Buyer's Remorse

The government's phony outrage over the AIG bonuses

David Harsanyi | March 18, 2009

Here's an idea: If you stop nationalizing banks, there will be no need to engage in phony-baloney indignation over bonus payments anymore.

This cockamamie populism in Washington really hit its stride when Sen. Charles Grassley (R-Iowa), suggested that AIG execs who earned bonuses should "follow the Japanese example and come before the American people and take that deep bow and say, 'I'm sorry,' and then either do one of two things: resign or go commit suicide."

C'mon. If suicide were a proper penalty for piddling away taxpayer dollars, the National Mall would look just like Jonestown—after refreshments.

These same senators who voted to nationalize banks with nary a precondition are also, apparently, stupendously talented actors. After all, most of these senators voted for a bill that contained a provision that specifically protected bonuses that were agreed upon before Feb. 11 in the bank bailout legislation. It was put there by Sen. Chris Dodd (D-Conn.), who is the chairman of the Banking Committee.

How is it that all those who cast votes on this provision—because, we imagine, no trustworthy lawmaker would vote for legislation he hadn't examined vigorously—are threatening a "special" tax to snag AIG bonuses? It not only is dishonest but also means they, in a breathtaking abuse of power, believe using punitive taxation to appropriate someone's salary is a legitimate function of government.

President Barack Obama, meanwhile, has asked Treasury Secretary Timothy Geithner "to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole," claiming it is all about "fundamental values."

You know what's a super-useful value? A guarantee that contracts entered into by individuals or parties are respected. Or is the state ready to throw that fundamental value out and bend to the will of the angry mob?

Those are only a few of the reasons the insincere contortions of politicians over $165 million are so pathetically transparent. How could a president who threw $700 billion of your money away in a Keynesian spending orgy feign moral indignation over a few bonuses? We now have $11 trillion, in effect, invested in various bailouts—with $170 billion going directly to AIG.

Grandstanding isn't going to make us "whole" again. Sorry.

AIG has been dreadfully run, obviously, or it wouldn't be a welfare queen. No one will pity it.

Yet making an assumption that every AIG bonus earner is, by default, a numskull, a bad actor or undeserving is also wrongheaded. Don't we want AIG to succeed and get off the government dole? What sort of employee would work for an entity that doesn't honor its contractual obligations? How many valuable employees would walk away from such a company?

Imagine if George W. Bush had dictated unilaterally to General Motors, after it took billions of bailout cash, to cut the salaries of union workers retroactively because their leadership had negotiated sweetheart deals earlier. A line worker makes a pittance compared with an executive, but the principle does not change.

I get the anger. It's real. It's deserved. The public pressure on AIG is wholly understandable. And with the kind of bailout and stimulus money we're throwing around, you can bet this won't be the last time you're upset.

Being upset is one thing. Permitting government to tear up legal contracts and tax away people's entire incomes, though they haven't broken any laws, are precedents we will regret in the end. Maybe even more than the bailouts themselves.

David Harsanyi is a columnist at The Denver Post and the author of Nanny State. Visit his Web site at www.DavidHarsanyi.com.

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|3.18.09 @ 12:01PM|#

But dictating how businesses operate without having the authority of blackletter law to do so is okay. And it's not socialism, damn your hide!

Reinmoose|3.18.09 @ 12:13PM|#

I keep hearing that there's a lot of public outrage about the AIG bonuses, but I haven't talked to anyone yet who even so much as mentioned them. Could it be that the press are outraged and telling everyone else that they should be too?

There is more here than meets the eye. The pols are likely using this case as a test.

|3.18.09 @ 12:15PM|#

Holy underwear! Innocent tax payers blown to bits!

Gentlemen! We've got to protect our phony-baloney jobs!

|3.18.09 @ 12:17PM|#

When people worried about "moral hazard" when all this bailout stuff began, it wasn't so much about setting up an expectation that everyone big enough would get bailed out. That ship was ready to sail.

It was that we'd come to a point where Senators were suggesting retroactive abortion for employees of the bailed out companies. It's an accountant, not a choice Senator Grassley!

It was that we'd come to a point where Congress, in a populist move to cover its collective ass from taxpayers who were skeptical about these bailouts, would start legislating super targeted confiscatory taxes on employees of these struggling companies. What incentive does that provide the employees to fix their companies so that the loans can eventually be repaid.

