Tuesday, March 17, 2009

Outrage over AIG: the same old hypocrisy, lies and corruption

Let it never be said that I didn't warn about this from the start. I rhetorically asked last November, "what bank would lend you money to repay debts that you owe others, when you likely can't repay that latest loan, and then the bank will loan you an additional 79.4% of the initial amount so you can sell...assets...to repay the entire loan?" In February, AIG said it won't sell any assets to repay the federal government, because it couldn't find any buyers. After announcing a $61.7 billion loss in 4th quarter 2008 (the most for any company ever), AIG simply relied on the federal government to give it another $20 billion "infusion."

And it has now given $165 million in bonuses to top executives, the first part of $450 million that it says it has to pay out. AIG claims these were "promised," "contractually obligated" and "retention bonuses," despite the fact that 11 of the recipients don't even work for AIG anymore.

Now every limelight-seeker in the federal government, from Obama to every freshman Congressman, is blue in the face from screaming about this, throwing out words like "irresponsible," "waste" and "taxpayer money." Chief among the critics is Chris Dodd, who received $103,100 in campaign bonuses from AIG during the 2008 election cycle, and snuck in an amendment into the stimulus bill that -- surprise, surprise! -- protects the AIG bonuses.

Congress is looking to institute a special tax on AIG bonuses to recover the money. CBS radio had a soundbite of Chuck "The Schmuck" Schumer saying it would be 100%. The point has already been brought up that such a tax is a bill of attainder, hence unconstitutional. But since when did that stop the federal government from doing anything else unconstitutional? Obama's former law professor has suggested how that can be done via loopholes, and this asshat Michigan Congressman proposing a "surcharge" tax that applies only to companies that are at least 79% owned by the federal government. Of course, AIG is the only such company. That's how the so-called "Amazon tax" survives here in New York state, though its exemptions clearly shows that it was aimed at Amazon.

Pure hypocrisy from the feds should never surprise us. Not to downplay that giving AIG anything is a waste of taxpayer money, but let's put things in perspective. The federal government will blow through $165 million in not even 30 minutes, $450 million in 1.3 hours, and the $170 billion guaranteed to AIG in just under three weeks. And that's going by the "mere" $3 trillion in federal spending for the 2008 fiscal year (not including what's spent on the Iraq and Afghanistan wars, which are about $200 billion more!). But why should government ever care about spending and proper record keeping when it's not its money? A "shadow holding company" was set up for AIG's toxic assets so that AIG doesn't have to list those assets on its official books. In the private sector, this is called accounting fraud.

It also turns out that for all their accusations, Obama and Co., particularly Tim Geithner, have known about the bonuses for several months but only now are trying to stop it. Let's not be the least bit shocked, though. It's more than just hypocrisy. Just as this entire crisis has been engineered by the government so it can take over major industries, it's another subtle power grab for the feds. No doubt one of the "critics" will himself say that they can't pass a bill of attainder, so this is a sneaky step on the road to a tax on bonuses regardless of company. Mark my words.

Claire McCaskill threatened, "We state the obvious in the letter, bonuses should not be given for failure." If memory serves, she's the same who said executives of companies receiving TARP funds should be compensated no more than the President, i.e. $400,000 per year, including bonus. I don't know if she's too stupid to see the simple, easy solution, or if she's so agenda-driven that she ignores it out of ideological convenience. How about, you know, not putting Americans on the hook for AIG's idiotic business decisions? Then AIG can pay whatever it wants, and drive itself into the ground for all we care. If it goes Chapter 7 or 11 with no ability to meet these bonus "obligations," then its executives can stand in front of a bankruptcy judge and explain precisely why they deserve the compensation when the company failed.

If "we the taxpayers" hadn't been forced to hand over our money, then we all wouldn't have been thrown into the same leaking lifeboat. We could have all exercised individual decisions in trusting AIG, reaping the rewards, missed opportunities or bad consequences of what was solely our choice.

Had AIG gone bankrupt, it certainly would have affected lots of other companies, but sometimes part of a forest must burn down so it can grow back fuller and with more life than before. But that isn't even an appropriate analogy: when a company goes under, its assets and infrastructure don't just disappear. The Bear Stearns and Lehman Brothers buildings and all their employees didn't just vanish from the planet; they were reabsorbed into the economy. So AIG would have been liquidated, with all its holdings and buildings distributed among creditors, who could then make use of "what's left" as they see fit.

The importance of allowing firms to go bankrupt, as Walter Williams recently said, is so that the rest of us can learn from the bad decision. AIG going under would have been a lesson to everyone else: first to those who never wondered if such a big company in precarious financial condition could have trouble fulfilling its insurance obligations, and second to other insurers who are on or thinking of going on the same path.

A friend recently got a new policy with AIG, and I pointed out the craziness of it all: his teenage daughters' future earnings are guaranteeing AIG's ability to pay out on his policy. It really is all so absurd, and it won't end.

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3 Comments:

Blogger Capital Freedom said...

Absolutely! But it's not a leaking lifeboat that taxpayers are patching or putting water into. It's a bonfire that we are throwing billions of dollars into, and those dollars will never be returned to their rightful owners.

Wednesday, March 18, 2009 2:03:00 PM  
Blogger DSporn said...

Speaking of hypocrisy, Perry,it's interesting that you only criticize democrats by name.

Back when Bush started this whole wave of bailouts, the republican leadership stated strong opposition to the fed. gov't. having any control over payments made to executives of private companies. Mitch McConnell, John Boehner and Eric Cantor all chimed in energetically. But the moment they saw a chance to sling mud, they changed their tune and and passed the blame.

I don't know about you, but I'm looking forward to their long awaited proposal on the "right way" to deal with this mess.

Thursday, March 19, 2009 4:24:00 PM  
Blogger Perry Eidelbus said...

If you're calling me a hypocrite for accusing only Democrats, you'd better look around my blog first.

Last October, I said, "It won't matter who wins the election. Under Bush, we've already trudged enough on the road to nationalization of education, health care, energy and now finance. Soon it will all be complete. Good heavens, people, wake up." I said much the same about him and McCain here and elsewhere. If you check my labels Republican hypocrisy and Republican idiocy, you'll find most of my entries on that. I think I've missed some in tagging.

So kindly don't act so poorly and make assumptions when you have such little information.

There is one Republican who has consistently said the truth about what's really happening and what must be done, but the Republican Party has painted Ron Paul as a kook. Mark Levin is one of many shills who won't even take your calls for his radio show, if you tell his screener you're a Ron Paul supporter.

Thursday, March 19, 2009 8:18:00 PM  

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