Negligent Congress Piles on AIG

Live From The Nation’s Capitol,

It’s Day 4 of the Great AIG Horsewhipping.congress-kicking-aig

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It’s an all too familiar stunt: politicians attempting to dodge accountability and elevate perceptions of themselves by stampeding to the cameras to bellow their sanctimonious indignation at an easy target who’s already down and out of public favor.

This time the faux outrage was aimed at AIG and it’s CEO Edward Liddy.  AIG, after receiving the largest bailouts from the Treasury and Federal Reserve, paid some $165 Million in bonuses to the very same alleged “idiots who ruined the company.”

Our purpose here is not to defend the people of AIG who surely made huge mistakes.  Our purpose is to point out the motives of, and the diversionary tactics  used by politicians from the President to Senators and Congressmen who are equally if not far more accountable for the nation’s economic misery.

President Obama’s televised comment was typical of those heard from dozens of Politicians:

This is a corporation that finds itself in financial distress due to recklessness and greed…its hard to understand how dirivative traders warranted any bonuses, much less $165 Million in extra pay.  How do they justify this outrage to taxpayers who are keeping the company afloat…I’ve asked Secretary Geithner to pursue every single legal avenue to block these bonuses and make the taxpayers whole.

Yesterday, AIG C.E.O. Edward Liddy was hauled into a Congressional committee hearing to face abuse, ignorant questions, petulant challenges and moralistic accusations from show-boating politicians, who should have bowed their heads in shame.

It turns out that Mr. Liddy, 63,  has  been with AIG only six months and is in no way responsible for its meltdown.   He’s an experienced, seasoned executive who has been both CFO and CEO of Allstate Insurance.  He was semi-retired when the phone rang and Treasury Secretary Henry Paulson asked him to take on a nearly impossible and thoroughly thankless job: Extricate AIG from the derivatives trading business that brought it to insolvency, while keeping the healthy parts of the company profitable so they could survive, eventually repay government loans,  and save thousands of jobs.

It’s interesting to compare Mr. Liddy’s experience and qualifications with those of his politician-attackers.  Congressman Lynch of Massachusetts, one of the most abusive in yesterday’s hearing, was an iron worker and then a mid-level official in the iron worker’s union until he was elected to the state legislature in 1994, and then to Congress in 2002.  Obviously, he has no executive experience that would rival Mr. Liddy’s.

Another hostile inquisitor was Congressman Barney Frank.  As a career politician, in his State’s legislature and Congress since 1973, Frank has always dodged the accountability that executives like Mr. Liddy accept every day.  If one member of Congress is most responsible for the mortgage blight caused by Fannie Mae and Freddie Mac, it would have to be Barney Frank, Chairman of the House Committee charged with supervising and Regulating Fannie and Freddie.

And President Obama, who has no executive or management experience at all, would be completely over his head if he attempted to do what Mr. Liddy is doing at AIG.

Mr. Liddy, who  will receive no bonuses and is being paid all of $1 per year, patiently explained to the committee the circumstances that led to payment of the bonuses.  Yes, bonuses went to individuals who worked in the AIG derivatives trading unit that caused Billions in losses that brought the company to insolvency and dependence on massive government bailouts.

Why?  Because after due consideration Mr. Liddy decided the least risky way to manage and eventually to “unwind” or dispose of the complex, and intertwined groups of toxic, derivative investments was to assign the tasks to some of the same people who had assembled them in the first place.  Most of these people would have left AIG many months ago.  But Mr. Liddy’s predecessor offered them “retention bonuses” in exchange for staying on long enough to maintain and eventually “unwind” the “books of business” they were most familiar with.

Some retention bonuses  were paid to people who recently left the company because those folks had completed their “unwinding” assignments to the satisfaction of senior AIG management and overseers from the Federal Reserve and thus had earned the agreed upon bonus.

The alternative, bringing in new people who may have had relevant experience but were unfamiliar with AIG’s specific “books of business” was, in Mr. Libby’s judgment, more risky and could have resulted in much greater cost to the government.