This is like when we were kids and our crazy aunt gave us $20, which we spent on candy. She got all hot and bothered that we didn't donate it to soup kitchen.

Alan Vanneman|3.18.09 @ 12:19PM|#

Putting the blame on Chris Dodd is entirely false, as Glenn Greenwald explains, here:

http://www.salon.com/opinion/greenwald/2009/03/17/dodd/

It was the Obama Administration, specifically Geithner and Summers (I hope I'm spelling their names right), who insisted on protecting the bonuses (Dodd wanted to limit them). They also came out with the "our hands are tied, totally" line until they realized how pissed people were, at which point they started blaming Dodd and pretending to think about ways to mollify the pitchfork crowd.

Both the Bush and Obama Administrations have wanted to assure Wall Street that, even though they're getting maybe a trillion dollars in below-market loans from the government, nothing else has changed. You can still party like it's 1999.

But things have changed. Main Street is funding Wall Street. Wall Street is in denial. They think the name of the game is still "My bonus is bigger than your bonus." It's not.

Tim Cavanaugh|3.18.09 @ 12:21PM|#

Could it be that the press are outraged and telling everyone else that they should be too?

Bullseye.

If Bernanke and Paulson had just let AIG go into bankruptcy in the first place, all these evil, evil bonus contracts would have disappeared and our fundamental values would have been upheld. Instead they went in with bold announcements about how they were in all the way, with all their skin in the game, no turning back. Try saying that next time you sit down at a poker game, then see who's interested in your whining when you get fleeced.

|3.18.09 @ 12:23PM|#

I've now RTFA. I was wrong above. It's not a matter of not having blackletter law behind them. The blackletter law, the bailout bill itself, is being affirmatively violated. Even these idiots in Congress and the administration talking like they're going to "do something" strikes me as an abuse of power and an illegal interference in contractual relations. Every single politician who has done so should be forced out of office. Of course, nothing of the kind will happen.

Should've let the banks fail in the first place, you incredible, sanctimonious, lying windbags.

ed|3.18.09 @ 12:23PM|#

Wall Street is in denial.
They think the name of the game is still "My bonus is bigger than your bonus."

I have a new game for them: "I still have my head."
Winner gets to live.

kinnath|3.18.09 @ 12:24PM|#

This is why bankrupcy was necessary. The judge would have had the legal authority to invalidate the contracts (expressed or implied) that "required" the payment of bonuses to the excutives that had "earned" them.

Jozef|3.18.09 @ 12:24PM|#

With this all AIG mess, I just keep thinking: what if Spitzer didn't force Hank Greenberg out of the company? I can't really imagine Greenbers accepting any bailout money that would cause him losing control over AIG.

Tim Cavanaugh|3.18.09 @ 12:27PM|#

But things have changed. Main Street is funding Wall Street. Wall Street is in denial. They think the name of the game is still "My bonus is bigger than your bonus." It's not.

Maybe so, but the time to make that clear was before using our money to become a majority shareholder.

When you buy a car, a spouse, a house or anything else, you're buying it for better or worse, including all defects, pre-existing conditions, liens and other contractual obligations. These contracts were part of the investment. The government could have demanded abrogation of all bonuses as a condition of the bailout. It didn't. To allow the government to change the terms now is despotic.

|3.18.09 @ 12:29PM|#

what if Spitzer didn't force Hank Greenberg out of the company

Just one more crime we can lay at Spitzer's fucking steamrolling feet. Or at least I now intend to.

Shannon Love|3.18.09 @ 12:29PM|#

Of course, lost in all this is that AIG went under in large part because they insured Freddie Mac and Fanny Mae (GSEs) mortgage-backed securities against default. They did so based on the the securities ratings which in turn was based on the implied government guarantee on the payout of the securities. Indeed, AIG used the GSE securities to anchor default insurance of private security issuers. They bundled them together in risk pool based on the idea that, yeah, the private securities might fail the government backed ones would not. They went under because the government securities proved even more unsound than the private ones.

