Good Richard's Almanac: Obama's Outrage At AIG Caused By His Own Administration

March 16, 2009

Obama's Outrage At AIG Caused By His Own Administration

Via CNN...

President Barack Obama said Monday he will attempt to block bonuses to executives at ailing insurance giant AIG, payments he described as an "outrage."

...

The president expressed dismay and anger over the bonuses to executives at AIG, which has received $173 billion in U.S. government bailouts over the past six months.

Outrage indeed.

I'd like to propose an alternative to blocking bonuses. The government should sell its 80% stake in AIG on the open market. Then shareholders can decide whether the bonuses are reasonable.

Blocking bonuses for AIG employees will not be easy, as the bonuses are guaranteed by contract. I'd bet Obama will instead push for full nationalization of AIG so it can "restore confidence in responsible management to taxpayers"? After all, when faced with the choice between increasing or reducing government control, Liberal politicians always choose to increase their power.

It's amusing to see so many jump on the AIG-condemnation bandwagon. Their outrage is based on the notion that taxpayer dollars should not be used to pay bonuses. The root of the problem isn't bonuses. The problem is that the government rewards failure by propping up failing industries with taxpayer money. We wouldn't be in this situation if the government would have allowed an orderly dissolution of AIG.

What's more, it's not enough for the government to stipulate that taxpayer dollars not be used for bonuses. Once the government provides financial support, everything that company does is subsidized by taxpayers. When the government gives a company money for a specific purpose, it becomes easier for them to pay for everything else -- things like private jets, golf-trips, and bonuses.

Leftist pundits and politicians tell us the problem is irresponsible management of AIG. They're wrong. The problem is that government should never give your money to private industry.

Update

The plot thickens... Obama says Geithner is on the case. Well, it's a good thing he's "on the case" now, because he sure wasn't "on the case" when he architected the AIG bailout...

As president of the New York Federal Reserve Bank - the most important bank of the Fed - Geithner has already quietly quarterbacked and advised on the three major offenses this year to keep the financial system from seizing up.

They included killing off Bear Stearns, Uncle Sam's seizing of mortgage misfits Freddie Mac and Fannie Mae, and taking control of tottering insurance giant AIG for a bailout deal.

How bold. The genius that created the problem in the first place is supposed to fix it for us? How smart, Obama!

In attempting to solve the problem, government invariably makes it worse

Related

AIG: Ain’t it gag-worthy? by Michelle Malkin

Posted by Richard at March 16, 2009 10:44 AM

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