The populist backlash against AIG continues as folks from every quarter (here is one of the few articles in favor of keeping them) coming out against these bailouts. It almost seems like a contest to see who is the most outraged. What seems outrageous to me though is that we have spent several days now hyper analyzing these bonuses while it's nothing more than after thought that the tax payers continue to fund a company with absolutely no plan for anything close to long term viability.
Whatever your view of these bonuses, they amount to about $165 million. That is peanuts compared to the nearly $200 billion that the tax payers have sunk into AIG. While we scream and express moral outrage for these bonuses, there is no outrage that this company is in business strictly to make sure that everyone they owe gets paid.
This is what happens when a company gets nationalized. It becomes a political entity not a business entity. Whatever your view of these bonuses, their ultimate outcome will have negligible effect on the company's continued viability. Yet, no one, NO ONE, can produce a plan to keep this company viable in the long run. This continues to be the case even though we have sunk nearly $200 billion into the company. Yet, there is absolutely no outrage that we have sunk hundreds of billions into a failing entity. There is, however, outrage that we have paid out hundreds of billions to incompetent and corrupt executives.
Yet, the president has pronounced that the Treasury Secretary has been charged to do everything he can to make sure that these bonuses aren't paid. He's even said that no more bailout money will be given if these bonuses are given. Think about that. We have dropped nearly $200 billion into the company even though it can't be viable. Yet, we will stop bailing them out if they pay out hundreds of millions in bonuses.
This is happening because the average tax payer doesn't really understand what is going on with AIG. They don't know how to make them viable. They do, however, understand when executives get bonuses even though the company was bailed out with tax payer money. Of course, fixing problems because of their political rather than economic nature is no way to run a business. It is, however, the future if more banks and financial institutions get nationalized. Each and everyone will go through something like this. We will get outraged over something morally reprehensible yet financially negligible. We will all do it because we don't really all understand high finance (apparently those that run AIG don't understand it either), but we will do it when bonuses are paid out.
Make no mistake. If all banks, or even more banks, are nationalized we will go through the same sort of politicization of business that has happened with AIG. The current controversy surrounding AIG is the best example we have not to nationalize any of them.
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