Saturday, March 21, 2009

Phony Outrage Alert

The Administration and Congress have been slamming AIG this past week for doling out executive compensation packages and bonuses to employees despite AIG receiving TARP money (and for the record, AIG is being used as a conduit to prop up banks around the world for the credit mess that started with the "affordable housing" mess and credit defaults and toxic paper outside the TARP regime). They're busy railing on the $165 million (or is it $218 million) that AIG is going to be sending out to its employees in the next few weeks.

Congress, led by Rep. Charles Rangel (D-Tax Cheat/NY), has pushed for a 90% confiscatory tax on all income earned by individuals receiving the bonuses from companies that have received $5 billion or more in TARP aid. That ignores the economic benefits that the bonuses have on the NYC metro area economy, let alone the ancillary benefit that such money has around the nation. It also ignores that the bonuses reflect a fraction of a percent of what the government has doled out to the banks and AIG thus far in their quest to prop up the banking system. The amount here is a rounding error under usual Government math practices, but the real crime isn't the AIG bonuses, but the bailouts in the first place.

It's hilarious to hear President Obama claim that he was blindsided by the bonus situation, especially since Obama was busy railing on the bonuses back in January. His Administration also knew that these bonuses would be paid out and his Treasury Secretary knew that the bonuses would be paid because he and Sen. Chris Dodd (D-AIG/CT) pushed to get language inserted into the porkfest stimulus package to authorize those payments. The situation with the bonuses has been known for months, and yet Congress declares its outrage and demands accountability from the new CEO of AIG, who had nothing to do with the bonus compensation packages in the first place and was brought in to clean up the mess left by the prior leadership group.

Keep in mind that Congress provided a bailout to Citigroup, and set conditions on its executive compensation and bonuses. It chose not to do so with AIG.

Why is that the case? Well, AIG has quite the record with its lobbyists. They got quite the return on their dollar; spreading the money among top Democrats, including Barack Obama (in his capacity as US Senator), Chris Dodd, and others. Speaking of Dodd, it seems that his actions require far more scrutiny from the media and his fellow Senators. He's skated along despite clear evidence of benefiting from cozy arrangements with Countrywide Home Finance (friends of Angelo plan) and inserted the AIG provisos that enabled the bonus money.

The real issue is that the government is engaging in outrage and attempting to cover its tracks for its miserable handling of a mess that it initiated all those years ago in the name of affordable housing. One bad policy was tacked on to the next, like a house of cards, and the current bailouts are exacerbating the mess by throwing trillions of dollars into the marketplace to unstick the credit markets because banks don't know how much they have on their books and don't want to lend to those who are a credit risk (despite Congress demanding that they continue providing subprime mortgages).

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