Poor Ed Liddy. Hauled before a Congressional subcommittee yesterday he must have felt like the object of a multi-player Whack-a-Mole game. He took offense at one comment, only to have his interlocutor confirm that such was exactly his intention in making it. The disclosure of receipt of death threats by AIG employees was acknowledged, but probably not with such reassurance that the potential targets are eager to venture from their houses.
After a full dose of this verbal mutilation, Mr. Liddy offered that he was encouraging bonus recipients whose salary exceeded $100,000 to return half the bonus money. Too little, and likely too late, as the witch hunt for any half-plausibly responsible party continues. Hardly a wonder that the President has temporarily abandoned the capital fortress for the more congenial venues of a Los Angeles suburb town meeting and an appearance on the Tonight Show.
But ol’ Ed may be on to something. As Andrew Cuomo, New York State’s Attorney General seems intent on determining, those having pocketed the bonuses may have little protection from public disclosure of their names and respective extraordinary emoluments. Save of course, the seemingly attractive defense of having, after due consideration, returned them in their entirety.
As every parent knows, the instillation of desired juvenile behavior involves the careful application of both positive and negative reinforcement. And what, even allowing for the presumed adulthood of the AIG’ers at issue could be more conducive to subsequent right action, not to mention recouping the bonus money, and quelling the unseemly rush to judgment and execution of sentence, the latter two not necessarily in that order?
Surely not all eyes will weep for those with salaries of $100,000 having to make due without what were, in numerous cases, bonuses of stupefying magnitude. The total bonus pool of $165 million was spread over 418 employees – an average of just under $400,000 each and every one. And while some poor souls fell below that figure, fully 73 became first-time, or more likely multimillionaires.
After a brief period to allow calm reflection by those involved, AIG should accede to Congress’s request for the names of the 418 with salaries over $100,000, along with the amount of their bonus and, crucially, how much if not all has been returned.
One would hope those making the generous, not to mention prudent decision would be properly recognized, perhaps even partially exonerated for their past roles in leading AIG over the brink. For those choosing otherwise, well, the resulting scarlet letter might be more figurative than Hester Prynne’s, but might better serve to identify and shame.
Thursday, March 19, 2009
Madness
No, not the seasonal celebration of collegiate team ability to put a ball into a netted basket. We refer rather to the sentiment so memorably ellucidated by Howard Beale in “Network:” “I’m mad as hell and I’m not going to take this any more!”
Bringing these references to mind is, of course, the ongoing spectacle occasioned by payment of outsized bonuses to many of the very same AIG worthies responsible for bringing the global financial house of cards down around their – and our ears. It develops that AIG, having been showered with $200 billion in an as-yet unsuccessful effort to keep it vaguely afloat, dispensed some $165 million in bonuses to 418 lucky employees. And former employees, as 52 of the recipients no longer grace AIG’s payroll, a fact which somewhat undercuts the rationalization of the bonuses as necessary to prevent the slow-motion train wreck that is AIG from doing further damage. Politicians of every stripe are lining up for their sound bites expressing outrage at this unconscionable perversion of something or other, vowing to take all steps necessary to rescind the bonuses while their recipients, in one of the more extreme scenarios, are encouraged to fall on their ceremonial swords. Presumably in full public view.
Well, we’re all mad as hell. Politicians have no monopoly on anger at how a tiny group of individuals gamed the system for their own pecuniary benefit while the supposed regulators, perhaps mesmerized by a 14,000 Dow and beguiled by the apparent endless success of a let-‘er-rip approach to market oversight ignored any and all signs of an impending catastrophe and even the too-rare expert warnings.
If outrage could be monetized, this crisis would be over by lunch. But as we sharpen our poleaxes and head off for the castle in search of retribution and the heads of those responsible for, or at least proximate to the problem, some caution might be advisable.
Among the redresses being loudly advocated, including by some who should know better (front and center, Representatives Maloney and Frank) is the ex post facto voiding of the contracts under which the bonuses were paid. Or the imposition of a confiscatory tax rate on the misbegotten gains. While perhaps momentarily satisfying, these steps and similar others run a serious risk of exacerbating the problem.
