The Real Outrage Of AIG
Josh Harding
March 20, 2009
There has been a lot of angst directed toward AIG this week since they used some of the $173 billion in taxpayer-funded bailout money to pay executive bonuses. The outrage over $165 million in bonuses crossed party lines. Sen. Charles Grassley (R-IA) has called for executives to come before the American people, apologize, then either resign or commit suicide. Rep. Barney Frank (D-MA) wants the names of those executives who received the money. President Obama said "I'm absolutely committed to ensuring we have the tools we need to prevent the kinds of abuses that sent AIG spiraling."
It looks like he will receive his "tools," in the form of a 90 percent tax on the bonuses paid out by firms that received bailout money. This tax, which violates the ex post facto provision of the Constitution, was voted through the House 329-93, with nearly half of the Republicans joining the Democrats. The Senate is expected to approve this tax as well, and President Obama has indicated he will sign the legislation.
Unfortunately, the federal government misses the point.
The most offensive part of this whole story is not the fact that AIG paid 0.00095 percent of its bailout money in executive bonuses. The real problem is the culture in Washington DC that assumes AIG is entitled to taxpayer money in the first place. AIG is still due $30 billion from the bailout (less the $165 million in bonuses). Instead of seriously questioning the legitimacy of these bailouts, they are AFRAID that this legalized theft will be undermined. Rep. Paul Kanjorski (D-PA) stated the bonuses "may jeopardize our ability to get the majority of this Congress to support further largess, to provide funds, to prevent a recession, depression or meltdown." In other words, we WANT to take this money from innocent taxpayers and throw it on your sinking ship, but why do you gotta be so darn greedy??
AIG does not deserve another dime of taxpayer money, regardless of how they plan to use it. The government will not solve these economic problems by throwing money it does not have at bad money. It obligates taxpayers to pay for reckless decisions they had no part in, which is reprehensible. Besides, this money is not making AIG financially solvent. It is going into an abyss, as the company reported a $62 billion loss in the fourth quarter of 2008.
Now is the time to let AIG sink or swim on its own. The "too big too fail" argument is a sham. The OC Register put it best when they said "If the only thing propping up the global financial system, however, is a company that lost $60 billion last quarter, then the global financial system is a house of cards rooted in self-deception. As the previous failure to prop up AIG and other financial institutions should have demonstrated by now, if a company or institution is deemed "too big to fail" by financial gurus and political pundits, it is probably too big to exist in the first place."
But the politicians disagree. They have wasted billions on a failed company and will continue to do so. With a straight face, they will claim to have the taxpayers' best interests at heart.
Why am I not convinced?
Sources:
http://www.cato-at-liberty.org/2009/03/19/selective-taxation-is-tyranny/
http://www.bloomberg.com/apps/news?pid=20601087&sid=aPcguuWVK9eQ&refer=home
http://economictimes.indiatimes.com/News/International-Business/AIGs-bonus-payment-to-be-deducted-from-bailout-Report/rssarticleshow/4283846.cms
http://www.ocregister.com/articles/billion-company-aig-2322531-government-financial
It looks like he will receive his "tools," in the form of a 90 percent tax on the bonuses paid out by firms that received bailout money. This tax, which violates the ex post facto provision of the Constitution, was voted through the House 329-93, with nearly half of the Republicans joining the Democrats. The Senate is expected to approve this tax as well, and President Obama has indicated he will sign the legislation.
Unfortunately, the federal government misses the point.
The most offensive part of this whole story is not the fact that AIG paid 0.00095 percent of its bailout money in executive bonuses. The real problem is the culture in Washington DC that assumes AIG is entitled to taxpayer money in the first place. AIG is still due $30 billion from the bailout (less the $165 million in bonuses). Instead of seriously questioning the legitimacy of these bailouts, they are AFRAID that this legalized theft will be undermined. Rep. Paul Kanjorski (D-PA) stated the bonuses "may jeopardize our ability to get the majority of this Congress to support further largess, to provide funds, to prevent a recession, depression or meltdown." In other words, we WANT to take this money from innocent taxpayers and throw it on your sinking ship, but why do you gotta be so darn greedy??
AIG does not deserve another dime of taxpayer money, regardless of how they plan to use it. The government will not solve these economic problems by throwing money it does not have at bad money. It obligates taxpayers to pay for reckless decisions they had no part in, which is reprehensible. Besides, this money is not making AIG financially solvent. It is going into an abyss, as the company reported a $62 billion loss in the fourth quarter of 2008.
Now is the time to let AIG sink or swim on its own. The "too big too fail" argument is a sham. The OC Register put it best when they said "If the only thing propping up the global financial system, however, is a company that lost $60 billion last quarter, then the global financial system is a house of cards rooted in self-deception. As the previous failure to prop up AIG and other financial institutions should have demonstrated by now, if a company or institution is deemed "too big to fail" by financial gurus and political pundits, it is probably too big to exist in the first place."
But the politicians disagree. They have wasted billions on a failed company and will continue to do so. With a straight face, they will claim to have the taxpayers' best interests at heart.
Why am I not convinced?
Sources:
http://www.cato-at-liberty.org/2009/03/19/selective-taxation-is-tyranny/
http://www.bloomberg.com/apps/news?pid=20601087&sid=aPcguuWVK9eQ&refer=home
http://economictimes.indiatimes.com/News/International-Business/AIGs-bonus-payment-to-be-deducted-from-bailout-Report/rssarticleshow/4283846.cms
http://www.ocregister.com/articles/billion-company-aig-2322531-government-financial