AIG Bonuses: Misplaced Rage?

I’m not going to try to, in anyway, usurp the discussions of AIG over the past weekend by any number of progressive blogs. Firedoglake has had particularly extensive coverage.

Having said that, I want to ask if we are focusing on the wrong thing. Yes, the bonuses are entirely outrageous, but I can’t say I’m particularly surprised. These are the exact same issues we’ve been encountering with the bailed out banks over the last few months. More importantly, I think our anger over the bonuses is distracting us from a far more interesting issue: the flow bailout money from AIG to its counterparties.

Over the weekend, AIG released the list of its counterpartiesthat have received bailout money. Of the money thus far distributed, only 35% of it has gone to American institutions. Not to get excessively protectionist, but why are we bailing out European institutions, while Europe appears to lack the political will to address its own problems? This is especially true of Germany, whose idiocy is endangering the entire EU and whose Deutsche Bank has received billions.

Let us be perfectly blunt about what this is: money laundering. We are laundering money through AIG to other institutions that benefit from the bailout without any of the restrictions put on banks that have received money directly. This situation should not continue.

Instead, we should complete our takeover of the company, wiping out the remaining shareholders. The normal insurance divisions, which appear to still be both profitable and sufficiently capitalized, can be sold to private investors. The financial products division should be allowed to enter some kind of controlled bankruptcy. The counterparties should receive whatever monies they would be entitled to in the course of a normal bankruptcy, which would be significantly less than the face value of monies owed. Then, at the end of the day, we can choose which, if any, of the counterparties deserve or require a bailout on their own merits.

Of those counterparties, I don’t see why any hedge fund profiteering from rank speculation should be bailed out, though I’m willing to be convinced on that issue. However, for those financial institutions who require and merit a bailout, let that money be delivered directly and openly, in the sterilizing light of day.

This is a much worthier goal than obsessing over the 0.1% of AIG bailout money that was spent wasted on bonuses. That said, we own the company, maybe there is a derivative lawsuit for fraud somewhere in here. I’ll take the money back, but we shouldn’t spend too much of our political focus on it.

Update:Professor Jonathan Turley was on Countdown tonight talking about the bonuses. First, he is concerned that attempts to get the money back from executives may run afoul of Constitutional prohibitions on bills of attainder. Second, he pointed out that much of the blame lies with Congress, noting:

When you give billions and billions of dollars to the pirates of Penzance you can hardly be surprised if they spend it on women and grog.

Well said.

Update 2: At the request of a reader I’ll make my point about money laundering more clear. Goldman Sachs, for example, has been proud to claim that it has received no bailout money from the government. And yet it has received bailout money washed clean by AIG. Criminals launder money so that it appears legitimate. The AIG bailout is proving to be a money laundering enterprise because it makes the money received by AIG’s counterparties appear to be unconnected to bailout funds.

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Published in: on March 18, 2009 at 12:19 am  Comments (1)  
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One CommentLeave a comment

  1. Take the money back? Sorry, the government will take it back and give it to someone else; we won’t see a dime of it either way.


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