Everyone is outraged that AIG, which sidled up to the public trough to the tune of 75 Billion dollars, has apparently paid out over a hundred million in “bonuses” to employees this past weekend.
How do we know AIG got 75 billion in bailout money? We don’t. We’re taking Washington’s word for it.
How do we know AIG paid out 105 million in bonuses this weekend? We don’t. We’re taking their word for it.
The financial media tell us AIG had to pay the “bonuses” because it was in their employment contracts. This, of course, is the same financial media that warned us about the impending economic meltdown (NOT!) and the same media which were so thoroughly excoriated by John Stewart on Comedy Central last week.
As the government counseled us against panic in the early days of the meltdown, it was obviously in panic mode itself. It shoveled tons of money at AIG and other poorly-managed businesses - money it didn’t have, and money that came with apparently absolutely no strings attached.
Later in the meltdown, with the borrowed money still being shoveled at failing companies at an incredible rate, a few strings were attached. But we still don’t have any reliable source which can tell us who got how much money, with what terms, and what they’re doing with it. Basics of lending money.
Just a thought about future dolings-out of money we don’t have to companies that have shown no evidence of being able to manage it: maybe we ought to put a clause in there saying that if they accept the bailout money, it nullifies any “bonus clause” of any employment contract until such time as the bailout money is paid back.
We ARE going to get paid back, aren’t we?
As to your question ... maybe not. My rant follows:
ReplyDeleteThe bonus system is near, if not at, the root of the problem. It provides an irresistable incentive to amass corporate income (not necessarily profits) by any and every means possible without regard to such niceties morals or ethics or prudence, and verily demands heedless risk. The goal is to have a big pot of money to divvy up the end of the year.
Even the most junior corporado cadet knows that you go for the big payday - put the money in the highest-yield investments and never mind the risk, because things probably won't collapse before the bonus checks are cut.
This system means that any money manager - right on up to the CEO - knows it would be worth his career if he's ever caught diluting risk with safer (and less lucrative) investments.
That made bankers a lot like the horse who found the oat bin door open. Once inside he could show no restraint and ate himself to death.
Richard Fuld, until recently the CEO of the late, great Lehman Brothers had a reputation for sheer arrogance; his style has been described as aggressive and unforgiving. He swore before Congress that he had looked back on recent history and could find nothing - not a single thing - he could have done differently that might have staved off the collapse of the company that had enriched him by hundreds of millions of dollars - mostly in bonuses. He seemed to hope we would all buy that bucket of self-serving muck.
Mr. Fuld was a major player in the drama that killed off investment banking. We do ourselves no favors by trying to rescue that system.
Risk-taking is one thing, speculation is another. When publicly held companies are no longer allowed to write their own rules, when bonuses may be paid only out of profits and are taxed at 80 percent, and when corporate executives are rewarded for building markets and creating wealth for stockholders, we'll be on our way out of the current morass.
We must find a way to ride restrain the competitive greed of corporate brigands like Richard Fuld and John Thain of Merrill Lynch and John Cayne of the defunct Bear Stearns and the late Ken Lay of Enron and the imprisoned CEOs Bernie Ebbers of MCI and Dennis Koslowski of Tyco ... (The list goes on and on. Our economic system cannot afford to be run by such amoral criminals.