Bailout money is all the rage lately, with just about every pundit, politician and journalist putting their two cents in. Unfortunately, the ones who are expressing realistic solutions are few, far between, and receiving very little attention in the glare of the frustrations.
Politicians' anger over the behavior of A.I.G. has already been mentioned, as has the problem I'm addressing here.
Andrew Ross Sorkin has finally mentioned the real problem with attempting to pull back the bonuses from the A.I.G. executives. The knee-jerk reactions I've been seeing from the supposedly well-versed advisers and politicians in Washington are disturbing to say the least, when one bothers to consider Sorkin's arguments for the bonuses.
If you think this economy is a mess now, imagine what it would look like if the business community started to worry that the government would start abrogating contracts left and right.
No matter how much we might want to wish it so, there is no justifiable reason to even attempt to get the A.I.G. bonuses back. Sadly, it has to fall under the "fool me once, shame on you..." adage. We gave the money to that company with no strings attached. We spent the past 16+ years watching as our leaders deregulated the financial world for the benefit of their friends on Wall St. Our only recourse now is to rebuild those regulations, and stop giving money to companies without conditions that are agreeable to the people.
Bluntly, doing anything else would be illegal, and would set the stage for even more problems. We can't just run about willy-nilly negating contracts - we have to make laws and regulations to allow it first.
But what about the commitment to taxpayers? Here is the second, perhaps more sobering thought: A.I.G. built this bomb, and it may be the only outfit that really knows how to defuse it.
A.I.G. employees concocted complex derivatives that then wormed their way through the global financial system. If they leave — the buzz on Wall Street is that some have, and more are ready to — they might simply turn around and trade against A.I.G.’s book. Why not? They know how bad it is. They built it.
If your plumber leaves you with a flooded bathroom, you don't call your electrician to fix it.
When my father was alive, he created an extremely confusing system for keeping his files. No one in his office, including his boss, could find anything, and my father bragged that was how he managed to keep his job. After he died, the company he worked for had to hire three engineers to take his place, and they gave up on trying to figure out his system. It was easier to just start over - but that put the company behind on contracts. I have no doubt in my mind that the workers at A.I.G. who received those bonuses are in a similar situation. No matter how much we may hate it, we need them to fix their own mistakes because they have a better chance of doing it quickly than anyone new would.
The bottom line is that A.I.G. is a painful and expensive lesson. Let us hope that our leaders are learning fast, and get busy. Next time they cut a check, there had better be laws to back them up, and keep the money from being misused.