put in what he did because the Treasury Department asked him too. Besides, the language basically just said that obligations entered into before the bill was passed were not affected, and only future things could be restricted, which is perfectly reasonable.
The problem here is that the government shouldn’t be in this business at all. At all.
And OK, so we decided that we are. Well, we should still be looking only at changing future behavior, not screwing with contracts that were already signed (no matter how bad they were) or trying to get money back that was already given out.
Anyway, the whole thing is just a crock. And worrying about the piddly millions represented by these bonuses, when orders of magnitude more are spent on all sorts of other things is just a massive distraction. This is a classic diversion. The mere fact that we’re all looking in this direction undoubtedly means that far far worse things are going on with the REST of the money. But we won’t notice, because we’re paying attention to this nonsense instead.
Oh, and it is CHRIS Dodd.
Seems like bailouts should be treated similarly to bankruptcies, eliminating or significantly lowering the amount due to creditors, forcing alterations to previous contracts, and throwing in a few rules to help avoid future moronic activities. Assuming they happen at all.
I don’t quite get the whole, “here’s your money, carry on..” thing they seem to have going.
Someone REALLY deserves a spanking here.
But that is exactly what they are trying to avoid with the bailouts… keeping them from having to ACTUALLY declare bankruptcy, which would require all of the things you are suggesting. Now, I agree, they should have just let them go bankrupt, which would mean you get all the standard mechanisms for deciding who gets paid in what order, etc. But they didn’t want that, they wanted the “give them more and more money and hope they use it wisely” thing.
They also presured some companies who DID NOT NEED MONEY to take it anyway, so you couldn’t tell which were in trouble by if they took money or not. So those companies are now WTF, you want t impose conditions? You can have the money back then.
LOTS of people need spankings.