The long-building wave of “populist outrage” over craven capitalist elites with a suffocating sense of privilege has broken on the shore with the AIG bonus scandal.
Having spent the last few days on the road, I come late to the story of the moment. Nevertheless, the more complicated it becomes the simpler it is:
The U.S.’s largest insurance company tanked in part because of the unprofessional and possibly criminal conduct of its derivatives traders. Finding itself foundering, AIG asked the government — that is to say American taxpayers — for a bailout. Three more bailouts followed for a total of $170 billion in mad money that is being pumped into the insurance giant to try to prevent a global economic collapse.
As a consequence, the government — that is to say those taxpayers — are the majority shareholders in AIG. Yet until last weekend the company refused to say where the bailout money went. Turns out a big chunk went to financial institutions that are separately getting bailout money, a situation that gives new meaning to the term “double dipping.”
New York state Attorney General Andrew Cuomo has been far more aggressive at trying to get to the bottom of the AIG rot than the Bush or Obama administrations, some $30 billion of the bailout money remains unaccounted for and AIG’s answers about the rest smell like fetid Swiss cheese.
We now learn that the very derivatives traders who shat in AIG’s hat, including some who have subsequently decided to spend more time with their families, received $165 million in bonuses to which they were “contractually obligated.”
AIG bigs wring their hankies and semi-apologetically note that a contract is a contract and the money cannot be returned.
Congressional Democrats and Republicans, trying to outdo each other in outrage, are demanding that the bonus money be returned, and one idiotic proposal would somehow tax every last cent of it. Also idiotic are congressional Republicans who worked with the oversight-averse Bush administration in setting the terms of the bailout who are now blaming the Obama administration for . . . what’s the term? Lax oversight. One Republican shot the moon by suggesting that AIG execs commit suicide.
President Obama is belatedly acting outraged himself while some of his key economic advisers are siding with AIG on the “a contract is a contract” assertion.
Yes, the bonuses represent only about one-tenth of 1 percent of the bailout dough. Yes, they are not bonuses in the traditional “you done good” sense but rather guarantees of minimum pay levels no matter what the market does, although some of these bonus babies moved on anyhow. And, yes, the hoary principle of honoring contracts is to be upheld under ordinary circumstances.
But these circumstances are anything but ordinary, and as majority shareholders in a company that is bankrupt in all but name, our agents in the form of the government must demand the return of all bonus money. Or alternately have that amount subtracted from the latest bailout, as Treasury Secretary Timothy “We Wuz Caught Off Guard” Geithner has proposed, as well as a full accounting of where all bailout money went.
Like I said, it’s pretty simple.
Shaun Mullen is a former The Moderate Voice columnist. Over a long career with newspapers, this award-winning editor and reporter covered the Vietnam War, O.J. Simpson trials, Clinton impeachment circus and coming of Osama bin Laden, among many other big stories. He blogs at Kiko’s House.