The Big Bash

[Beacool]

Politicians of both parties pile on AIG.
Wednesday, March 18, 2009

YESTERDAY, we were more skeptical than most about the "populist" backlash against the $165 million in bonuses that went to some employees of government-owned AIG. The events of the past 24 hours have only confirmed our view. We don't love the fact that the men and women of this disgraced company are insisting upon the compensation they signed up for before the company collapsed into the arms of the taxpayers. But whether they are being greedy, or simply human, is hardly relevant to what is in the public interest now. AIG's demagogic critics in both parties should keep that in mind.

For better or worse, the U.S. government -- i.e., all of us -- now owns AIG. The firm is hemorrhaging knowledgeable employees at precisely the time when it -- and therefore we -- need them most. No matter how morally satisfying, taking back bonuses now, as proposed yesterday in belated outrage by Senate Majority Leader Harry M. Reid (D-Nev.) and House Speaker Nancy Pelosi (D-Calif.), would probably accelerate the exodus, with the likely effect that the country would lose much more money on AIG than it would otherwise. Yes, $165 million is a lot of money. But it is 0.09 percent of the total AIG bailout cost, $173 billion. The relevant policy question here is not whether we feel like spending $165 million on bonuses; it is whether doing so will help wrap up the AIG rescue as cheaply and quickly as possible.

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Under the circumstances, we can understand why President Obama feels that he must join this opportunistic chorus rather than resist it. Still, this has not been a stellar moment for the man who came into office arguing that "the time has come to set aside childish things." With hundreds of billions of dollars in necessary repairs to the financial system still to come, Mr. Obama must find a way to explain those costs in terms that neither inflame the public nor insult its intelligence. The best we've heard so far came from a non-politician, Federal Reserve Chairman Ben S. Bernanke. AIG's irresponsible behavior angers Mr. Bernanke, too, but he's not losing his cool. On CBS's "60 Minutes" last Sunday, he likened the firm to a neighbor who sets his house on fire by smoking in bed; the town has a choice between letting the place burn down to teach him a lesson, or dousing the flames to prevent them from consuming the homes of non-smoking neighbors. "That's where we are now," he said. "We have a fire going on." This is no time to be throwing more fuel on it.

http://www.washingtonpost.com/wp-dyn/content/article/2009/03/17/AR2009031702936.html

[RaleighNCDUer]

1. WHAT THE FUCK????

Those 'knowledgeable employees' are exactly the people that created this cock up. Why would we - as the new owners of AIG - WANT to keep them on?

Better to let them go and hire in some sharp kids out of school who haven't developed any bad habits yet.

[Teaser]

2. Depends, some of them are, some of them aren't

I'm sure there are many talented Quants at AIG.

Problem is, too many Quants think they're working in theoretical physics, and not finanical engineering.

[Beacool]

3. These transactions are so complex that most didn't understand them.

That's the whole point, a small division of AIG (totaling around 400 people) are the ones who brought down a giant. The people who are directly culpable should be punished, but we still need knowledgeable folks to untangle this mess, not some kids just out of school as you suggest.

Furthermore, I think that Obama wasted a precious opportunity, by making a lame joke about "choking on his anger", instead of explaining the situation. Adding fuel to the fire is not helpful.

:eyes: