17 March 2009

Extremism in opposition to capitalism is no vice

Well, what remains of capitalism, anyway. But I digress.

The bonuses that our benevolent fathers on the hill are so exercised about (and over which Charles Grassely, who took $26,250 from AIG in 2008, thinks these bonus receiving executives should commit suicide ) are retention bonuses.

There is more to this, of course. In typical journalistic fashion, news media report (and Congressmen spew) that these bonuses are being paid to people in the very division that destroyed the company by issuing billions of dollars in derivatives insuring risky assets. These people work in the division that destroyed the company. And, apparently, simply for working in that division -- quite apart from any consideration for the nature of the work they did -- they are actually responsible, as if they themselves made the decision to issue the derivatives. Perhaps they did, but we don't know. We don't know what these people did. We don't know what, if any, responsibility they have for the mess. They may have none at all. But they work in the division which caused the mess; and that is all we need to know.

And again: We're supposed to think these people are smarter than us. It staggers the imagination.

Nevertheless, what's completely odd is the fuss made over the $165 million spent to honor these contracts while there is relative silence about the billions in payments AIG has made to Goldman Sachs Group Inc and others. Specifically, AIG has paid $120 billion in cash, collateral and other payouts to banks, municipal governments and other derivative counterparties around the world, including at least $20 billion to European banks. Goldman Sachs received at least $13 billion. That's not only more than $165 million, it's more than half of the $173 billion in U.S. taxpayer money spent to rescue AIG. For any journalists and liberal politicians who might be reading (as if!), I'll do the math for you. While the pay-out to Goldman Sach's and the Eurobancs is 69.36% of the bailout money, the bonuses amount to a whopping .095%. Note, that .095% is not the same as 9.5%. And further note, just to make sure we're clear, that 69.36% is bigger than .095%.

I understand the payout to Goldman Sachs: Save the U.S. economy. But if the bailout was to save the U.S. economy, then why the payout to the Eurobancs? Why should taxpayer money, needed to prop up the taxpayer economy, be sent overseas? Could it be that the money was paid out because these payouts, like those executive bonuses, were contractual obligations?

Whatever the answers to those questions, it seems a bit disproportional, like one of those crazy mirrors at the carnival, to focus so much on the .095% rather than the 69.36% -- the $165 million rather than the $120 billion. I doubt we'll hear the likes of Charles Shumer or Barney Frank threatening to get the $120 billion from those foreign countries, or the $13 billion back from Goldman Sachs.

A side-bar comment addressed to the aforementioned Charles Grassely. I agree with the Confederate Yankee: If dishonor in the use of taxpayer money is grounds for committing seppuku, then you first. No one beats Congress when it comes to dishonor in use of taxpayer money. And unlike government, AIG didn't get our money from us at gun-point. And the shareholders of AIG didn't approve the bailout plan. (Does anyone remember what a shareholder is?)

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James Frank SolĂ­s
Former soldier (USA). Graduate-level educated. Married 26 years. Texas ex-patriate. Ruling elder in the Presbyterian Church in America.
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