It's funny therefore to see leftist complaining about the "greed" of the people who bought into the safety and security of the Democrat's own pet housing project. Had they never set out to induce the market to make risky loans back in the 70's we wouldn't be in this mess today.

|3.18.09 @ 12:31PM|#

As bad as the savings-and-loan bailout was, at least the RTC only came in after the S&Ls failed and filed bankruptcy. The current government is easily the stupidest we've ever had. Congress especially, but Bush/Obama are dumbasses, too.

ed|3.18.09 @ 12:35PM|#

CNN is running a piece right now on how AIG employees in Connecticut and New York are afraid to come to work. Poor little whipping boys. I feel their pain.

|3.18.09 @ 12:39PM|#

Wonder how all these attacks affect shareholder, employee, and customer perceptions of AIG? Do they help a beleaguered business?

Or are they. . .Satan?

SpongePaul|3.18.09 @ 12:52PM|#

With the shape of America theese days, Belize is looking more like a home than a vacation spot, LOL!

Some Guy|3.18.09 @ 12:54PM|#

Don't we want AIG to succeed and get off the government dole?

No, I want the building to collapse and catch fire. Then I want the bankruptcy judge to wipe his ass with the bonus contracts that would have never been paid if the government hadn't bailed them out. Also, I want Dodd in the lobby while this happens.

Imagine if George W. Bush had dictated unilaterally to General Motors, after it took billions of bailout cash, to cut the salaries of union workers retroactively because their leadership had negotiated sweetheart deals earlier.

Then 70% of the people defending these bonuses would have a party.

fyodor|3.18.09 @ 12:55PM|#

It ... means they ... believe using punitive taxation to appropriate someone's salary is a legitimate function of government.

Well, DUH-UH!!!

Don't you realize you can't oppose ANY tax on principle unless you're an anarchist who opposes ALL taxes on principle?

Democracy baby, majority rules! (Except for those pesky first 10 amendments, when we can't get around them....)

|3.18.09 @ 12:57PM|#

These same people were just saying earmarks are such a small part of spending.Their not important.

|3.18.09 @ 12:59PM|#

Isn't it time for someone to come by and claim that 80% ownership in a company by the government isn't nationalization?

Zeb|3.18.09 @ 1:01PM|#

While I have little love for the AIG execs or the UAW, the situations are not comparable. While the bonuses for AIG do seem rather inappropriate at this point, they are not what has ruined the company. The UAW contracts, on the other hand, are a part of what is causing GM to fail.
Both companies should be in bankruptcy, which would make this a moot point, but AIG bonuses and UAW union contracts are not comparable situations.

|3.18.09 @ 1:01PM|#

Even if the Obama administration realizes at some point that it's better to let them fail, it won't happen. It'd be too politically costly.

Of course, when it comes to the bonuses he's expressing a lot of outrage over something that he specifically guaranteed in his own stimulus bill.

mark|3.18.09 @ 1:03PM|#

Don't we want AIG to succeed and get off the government dole? (from the article)
I don't. AIG should be closing up by now, and always be referred to with the prefix "defunct insurer".

If you stop nationalizing banks, there will be no need to engage in phony-baloney indignation over bonus payments anymore.
If the too-big-to-fail firms were actually fully nationalized, then there would really be no need to whine about anything, as the government could set all the terms. What we have now is some kind of "free money with no strings attached" system compounded by a "oh yeah, there were strings attached after all" system. This, I'm sure, will evolve into a despotic system Tim hinted at.

If Bernanke and Paulson had just let AIG go into bankruptcy in the first place
I would be selling apples. Sorry but that was not a very good option.

It is now day 58 of the new administration. Citigroup and AIG could have been nationalized, broken up and sold off by now. Instead we have zombie banks and we're trying to tell them not to eat brains.

Jerry|3.18.09 @ 1:04PM|#

Has anyone done a FOIA to figure out why the Fed/Treasury thought AIG bankruptcy would pose a systemic risk?

|3.18.09 @ 1:07PM|#

I know this may be just semantic nitpicking, but aren't guaranteed bonuses really just wages? Shouldn't a bonus be a reward or incentive for desired behaviors? The guys in the financial division lost the company billions. Even if they are retention "bonuses," why keep around obviously shitty employees?

mark|3.18.09 @ 1:08PM|#

And while the economy tanks, Russia and China are publicly mulling alternative currencies... and if someone does not get those doctors back into Darfur to vaccinate people there is going to be a second genocide from infections. Sorry to go off topic a bit.

