Monday, March 23, 2009

Enough with the Misplaced Outrage, Already!

I haven't been commenting much on current events because I am so tired of hearing about everyone's outrage - from the President on down - about the bonuses AIG had the chutzpah to pay their top executives when they were the ones who screwed up the company in the first place. The "populist rage" against this is the talk of the town and I understand the feelings, believe me.

But this is not the biggest problem with AIG. The real problem with AIG is that it was selling companies "insurance" so that they didn't have to worry about losing their money (in simplistic terms). But AIG never had enough money to cover it if anything failed! This isn't selling insurance, it's a scam. So why don't they just indict these people for fraud as they did Bernie Madoff? That is the thing I don't understand.

But another thing that irks me about all of this outrage is that the bonuses are a drop in the proverbial bucket compared to the immensity of the total bailout money. They are not the biggest problem we have and too much time is being spent on this issue.

And you know what else? Companies were giving out these outrageous bonuses for years under the Bush administration. No, they weren't companies that received designated "bailouts" from the government. But they certainly received a lot of corporate welfare in terms of tax cuts and other favorable government policies. These companies were still giving out this exorbitant money to executives on the backs of the public and the taxpayers. Where was the outrage then? It seems as long as people were able to drive around in their SUVs and their 401ks were going up, they were able to somehow ignore the growth of the huge deficit between the very rich and the rest of us.

Now that everybody's 401k is in the toilet, suddenly they're "shocked" that AIG conducts business as usual.

Louis to Rick: "I'm shocked - shocked! - to find that gambling has been going on here!"

Gail Collins had a satirical column addressing this all-pervasive anger in the Saturday New York Times. As she put it,

"Angry. So very, very angry. Unable to speak due to mega-anger washing over every pore and fiber of my being. Anger is in. (Hope’s so ... January.)"

She then goes on to talk about all the various things she is "angry" about, finishing with the President.

"Let’s complain about Barack Obama. Why doesn’t he sound angrier? Doesn’t he understand that his job right now is to be the Great Venter?

Sure he keeps saying he’s mad. But you can tell that he secretly thinks it’s crazy to obsess about $165 million in bonuses in a company that’s still got $1.6 trillion in toxic assets to unravel. 'I don’t want to quell that anger. I want to channel our anger in a constructive way,' he said on Wednesday. Everybody knows constructively channeled anger doesn’t really count. It’s like diet pizza."

She then points out that if we had elected McCain we'd be "getting outrage 24/7" and then says:

"Except, of course, the whole reason we elected Barack Obama was because when the economy started melting down, Obama seemed sane and calm while McCain appeared to be a loopy visitor from the Planet of the Overwrought.

I hate it when we make irrational, contradictory demands of our president. But, it seems as if that’s what he’s there for."

Now, if the media could stop hyping up this bonus issue and concentrate on the real problem - how the administration will fix the banks - we'd be in better shape. It's time for us all to get over this - especially since apparently 15 out of 20 high-level AIG executives have given the bonuses back anyway, with more to come.

The bigger concern we should all be worrying about is, will the administration's plans for the economy work? So far, Paul Krugman is not hopeful. In fact, he uses the word "despair." When a Nobel-Prize winning economist says he has a "sense of despair" over the plan, this is not a good thing.

Let's concentrate on the stuff that really matters.


Reamus said...

Since no one is listening to me, I hope they hear you...You go girl!

Anonymous said...

Considering that Wall Street seemed to love the plan unveiled today, I'm definitely skeptical. Anything Wall Street loves cannot be a good thing.

Good rant!

Christopher said...

I have to thoroughly disagree.

In a meritocratic culture, you are rewarded for making sound business decisions resulting in profits.

In the case of the AIG bonuses, the very executives in the division who made the decisions that led the company to drink from the bailout trough or risk bankruptcy, were paid bonuses from the TARP fund.

Frankly, I don't care if these bonuses are $1,000 or $10,000,000 dollars -- they're inappropriate and obscene.

I don't want my tax dollars rewarding suits who helped drive a company to the brink of bankruptcy. Not during the worst economic times since the Great Depression.

Mauigirl said...

Bee,I know - it seems as if Wall Street always reacts inappropriately to everything. For instance, when companies used to lay off people, the market would go up.

Christopher, I totally agree it isn't appropriate and is obscene - but I feel it is getting a disproportionate amount of attention by the media and Congress (especially since Congress themselves were probably aware of this long before now).