Now, we don’t know if Mr. Liddy made the best decision.  We do know that Barack Obama and the bloviating Senators are not qualified to second-guess Mr. Liddy’s decision.  We do know he has far more credibility than any of them, and for that reason alone, deserves the benefit of the doubt.comparison

We also know the cost of the AIG bonuses, called an “irresponsible waste of taxpayer money” by Obama and his allies in Congress, equals about two tenths of one percent of the cost of Obama’s Big Stimulus (B.S.), passed a month ago.  The stimulus was hyped as so urgent it had to be passed in a few hours, before any Senator or Congressman had read its thousand pages, when the one and only copy still had hand written corrections, cross-outs, and margin notes.

For those politicians who are accountable for The Big Stimulus (B.S.) to feign outrage at the cost of the AIG bonuses is like a man who smoked in bed and set his house on fire berating the firefighters for trampling his $20 rose bush.

One is reminded of the words of Jesus in Mathew 7: 3

Why do you look at the speck of sawdust in your brother’s eye and pay no attention to the plank in your own eye?

Update:

This morning Senator and Democrat Party Leader Chris Dodd admitted that he included fine print in the Big Stimulus (B.S.) that specifically authorized and permited payment of bonuses to AIG Derivative traders.

7 Comments so far

  1. Frisky on March 19th, 2009

    Apparently The Honorable Senator from Connecticut, Chris Dodd was telling lies yesterday when he said he had nothing to do with adding bonus protections to the bailout.

    And if he did, it was that wicked Tim Geithner, soon to be ex of Treasury who made him do it.

    Don’t you yearn for the old days when a scumbag politician would actually have the decency to resign when caught in a scandal?

  2. SharonG on March 19th, 2009

    Who needs The Three Stooges with these clowns on Capital Hill?

    Chris Dodd crook is the one who put this not so little loophole into the original bill to begin with, never mind the fact that the clueless idiots in the White House, or Tax Cheat Geithner knew about these bonuses already and didn’t do a thing about it.

  3. aaa again on March 20th, 2009

    As Boomerjeff points out, these indivuiduals were given retainage bonuses in an effort to maximize the value of trading positions AIG had.

    Some have commented publicly “who cares,” the company is effectively insolvent and the shareholders should take the economic hit. A fair point in general terms. But it misses something crucial:

    Sloppy unwinding WOULD AFFECT THE OTHER SIDE OF THOSE TRADING POSITIONS. And on the other side of the trade are entities receiving taxpayer money to stay afloat. In their torch and pitchfork zeal to castigate these employees critics have forgotten that they are actually saving taxpayers billions. Bonuses of millions to save billions sounds like a fair trade to me.

    Geithner and Obama etal know this. As Boomerjeff points out, theirs is entirely faux outrage to appeal to the masses.

  4. SharonG on March 20th, 2009

    The House passed a special tax punishment bill that applies only to AIG bonuses.

    If they can do that to AIG & AIG employees, then they can do it to your company and to you! Obama and his people think he is King! They think they can do any damn thing they damn will please! No more rules. no more rights.

    NO MORE AMERICA! NOW IT’S OBAMANATION!

  5. Chuck on March 20th, 2009

    What’s wrong with an extra tax to get the bonus money back from those Wall Street bandits?

    There not going after other companies. Only the ones that got Billions in taxpayer money to keep them from melting down.

  6. Thousand Flowers Blooming on March 20th, 2009

    It’s the Republican way! Give all the money to Wall Street crooks. Nothing for the people.

    Dodd screwed up but at least he and Obama and the Democrats are trying to fix their mistake and get the money back to the taxpayers.

    Republicans are blocking the new tax to keep Wall street fat and mellow.

  7. Pasadena Phil on March 20th, 2009

    And given a Marxist Chicago corruptocrat president to rubber stamp anything Congress passes, this country is really in trouble.

    Add a clueless, spineless GOP to the rubber stamping crew. What we have is a one party system, Lets call it the United Establishment Party.

    Where is the opposition party? There is none.

    Corrupt and Corrupter