Bonus III

Click on the following link. It expresses my opinion on the Bonus furor better than anything I could write myself.

http://www.nytimes.com/2009/03/25/opinion/25desantis.html?_r=1&scp=3&sq=AIG%20&st=cse

This piece, published in the New York Times on March 25th, comes from an executive vice president at AIG who was involved in its financial products division. The upshot is this: he took a $1 per year salary and was promised a now-dreaded and reviled "retention bonus" to stay with AIG and attempt to help the company minimizes its losses in 2008. The author had nothing to do with the credit default swaps that were the primary cause of AIG's downfall.

Let's start with the premise that someone who makes a million dollars per year is not inherently evil or greedy. If I'm wrong, let's throw away all of our televisions because most of the folks we watch on major networks are earning that kind of money. After all, no one wants to be accused of being a hypocrite.

If we can get past that hurdle, what is really making us so angry about AIG retention bonuses? Is it the fact that most of us will never be offered one? Is it because we know all we need to know about the thousands of employees and what their role was at AIG (including the AIG guy who might have sold you car insurance)? Wouldn't we rather know more about the folks in the credit default swap game, at what level they worked (i.e., should we punish the administrative assistant who worked for one of the "bad guys"?) and from whom they got their marching orders?

It is quite possible that there are scores of AIG folks who are truly responsible for the mess they created. It is not remotely possible this mess was a conspiracy of thousands of employees.

To me, this was a case of a lazy government winking at or turning a blind eye to potential disaster. Bundling up and selling off mortgage risk as an investment product was clever indeed, but it took a lot more than AIG to make it all happen. It took shady real estate appraisers, mortgage brokers, banks and the purchasers themselves to get us where we are today. Sub-prime mortgages, backed by nothing more than a hope of ever-increasing real estate values and the ability of borrowers to keep flipping their property, were the ultimate modern scam. Much of what was happening should have been heavily regulated or criminalized. I've said it before, but I wouldn't waste much time worrying about AIG bonuses. I'd spend my time writing to my representatives in Congress and asking them to explain why they were either too disinterested to know what was going on or unwilling to do the politically unpopular thing and pass laws that might have kept a few million people from buying their dream house, but would have avoided millions of foreclosures. Don't expect them to express any remorse or regret. They'll tell you that you should be angry at AIG because that's easier. And no, your representatives will not return the campaign contributions from employees at AIG or any other financial institution.