Hormonal Redhead|3.18.09 @ 1:09PM|#

$165 million is approximately 0.01% of the $170 billion that AIG got. Now, I don't believe in rewarding incompetence, so maybe the bonuses don't make sense on one level. But I'm more ticked off about the $170 billion than about the (comparative) chump change the execs got.

Now to read the full article. :-)

|3.18.09 @ 1:09PM|#

Jerry | March 18, 2009, 1:04pm | #

Has anyone done a FOIA to figure out why the Fed/Treasury thought AIG bankruptcy would pose a systemic risk?

Systemic risk is just another name for "things keep getting worse and worse, and we don't know why" It's impossible to fully define, and means different things to different people. Which makes it a great excuse to do any damn thing you want.

Gilbert Martin|3.18.09 @ 1:09PM|#

"Of course, lost in all this is that AIG went under in large part because they insured Freddie Mac and Fanny Mae (GSEs) mortgage-backed securities against default."

Speaking of Fannie and Freddie I heard that the've got retention bonus deals with some of their employees as well. I don't hear any squawking from Congress about that.

Sean W. Malone|3.18.09 @ 1:10PM|#

"Isn't it time for someone to come by and claim that 80% ownership in a company by the government isn't nationalization?"

Oooh... I'll do it!

Cause umm, 80% majority share isn't... uh... the same, as government managers actually running the company outright. The ownership is still partly private, so... uhh...

Hmm... Harder than I thought.

|3.18.09 @ 1:11PM|#

Hormonal Redhead
$165 million is approximately 0.01% of the $170 billion that AIG got.

As the self designated decimal point police, I would point out it's 0.1% - not 0.01%. but still...

fyodor|3.18.09 @ 1:12PM|#

Yet making an assumption that every AIG bonus earner is, by default, a numskull, a bad actor or undeserving is also wrongheaded.

This "who needs those fuckups anyway" attitude kind of reminds me somehow of the Bush administration's catastrophic decision to disband the Iraqi military.

That said, the "who needs those fuckups anyway" attitude would have been just fine had we been willing to just let the entire company fail in the first place, as we should have.

Seems the government is acting now like a confused parent or charity worker who wants to help out by is then scandalized that the recipient of the aid doesn't use it the way he's "supposed to" (especially when it wasn't stipulated that he couldn't!).

|3.18.09 @ 1:14PM|#

Cause umm, 80% majority share isn't... uh... the same, as government managers actually running the company outright. The ownership is still partly private, so... uhh...

If government-as-shareholder exercised the same influence of corporate decision making that individuals-as-shareholder do, then even 100% ownership wouldn't be nationalization. The key is whether or not the government is making business decisions or not.

|3.18.09 @ 1:15PM|#

Employee compensation is a business decision.

Gilbert Martin|3.18.09 @ 1:20PM|#

The funniest thing about this is listening to the blowhards in Congress and the Obama administration try to act as if they were a bunch of innocent bystanders and had nothing to do with this.

The bonuses were part of the deal they voted on. They own it and the responsibilty for approving it.

Sean W. Malone|3.18.09 @ 1:22PM|#

Individuals-as-shareholder how? Like... someone who owns 0.05% of a company? Or someone who owns 75% of a company?

There's a bit of a difference in influence on business decisions.

TofuSushi|3.18.09 @ 1:22PM|#

moose,

I keep hearing that there's a lot of public outrage about the AIG bonuses, but I haven't talked to anyone yet who even so much as mentioned them. Could it be that the press are outraged and telling everyone else that they should be too?

Of course the people are outraged. Just look at the polls. You are just ignoring the outrage or you don't know the right people.

Didn't someone once say "I don't know anybody who voted for Nixon?" Well, that election was probably rigged, but the idea stands.

|3.18.09 @ 1:23PM|#

If government-as-shareholder exercised the same influence of corporate decision making that individuals-as-shareholder do, then even 100% ownership wouldn't be nationalization.

If the government exercises the same level of influence as a sole shareholder, or as an 80% shareholder, then damn skippy it would be nationalization. Trust me, anyone who owns that much of a company can and will micromanage the hell out of it anytime they want.

|3.18.09 @ 1:26PM|#

SugarFree | March 18, 2009, 1:15pm | #

Employee compensation is a business decision.

