I like a bit of contrarian reporting as much as the next person, but this little gem fromAndrew R. Sorkin in the business section of the times left me gasping.
The Case for Paying Out Bonuses at A.I.G.
The essential jist:
So here is a sobering thought: Maybe we have to swallow hard and pay up, partly for our own good. I can hear the howls already, so let me explain.
Sorkin's article floats two reasons why we might be better off:
- The "sanctity of contracts" (that is if the government breaks this contract, what contract won't it break?)
- The bonuses are necessary to "retain" the best and the brightest at AIG:
Let them leave, you say. Where would they go, given the troubles in the financial industry? But the fact is, the real moneymakers in finance always have a place to go. You can bet that someone would scoop up the talent from A.I.G. and, quite possibly, put it to work — against taxpayers’ interests.
"The word on the street is that A.I.G. employees are being heavily recruited," Ms. Meyer says.
Sorkin concludes:
Mr. Cuomo wants to know who A.I.G.’s lucky employees are, and how they have been doing at their jobs. So here is a suggestion for him. Get the list, and give those big earners at A.I.G. a not-so-subtle nudge: Perhaps they will "volunteer" to give some of their bonuses back or watch their names hit the newspapers. But in the meantime, despite how offensive and painful it might be, let’s honor the contracts.
Ok. I won't spend much time with Sorkin's "reasons" for paying out the bonuses because they have been addressed elsewhere. Suffice it to say that basic principles of contract law probably provide AIG an out for having to pay these bonuses: Neither AIG nor the employees in all probability executed the contracts imagining that AIG would be insolvent when they came due so changed circumstances could warrant modification or avoidance of the contracts. Moreover, the idea that if the government forces AIG to void the contracts it will be threatening the "sactity" of contracts everywhere is patent nonsense. This is not a slippery slope, Mr. Sorkin. Nor is anyone seriously arguing that the US Gov't will default on its obligations as a result.
Similarly, who really cares if the AIG folks leave? Does anyone seriously think that these people could work in the financial industry again if they are investigated for fraud and breaches of fiduciary duty by a US attorney's office, the SEC or the NY AG? Unlikely, at best -- regardless of the "word on the Street."
But what is really instructive here is not that Sorkin entertains or discusses these "reasons" to pay the bonuses, but that he does so entirely uncritically, and that he feels completely free to do so. This is astonishing in the week after John Stewart essentially killed Mr. Cramer -- and financial journalism as a whole -- for taking a similarly cavalier approach to their jobs.
Other than quoting to people whose views fit the theme of his piece, he appears to have done no checking to see whether what he was being told is reasonable or true. And, one need look no further than this blog -- or almost any other blog -- to see how thin the explanations that he was provided with are.
Now -- one could say that he is being knowingly contrarian and that his piece is more of an opinion piece than a news story -- analysis rather than journalism. But that lets him off too easy, I think. If you are told something and you want to write a credible piece about it, you need to check on what you are being told. Sorkin didn't check, because to have done so, even a little, would have led him to write about how superficial the arguments in favor of the bonuses are. In other words, Mr. Sorkin is guilty of the same sins as Mr. Cramer.
The sad and dirty little truth here is that AIG wanted to pay those bonuses and looked for any excuse -- no matter how thin -- to pay them. And Sorkin wants to provide a platform to justify them.
Perhaps it is too much to hope for that Mr. Sorkin and his ilk can reform themselves after comedy central skewered them.