And, not to put too fine a point on it - supposedly these bonuses aren't "merit" bonuses but "rentention bonuses." For what that's worth (why would they want to retain them anyway?)

Yes, it is disgraceful and yes, I hate it too. But there are bigger fish to fry, is all I'm saying.

Annette said...

I think the bonuses were a ruse.. they were a shiny object to cover for the news they released at the same time that they were paying other banks BILLIONS of dollars out of the TARP money, including Goldman Sacs, Credit Suisse, and several others in Europe, when they got the first 85 Billion from Paulson. That's what everyone should have been angry about... but instead they paid the bonuses, got that out in the open, flashed it around and made everyone concentrate on it, and the bank pay offs went by the way side.

Yeah, 165 Million is a lot of money, it shouldn't have happened.. but why was AIG paying Goldman Sacs 16 BILLION out of the TARP they were paid, when GS was already getting TARP money of their own... and why was AIG paying foreign banks TARP money... that's what we should be angry about.

Annette said...

And Paul Krugman hasn't been happy with much of anything Pres. Obama has done.. so I take most of what he says with a grain of salt.. I think he got his feelings hurt or something... He has really never had anything good to say.. either he is angry because he didn't get an invite into the cabinet or something... but I have heard several others say today he is just wrong... so, just because one person says it is a bad idea does not mean it is... not when you can find others who say it is... it's like everything else.. for everyone you find says yes, you will find one who says no.. lol

themom said...

There ya go...get it all out. Well said ther Maui.

Comrade Kevin said...

I think the whole outrage comes down to the fact that people can understand CEOs that get a bonus when they shouldn't.

The rest of this financial mess is so complicated that pointing fingers is no easy matter.

Anonymous said...

Follow the trail. When you get to the end of it, you'll discover that if AIG fails, the Fed Fails.

That's the answer.

Fran said...

#1- I LOVE the Casablanca reference....
Louis to Rick: "I'm shocked - shocked! - to find that gambling has been going on here!"

Next line to the cop Louis: Your winnings, Sir.

Its true though, people got sooo hot under the collar about the $165 million, but less incensed about the $700 BILLION-- which is exponentially more moolah.

#2- As for finger pointing-- well you can guess which one I'd point-- this originated from the Bush bankruptcy. Which is water under the bridge- the thing is how to apply the tourniquet, and save ourselves.

#3- We are in uncharted waters. Never have we been so in debt before that the interest on the debt is one of the biggest items in the budget.

#4- If we must spend more, let it be FOR the people (for a change). The corporate world needs to spend some time with the word "consequences".
If they engaged in bad practices, let them take their hits. Because most of us noticed, even WITH the bailout billions, they are taking down the 401k retirement money values anyway.
Why should anyone else buy their toxic loans?

#5- If Krugman has a sense of despair.... I sure hope he is speaking up loud & clear about how exactly he thinks we should fix the economy.
SEriously.... I would love to hear his solutions, suggestions & ideas.

#6- My outrage lies in the Wars & military budgets.
They get a huge piece of the budget pie. In such heavy economic hardship- we need to bow out of middle east warring. I see it as a major element in this budget meltdown. $600 billion is a big chunk of change. Not to mention the social/moral elements- an even heavier "price".

#7- 15 out of 20 gave back bonus money??
Let the 5 holdouts go live in a tent city- without bonus money. I view the bonus takers as stealing (using federal treasury $) from Veterans, Senior care, Children's services. This should not have to be explained, really. Bailouts are not industry standard. (as they claim bonus money is ).

Annette said...

The others are in London... we have no authority over them.. they are just hoping they will give back their bonuses like the others did.. but what can you do if they don't. NOTHING..
And Krugman hasn't had any suggestions about anything he has criticized Pres. Obama on, from the wars to anything economically, just criitcism... he never gives suggestions for what to do, how to do it, or anything like a solution, just it's all bad... like I said I think he is just mad and pouting.

Randal Graves said...

Every day I check the mail to see if my bonus check has arrived, and every day it hasn't.

jmsjoin said...

I am sick of the feigned outrage. Every damn one of them is guilty including Barney Frank.
People are peeved but as I keep saying, this was done on purpose and is still just beginning regardless of what anyone thinks!

Have you seen this? Liddy made AIG sound like an orphan begging in a soup line, hungry and sick from being left out in someone else's financial weather. He conveniently forgot to mention that AIG had spent more than a decade systematically scheming to evade U.S. and international regulators, or that one of the causes of its "pneumonia" was making colossal, world-sinking $500 billion bets with money it didn't have, in a toxic and completely unregulated derivatives market.

