Wednesday, March 18, 2009

Predators at work

Teddy Roosevelt faces off against the robber barons - in that galaxy long ago and far away, the Republicans were known to actually oppose private predators!

Someone asked me today if the AIG bonuses were unusual. My response was, no, they're not. That's typical practice for investment banking and a lot of other corporations, too. It's always been bad practice. But the magic invisible hand of the market never found reason to object as long as stocks were doing okay.

Now that AIG is mostly nationalized, their bad practices are now public business and are being talked about openly. At one level, you almost have to feel sorry for the AIG executives that are surprised at all the controversy. They're just following standard bad corporate practice. And all their peers have approved of it before. Plus, from 2001-9 under the Cheney-Bush administration, the federal government saw its role as being to facilitate corporate buccaneering, not to impede it. You can understand why the executives might be getting huffy at being questioned by the lowly citizens whose tax dollars are keeping their failed company afloat. It must seem very unfair to the execs. I feel their pain.

Joe Conason comments on this same phenomenon in Be Like Cuomo: Call AIG's Bluff PolitickerNY 03/17/09. He writes that "the creative financiers of Wall Street and London are today exposed as grifters rather than geniuses."

But they are not humbled.

Instead the old arrogance remains intact, at least on the premises of American International Group, where the flow of hundreds of millions of bonuses in taxpayer money continues unimpeded so far by public outrage. These payments, made to the many of the same individuals whose freebooting misconduct ruined their firm and laid waste world markets, symbolize a system of rewards gone mad. [my emphasis]
Unschooled in the higher mysteries of the corporate priesthood, lots of people just seem to have a hard time understanding in AIG's case why the very unit that ruined the whole company, the exotic financial products unit, would be getting exorbitant bonuses.


The unschooled don't understand the still-prevailing Republican philosophy articulated so memorably by that archetypal Republican President Calvin Coolidge: "The business of America is business."

And, hey, just because a company does bad business like AIG, and in the process contribute in a major way to a failure of the world's private finance system, shouldn't be a reason not to hand out millions in bonuses!

Conason, also apparently uninitiated to the esoteric ways of High Capitalism the market economy, thinks the government should block the bonuses and call the bluff of those much-in-demand investment bankers who AIG claims will go somewhere else if that happens:

Disgruntled AIG employees may not just quit; they may sue us if we don't pay their bonuses. But let's see what happens in five years or so, as their lawsuit moves through the courts. Let's see how many of these executives really want to answer hard questions in a deposition about their dubious activities at AIG. And let's see how many of them suddenly realize that they may have criminal liability - like Joseph Cassano, the former head of AIG Financial Products, who has hired a top defense attorney.

Meanwhile New York State Attorney General Andrew Cuomo is dealing with this problem ably and forthrightly. He has subpoenaed the names and contracts of all the AIG employees whose bonuses are at stake in the current controversy. He should publish their names and let them demand their money in public. Let them explain to the world - including friends, neighbors, and family - why taxpayers should pay them bonuses while autoworkers give up pensions and health care.
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