Roger's post here today captures some of the inanity swirling around the AIG situation over the past few days. In my view, the AIG focus is populist, boob-bait scapegoating - along with a (doubtless welcome) chance to trash Wall St. Everybody loves to trash it until they need a loan, want to make an investment, or want to start a business. It's a distraction from the real issues in the economy which pose hard and complicated questions. Tough finance and tough politics.
The previous owners of AIG (the shareholders and bond holders - me included, I am sorry to say) have already been thoroughly punished. Like it or not, though, AIG is still one stone in the arch that holds up the superstructure of the global economy, same as Citigroup (same as Lehman was, and we saw how that worked out). Unlike Citi, We The People now own AIG, so it behooves us to run it well in a businesslike fashion unless or until it is broken into parts and sold. Thus of course those folks should get their contractual bonuses. That's how these folks get paid: it's not "extra" for doing a good job. Their salaries are token, and generally quite modest. Not getting your bonus is a finance company's gentle way of saying "Start looking for another job. We don't need you here anymore because you are not adding enough value to our enterprise." If they don't get paid they will leave, and our national "investment" in AIG will go down the toilet. We are getting these guys cheap, too.
Sorkin at the NYT agrees.
Our friend Tigerhawk has written one of the clearest and most succinct pieces on the background of the financial mess. Too much easy money from governments too politically timid to sit through economic contractions, too many greedy borrowers, and overly-lax lending. We are headed back in that same direction again.
Related: Bank punished by Fed for not making bad loans
