AIG gets in trouble–what about everything else?

I caught this article about AIG while perusing headlines the other day. What a good point it makes—what such a comparatively prolonged fuse about AIG execs and their bonuses? Aren’t there more important and impactful things to worry about and to rekindle our economy? I don’t mean say the crazy bonuses to AIG execs are morally just, but take a look around. China, for instance recently announced a major shift in its strategy concerning its investment in the U.S. dollar; in fact it suggested replacing the dollar as the international reserve currency. AIG exec bonuses of $165 million are chump change to the tectonic economic consequences such a change in policy could have for the U.S.

The Feds help AIG--but forgot to attach strings

The Feds help AIG–but forgot to attach strings

Who picks what important and what’s not in American economic strategy? Why does AIG cover the papers and congressional attention for a full week? Much of it is certainly public outrage from all of us non-bankers or non-insurance agents at all the bankers and insurance agents for taking our taxpayer money to compensate themselves. But congress looks like Robin Hood this week—steal from the rich and give to the poor! The Big Money articles sums it up nicely: “It’s healthy and cathartic to swear about the injustices of the bastards who got us into this mess. But this past week has been shortsighted. When we’re screaming one kind of inconsequential vulgarity about another kind of inconsequential vulgarity, our anger shouldn’t become a weeklong melodrama. We simply don’t have enough time for that.”

I think it is important to realize that however undeserving many AIG execs may be, they are hardworking dudes and dudettes like any other Americans. These two articles (one and two) bring up important points concerning the fact that blaming “AIG” or “bankers” or “Wall Street” isn’t exactly the best way to go about fixing things. In AIG’s case, one London-based unit of 377 employees pumped out $500 billion in credit-default swaps. These swaps helped ruin AIG and the U.S. economy. What about the rest of the 116,000 other employees at AIG? Slamming all of Wall Street or all of AIG is similar to blaming “corporate America” for “the government” for the countries problems. Making such broad accusations is unproductive and destructive. AIG isn’t simply a faceless corporation; it is (or was) 116,000 individual faces with lives and families and communities. The government should careful not to jump on the bandwagon an crush those not responsible for the mess.

It is certainly important to punish the wrong-doers of the economic debacle. But we don’t have to spend so much time doing it. (In fact, why didn’t congress think about putting in bonus restrictions in TARR before it passed it?) Perhaps congress should instead spend time thinking about other things, like how to help rejuvenate the U.S. auto industry.

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11 Responses

  1. […] Bloginization placed an interesting blog post on I caught this article about AIG while perusing headlines the other day. What a good point it makesâ […]

  2. Title?

  3. It seems like AIG is now in Enron’s position where there is blood to be had. Anything and everything is scrutinized and while it may be good that we are now really looking into the problems, the ways we approach a solution may be more out of malice than clear headed logic. It seems Americans would rather scalp a company than solve this problem. Throughout this crisis, I have been looking for more coverage on the world economy rather than the American economy since it seems that one will not prevail without the other. Yet everyday in the newspaper, scandal trumps our actual recovery strategy.

  4. You mentioned punishing the wrong-doers. There are two kinds of wrong- stupid and mean, right? In simple terms I mean there is incompetence and then there is malfeasance.

    Isn’t the market supposed to deal with incompetence? And, in fact, wasn’t it dealing with it quite nicely until the US government and the fed rolled along and put, what, $200 billion into AIG? For comparison sake, the President’s proposed budget calls for $9 billion for light rail development to help change our transportation infrastructure.

    Anyway, if we are going to punish being mean (evil intention), don’t we need to know that that kind of wrong doing happened? I am not saying it didn’t with AIG, just, let’s find out what it was. For example, who agreed to those contracts? Was there a conflict of interest? Also, who gave them a AA credit rating? Who allowed an insurance company to engage in so much derivative activity?

  5. […] Best Language Throwback (for the use of “dudes and dudettes”): Dave            (oddly enough, no title) […]

  6. It is always easy to say what they should have done. However, it seems like we are not taking lessons from the past and applying it now. Enron, is fresh in our brains, but apparently no one remembers it, otherwise, you would think that Congress would have done something about using the bailout money for bonuses.

  7. Does that mean as Ken Lay was to Andy Fastow, Congress is to AIG?

  8. I completely agree that AIG is not the only participant that has helped to perpetuate this mess. But, it seems Congress and the government in general have tried to make an example of one large player in hopes to send a message to all of the other similarly situated entities. Congress has neither the time nor resources to deal with every other company that has acted like AIG, and unfortunately, they probably will get away with it. We can only hope I guess that companies can begin to do a better job of self-regulating before they too go under.

  9. I totally understand the argument that we have bigger fish to fry right now and that maybe a little bit less attention should be on the bonuses that AIG execs are getting. That said, a lot of American feels like they have nothing to hold on to right now EXCEPT the trust they are putting in those whom they believe are going to hopefully pull us out of this. So I can understand why people are outraged to see the guys who arguably helped get us into this mess still be using their positions of power to reward themselves astronomical amounts of money…when most Americans are being forced to scale back and literally watch every penny.

  10. To answer your question Jordi…

    No I don’t think Lay was to Fastow as Congress is to AIG. As CEO, Lay is directly and personally responsible (right?) for the actions taken by his senior level employees. Most of the crazy plans of Fastow were presented to the board and Lay, both of whom happily and ignorantly signed off on them. In this case I think that they weren’t doing the job they were paid to do.

    Congress is not paid to watch over specific, individual companies; it’s paid to watch over the American people. Certain government organizations, like the SEC, take a company by company approach, but Congress usually takes a broader approach. However, Congress has recently been taking interest in individual companies like GM and AIG. This is not the norm. Although Congress may now be partially responsible for them, they were not directly responsible for the actions that got the companies into the hole they’re currently in.

  11. Soon people are going to use AIG as a verb, meaning to screw you out of money.

    Man 1: Can I borrow some money?
    Man 2: I dunno, are you going to AIG me out of it?

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