Nor did anyone mention that when AIG finally got up from its seat at the Wall Street casino, broke and busted in the after dawn light, it owed money all over town — and that a huge chunk of your taxpayer dollars in this particular bailout scam will be going to pay off the other high rollers at its table. Or that this was a casino unique among all casinos, one where middle-class taxpayers cover the bets of billionaires.

People are pissed off about this financial crisis, and about this bailout, but they're not pissed off enough. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.

The crisis was the coup de grâce: Given virtually free rein over the economy, these same insiders first wrecked the financial world, then cunningly granted themselves nearly unlimited emergency powers to clean up their own mess. The Big Takeover

Ruth Hull Chatlien said...

The bailout is massive and hard to understand. The bonuses fit in our sound bite culture.

I'm starting to wonder if Wall Street itself is the economic equivalent of toxic waste. I've seen good companies gut their future development in order to turn big profit ratios just to make Wall Street happy.

Where is the sense in that?

And that's just one example among many of how the trade up, trade up mentality of Wall Street causes people to do stupid things economically. It's all funny money and has little to do with real goods and services.

At least that's my opinion. It would probably make real economists roll their eyes, but I don't care.

kuanyin333 said...

You're a wonderful political blogger. Wish I could have the same ability to vent as you do! Now my partner and you could really have fun because he's the venter type! :-)

Anyways...just wanted to drop by and wish you aloha because I haven't done so in awhile.

Norma said...

What's outrageous is the Congress had a contract with these AIG people and are now acting surprised.

Utah Savage said...

This is a great piece, well structured and ending with Krugman who is breaking my heart. I so want Krugman to be part of the solution, working with the administration to craft policy. But...

You sure have a terrific following my dear. But then you're a terrific thinker and writer.

Dr. Zaius said...

It's funny that the media is all consumed with the rich and wealthy, when everyone else is either out of a job or fighting in Iraq or Afghanistan.

libhom said...

I think we should be outraged at the things you think we should be outraged at and the things you say we shouldn't. There is so much to be angry about these days.

libhom said...

Utah Savage: I think people on the left should be giving Obama a lot more grief. His wishy washy centrism isn't cutting it.

Distributorcap said...

tarp, AIG, bonuses, credit default swaps, securities, hedge funds, compensation, golden parachutes

what does it matter - the american people - with their obsession with such 'important' things as Britney, brangelina, american idol, gay marriage, octomom, runaway brides, dead blondes, anna nicole - you name it

anything but watching how we were robbed blind for years by the repubs (and some complicit dems) and wall st

we actually thought it was great when cameron diaz got 20 million for a movie -- you mean she wouldnt be so great if she got 18? money became the golden calf of worship -= not deeds like peace, education, and caring.

people laughed at the line- whoever has the most money when he/she died wins -- well turns out it was reality, not a laugh

there is only one solution that fits all - it all needs to collapse

and we have to start over

and please send george bush to mars

Travelingman Rick said...

Everything DCap just said! Ever since Regan we have allowed Wall St. to get deregulated and they turned investing soundly into Vegas. Is it any wonder that we are all now broke? Gov't is supposed to protect the people from this kinda crap. The leaders of our Gov't allowed this crap to happen, and it was a bipartisan effort.

Life As I Know It Now said...

I tried to comment on this post the other day and blogger just wouldn't let me for some reason. Now every one has pretty much said what I was going to but I would like to add...

Send Bush and Cheney and all their ilk to jail NOW!

Mauigirl said...

Thanks for all the great comments, have been reading them all week and just haven't had a chance to respond (OK, yes, I did play Scrabble on Facebook though). I really appreciate all your thoughts. It is a tremendously complex situation and there is blame enough on all sides.

I do think perhaps Krugman is a little sour-grapesy but he's been saying all along that the effort has to be big enough in terms of stimulus and that he didn't think it would be big enough. I wish Pres. Obama would invite him to Washington to be part of a think tank to make sure all the best minds are there to come up with the best solutions.

I think DCap and Travelingman kind of summed up how I'm feeling about the whole thing.

Dorothy said...

Fix the problem and learn what not to do again it is discouraging and I often wish there was something I could do. We have a state legislature here in New York State which is in the red and unable to date to agree on spending and I wonder when will be have competent lawmakers and not pretty faces who are popular I'll bet most of them don't understand half the laws they pass. Meanwhile the stock market is a light at the end of the tunnel..your go girl for us your so smart..

Dorothy from grammology

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