Sure, you may think rewarding people for crashing capitalism is a bad deal. But it's not. Just listen to Columbia professor, Charles Calomiris on NPR. First off, you're just making a knee jerk reaction, and should stop sticking your nose into things you know nothing about.
I can't, sitting here today, and neither can you, judge from a distance and without knowing the details, judge what's warranted and what's not. ... None of us know exactly who these bonuses are going to and for what reasons. ... The point is, it's very hard to micromanage from a distance here to determine if a payment is helpful to an institution.
This is all completely normal. In fact, they're doing it for you.
The reason why we compensate people in the financial industry not just with a smaller salary than they would otherwise get but with more of their compensation in bonuses, is because we want to incentivize them not to lose money. We want to incentivize them to make money. ... It doesn't really make sense to get rid of bonuses, especially for people we're hoping will make wise decisions so they don't lose us even more money.
Can you imagine the damage people would do in those spots if they weren't the really Top People fueled by multimillion dollar bonuses? We really have no choice. People need to get over this thing, and the biggest failure of the Obama administration? Not pushing people to accept this as the cost of doing business.
We need to do this. We need to do it aggressively. We need to do it for you. It's a hard sell, it doesn't sound right, but in fact it is. ... We as a country need to come together, stop being angry, and start thinking.
After all, it's not like we're funding a bunch of anonymous fiscal miscreants who undermined decades (hey, centuries) of the American economic system and left us all on the hook. Not at all.
So what should we do? Wait for it, you're going to love this.
The people at AIG are now working for us! We own 80%, and really more than that. We own the whole "bad side" of the obligations. What we need is, we need to compensate them so they stop losing money for us.
In other words, we're not paying bonuses, we're paying AIG to stop doing what they've been doing. If it makes it easier, don't think of it as a bonus, think of it as a bribe.
Calomiris makes the point that, as a college professor, he doesn't make bonuses. Which is good, because if he was being paid on the basis of the intellectual quality of what he was passing on to his students, he'd have to take out a loan (or maybe get AIG to provide a credit default swap). Fortunately for the poor professor, he has another source of income. He's the Codirector the Financial Deregulation Project for the American Enterprise Institute.
While we're worrying about the staffing at various federal agencies, can we take a moment to undo some of the damage at NPR? Anyone still looking to the AEI for wise counsel is beyond the bounds of reason.