Consider. The U.S. Government, through whatever agency matters not, undertakes to invalidate a legal document on the basis of its having regrettable, unforeseen results. Or, displeased with the financial doings of one or more of its citizens, subjects them to retroactive taxes on some portion of their income arbitrarily deemed offensive.
You want madness? The quick result would be a total destruction of any confidence in any undertaking, financial or otherwise, more complex than immediate barter. The notion of, for example, “full faith and credit” would be supplanted by Humpty Dumpty’s rather more flexible: “When I use a word, it means just what I choose it to mean, neither more nor less.” By these lights, a $10,000 U.S. Treasury note could, on a bureaucratic whim, be revalued at $50. The wretched citizens of Zimbabwe are too experienced with this sort of economic chaos, and theirs is a situation no sane person would welcome. Confidence that the vast amount of U.S. debt the Chinese hold is critical to their continued willingness to do so, and their disposal thereof would make the current meltdown look like a pleasant picnic in the park in late spring.
Let’s hold off on the mindless rage. At least before lining up the firing squad, let’s make sure it’s not in a circular formation.
Bringing these references to mind is, of course, the ongoing spectacle occasioned by payment of outsized bonuses to many of the very same AIG worthies responsible for bringing the global financial house of cards down around their – and our ears. It develops that AIG, having been showered with $200 billion in an as-yet unsuccessful effort to keep it vaguely afloat, dispensed some $165 million in bonuses to 418 lucky employees. And former employees, as 52 of the recipients no longer grace AIG’s payroll, a fact which somewhat undercuts the rationalization of the bonuses as necessary to prevent the slow-motion train wreck that is AIG from doing further damage. Politicians of every stripe are lining up for their sound bites expressing outrage at this unconscionable perversion of something or other, vowing to take all steps necessary to rescind the bonuses while their recipients, in one of the more extreme scenarios, are encouraged to fall on their ceremonial swords. Presumably in full public view.
Well, we’re all mad as hell. Politicians have no monopoly on anger at how a tiny group of individuals gamed the system for their own pecuniary benefit while the supposed regulators, perhaps mesmerized by a 14,000 Dow and beguiled by the apparent endless success of a let-‘er-rip approach to market oversight ignored any and all signs of an impending catastrophe and even the too-rare expert warnings.
If outrage could be monetized, this crisis would be over by lunch. But as we sharpen our poleaxes and head off for the castle in search of retribution and the heads of those responsible for, or at least proximate to the problem, some caution might be advisable.
Among the redresses being loudly advocated, including by some who should know better (front and center, Representatives Maloney and Frank) is the ex post facto voiding of the contracts under which the bonuses were paid. Or the imposition of a confiscatory tax rate on the misbegotten gains. While perhaps momentarily satisfying, these steps and similar others run a serious risk of exacerbating the problem.
Consider. The U.S. Government, through whatever agency matters not, undertakes to invalidate a legal document on the basis of its having regrettable, unforeseen results. Or, displeased with the financial doings of one or more of its citizens, subjects them to retroactive taxes on some portion of their income arbitrarily deemed offensive.
You want madness? The quick result would be a total destruction of any confidence in any undertaking, financial or otherwise, more complex than immediate barter. The notion of, for example, “full faith and credit” would be supplanted by Humpty Dumpty’s rather more flexible: “When I use a word, it means just what I choose it to mean, neither more nor less.” By these lights, a $10,000 U.S. Treasury note could, on a bureaucratic whim, be revalued at $50. The wretched citizens of Zimbabwe are too experienced with this sort of economic chaos, and theirs is a situation no sane person would welcome. Confidence that the vast amount of U.S. debt the Chinese hold is critical to their continued willingness to do so, and their disposal thereof would make the current meltdown look like a pleasant picnic in the park in late spring.
Let’s hold off on the mindless rage. At least before lining up the firing squad, let’s make sure it’s not in a circular formation.
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