There is a sentiment out there that the media and political furor over the AIG bonuses (and soon, the much larger Merrill Lynch bonuses) is a distraction from the real issue: getting the financial system back on track. President Obama himself apparently subscribes to this viewpoint:
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.
More in the extended entry.
|
STATE BLOGS
