As angry as the president is at the news about A.I.G., which he learned Thursday, Mr. Emanuel said, "his main priority is getting the financial system stabilized, and he believes this is a big distraction in that effort."
I disagree. The bonuses are not a distraction, because they are putting the bailouts back in the spotlight. The $165 million in bonuses to AIG are a hook allowing the country to refocus on the main act of kleptocracy that took place last fall and early this year: funneling hundreds of billions of dollars to the financial institutions that wrecked the economy in the first place. If it weren't for the bonuses, we wouldn't be talking about bailouts right now. As such, rather than a distraction, it is a move toward properly refocusing our attention.
The bonuses are also revealing that the bailout, no matter how well intentioned by lawmakers and the Obama administration, is actually being used by the financial institutions receiving bailout money only to enrich themselves. The people running these companies don't care about saving their firms, or saving the economy. We know this, because massive personal enrichment is emerging as a necessary condition for decision-makers at financial institutions to participate in the bailout program:
Officials at the Federal Reserve and the Treasury Department are increasingly worried that the controversy could discourage investors from joining a new government effort to revive consumer lending as well as a separate plan that relies on private money to buy toxic assets from banks, sources familiar with the matter said.(...)
A senior executive at one of the nation's largest banks said he had heard from several hedge funds that they would not partner with the government for fear that lawmakers would impose retroactive conditions on their participation, such as limits on compensation or disclosure requirements.
That's right: no matter the shape their company is in, and no matter the shape the economy is in, financial institutions will only take the government money if they can use it to give themselves huge compensation packages. For the people running these companies, the compensation packages are the necessary condition for their participation, not the state of the economy or of financial institutions. The people running the financial firms don't care whether or not their firms actually need the money, and whether or not the Obama administration's bailout program will actually work in turning the country around. If their bonuses or compensation packages are touched in any way, then they won't participate, no matter if doing so will save their firm or the economy.
The point is that the institutions to whom we are giving the hundreds of billions of dollars don't care about saving their firms or saving the economy. They only care about making themselves personally rich. If they cared about saving their firms or the economy, then they would participate in the bailout regardless of how it affected their compensation packages. However, since their participation is dependant upon personally receiving huge sums of money, then getting even richer is their primary motivation, not saving their firms or saving the economy.
If we are designing bailout programs to fix the economy, but we are giving the money in those bailout programs to people who only care about getting rich, then what are the odds that those bailout programs will succeed at anything except making the people involved rich? If the response is that our economy will only be healthy if we make people on Wall Street even richer, then I reject that premise. Making a small percentage of our country incredibly wealthy is not a necessary condition of prosperity for the country as a whole. The people to whom we are giving the money generally believe that, but I don't.
It is true that the bonuses are a small amount of the money. The real crime is that we are giving more than $700 billion to people who only care about getting rich, not about fixing either their firms or the economy. However, rather than the focus on the bonuses being a distraction, they are helping us once again look at the people who are stealing hundreds of billions of dollars from us, and reminding us that we should never again approve more public money for these greedy bastards.
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