Again, It’s The Government

Again, It’s The Government

Published: Mar 19, 2009 at 10:06 am

I want all the AIG bonuses paid, all $165 million of them. Congress, you see, just can’t seem to properly manage anything, other than managing blame-games when their own policies have caused unexpected circumstances. Back to the old, “It’s not my fault” routine. Hmm. Someone wrote a book along those lines.
So pay out those bonuses, even to the AIG employees working in the division that brought AIG to its knees. I do not want special taxes on the bonuses. I do not want any sort of government intervention. The government has already intervened too much. I admit I was as queasy as the rest of you over this news of these bonuses, then I did what I always do. I sat down and thought about the facts of the matter, trying to take my emotions out of the equation.
Now that the topic is out of the way, please just hear me out. It’s extremely rare that I do bullet points in articles, but there is so much wrong on this topic that I decided it would be much easier for any reader of the article if I use bullet points in this case. The bullet points won’t follow a timeline, because most of it is concurrent. Almost all of it was this week, with the blame flying from one place to another.

Background:

  • The first AIG bailout, in fall 2008, came with very few strings attached. It was done in the form of a secured loan, the loan being collateralized by all AIG assets. The loan was $85 billion and allowed the US government to take an 80% equity interest in the company, which allowed veto of dividend payments.
  • AIG has now received $170 billion dollars in bailout money, $30 billion of that coming as recently as the beginning of this month. Apparently, no one in the US Congress was aware of the potential “chaos” that was just down the road. Now that the non-chaos is upon us, those in Congress are trying to figure out how to “fix” it.
  • Congress would not have cared the least bit about this if it hadn’t come out in mainstream news. Now they have to seem to be as outraged as the public the mainstream news is trying to incite anger in by pointing out more injustice in the world. Had the news been relayed only to members of Congress, most of them would have just given a puzzled look to the messenger and said, “And how is that important to me? It’s only $165 million.”
  • AIG is under contractual obligation to pay the bonuses, or “retention payments.” These contracts were entered into before AIG fell apart. Unless the contracts are declared legally invalid at the time they were executed, or the employee did something illegal to fulfill the terms of the contract, those contracts are legally binding.
  • Had AIG withheld the retention payments, which were paid last week, they would have been in violation of any legal contracts. That, of course, results in lawsuits, most likely a class action lawsuit in this case, due to the number or affected employees. That results in the lawsuit being won by the class, plus the legal fees AIG incurs defending it, plus the likelihood of the class being awarded reimbursement for legal fees. Taxpayers, now owning 80% of AIG, are on the hook once again.
  • Congress had a chance to stop this if they wished. They instead chose to include an amendment in the recent stimulus bill that stated that any “contractually obligated bonuses [to entities that received bailout funds] agreed on or before Feb. 11, 2009,” would be excluded from executive pay provisions. Can we say, again, “Hey, AIG had some of those contracts!”
  • The Senate dropped an amendment to the stimulus bill that would have required companies paying more than $100,000 in bonuses to either be subjected to a 35% excise tax, or to return the bailout funds.

Current happenings:

  • What a mess. Now the public knows that AIG is complying with contractual obligations they were told to go ahead and comply with, and the public is infuriated. “The government must do something!” But the government already did do “something.” It just didn’t work out so well, as with most things the government does. Most of the people who are incensed over this don’t even realize that this is pocket change that will not have any effect on them, their children, or their grandchildren. They’re choosing to single out the “small change” indignities, rather than looking at the overall picture.
  • Congress has to do “something.” They just can’t figure out what. The contracts were already in place, and Congress agreed the contracts should be honored, so what to do now? How to recover?
  • One proposal is to tax the bonuses at 100%, negating them. Mr. Harry Reid has said about this, “Remember, we, as a Congress, are not defenseless. We can also do things.” They can obviously do a lot of “things.” Their “things” are what keep causing these messes. Do we really want Congress legislating something after the fact to take care of something they didn’t think of at the time, or that they want at that point in time? Do we want to live in a society where Senator Chuck Schumer can say that, if we don’t do it ourselves, they will force it upon us?
  • How is any potential legislation to “recover” this money emergency legislation? Is there anything in this administration that isn’t an emergency, and that doesn’t have to be forced through Congress so quickly that the public, much less the members of Congress who are voting on it, don’t even have time to read it? Why wasn’t funding for a speed-reading course for all members of Congress included in the stimulus or the budget bill? Do we need a, “No Politician Left Behind” bill added to the appropriations for education funding?
  • Another proposal is to undo the contracts, but that one isn’t viable. The government can’t undo contracts between private parties unless the terms of the contract are illegal. No, wait. Sorry about that. They apparently can. I just remembered that they recently gave the authority to judges hearing bankruptcy cases the authority to alter mortgage agreements. Maybe this is just a new trend of hope and change.
  • At least some part of the bonuses was apparently paid out to foreign nationals, who aren’t subject to US taxes. I haven’t yet been able to verify that, but if it’s true, that money would be difficult, if not impossible, to recover.

The bulleted list is done now, and for any of you who haven’t fallen asleep yet, I’ll leave you with a few things now.

I received while I was writing this article an e-mail from Bob Casey’s office that addresses this issue. In the video, he said, “the American people have provided them help.” Excuse me? The only way I provided them help was through bad decisions of US Congress. No one solicited my opinion, and they didn’t listen when I objected.

He says they (AIG) “came to the American people.” I’ve never talked to anyone from AIG. He also says, “the American people gave them $170 billion dollars.” Sorry, Mr. Casey. I didn’t co-sign that note; YOU did.

I don’t know how Mr. Casey typically presents himself on video. I don’t remember ever having seen video of him before, but in this particular one, he doesn’t seem particularly lucid. I won’t speculate on that. If there was a reason for his lack of lucidity, whatever it was, I can understand it. If I were in the position of trying to defend this, I’d need to be as distracted as he seemed to be. I’d also need the teleprompter he was obviously using, but that seems to be the vogue thing to do now anyway.

So, for those who have been patient in your reading, I said all that to say this: I have a reasonable solution to this whole mess. It’s one that hasn’t been proposed by any much greater minds than mine, at least not as far as I’ve heard on the radio, television, or the Internet news. (Please correct me if I’m wrong here.)

The solution in this particular case is to take a brief break from the four-year holiday that I’ve decided to term “Hopey Changemas,” partly in honor of the brilliant author Mark Steyn. If we take a temporary holiday break, we can get back to the simple idea of responsibility, whether it’s personal or group responsibility, rather than avoiding responsibility, and the whole mess can be put aside quickly and easily.

There were 246 representatives and 60 senators who voted for the bill that excluded bonuses to companies that had received bailout funds. That works out to slightly more than half a million dollars each, so why not spread the debt among them, and let them pay it back?

It can’t be forced with lawsuits, due to sovereign immunity laws. (That means you can’t be sued unless you choose to allow yourself to be sued.) However, the involved parties in Congress want justice, and honorable actions, so why not choose to be just and honorable, admit they made a mistake in oversight if in nothing else, and willingly pay it off themselves?

That would show honor, and dignity, and allow us to cling to a hope that they do still have some of both.

Gina Breckenridge is the PACC’s newsletter editor.