Exactly - my point is they are not "nationalized" because the gov't owns stock, but because the gov't is calling the shots. Companies that are majority owned may not be effectively nationalized and vice versa...

|3.18.09 @ 1:29PM|#

Sorry, domo. I understand know. I'm still a little hungover from yesterday.

|3.18.09 @ 1:33PM|#

Individuals-as-shareholder how? Like... someone who owns 0.05% of a company? Or someone who owns 75% of a company?

Institutional shareholders who own huge chunks of stock routinely give their proxies to management - effectively exercising no control despite their holdings. The government, on the other hand, can influence business decisions through threats, coercion, prosecution, legislation etc. - all outside of the shareholder voting process. So we are seeing massive government influence - but NOT via the mechanism of voting shares.

Hormonal Redhead|3.18.09 @ 1:39PM|#

"As the self designated decimal point police, I would point out it's 0.1% - not 0.01%. but still..."

Oops. Typing with a splinted finger. Thanks for the catch, domo.

Still a tiny percentage, though.

Some Guy|3.18.09 @ 1:40PM|#

Zeb - While the bonuses for AIG do seem rather inappropriate at this point, they are not what has ruined the company. The UAW contracts, on the other hand, are a part of what is causing GM to fail.

So tying these bonuses to short term gains - of which the most popular way to attain were by making bets that had no chance of paying off in the long run - had nothing to do with it?

Sounds EXACTLY like the UAW, except the UAW wasn't using 30:1 leverage.

Reinmoose|3.18.09 @ 1:42PM|#

You're slipping Tofu

Sean W. Malone|3.18.09 @ 1:43PM|#

Fair enough Domo, and point generally taken, but at the same time - giving proxy control to management is still control, as you would fire that management or remove them as proxy if they did something you didn't like.

Government force is a problem to begin with, without them having majority stake in companies like that, sure...

Also, I might add that government's political will has a moralistic component that very few large shareholders would ever have. And for those lefties out there - I don't mean that as a good thing. (And also, the alternative isn't "immoral", the alternative is "amoral").

TofuSushi|3.18.09 @ 1:43PM|#

Oh, now you are blaming the UAW for AIGs bad behavior? HA!

|3.18.09 @ 1:46PM|#

Don't you realize you can't oppose ANY tax on principle unless you're an anarchist who opposes ALL taxes on principle?

Just depends on the principle you're using to oppose a tax.

|3.18.09 @ 1:50PM|#

Could it be that the press are outraged and telling everyone else that they should be too?

This is what it seems like to me. Of course when you walk up to someone on the street they're gonna not like this situation. But mostly it seems as if everyone is just so accustomed to being screwed that they don't give a shit about minor symbolic crap like this and just want the economy to be rescued.

|3.18.09 @ 1:56PM|#

Also, I might add that government's political will has a moralistic component that very few large shareholders would ever have.

Exactly. Shareholders tend to align themselves with the best interests of the firm - so as to recover their investment - where the government is motivated to serve the interest of voters - which is always something else.

|3.18.09 @ 1:57PM|#

Oops. Typing with a splinted finger. Thanks for the catch, domo.

My middle finger is getting a bit sore from overuse as well...

ed|3.18.09 @ 2:00PM|#

SugarFree | March 18, 2009, 1:07pm | #

I know this may be just semantic nitpicking, but aren't guaranteed bonuses really just wages?

Yes, they are. But they have become potent symbols for a pissed-off and restless public. The executives and slick operators who ran AIG onto the reef might consider taking some of that accrued personal time, pronto.

fyodor|3.18.09 @ 2:01PM|#

Just depends on the principle you're using to oppose a tax.

I don't think Statists recognize any principle that restrains the government's power to tax, other than it didn't pass.

|3.18.09 @ 2:05PM|#

I don't think Statists recognize any principle that restrains the government's power to tax, other than it didn't pass.

I dunno. I don't know any "statists." But you can't argue that all taxation is theft and then be okay with the taxation that pays for armed services and limited government. It makes no sense to draw an arbitrary line in front of which taxation is fair and beyond which it is theft.

Sean W. Malone|3.18.09 @ 2:05PM|#

"where the government is motivated to serve the interest of voters - which is always something else."

Cue Tony, Chad, Joe (?), etc. saying how great a thing this is... Damn people looking to make a profit!

|3.18.09 @ 2:07PM|#

I don't know any "statists."

[Hands Tony a mirror.]

Anonymous Crank|3.18.09 @ 2:07PM|#

A few salient points here:

1.) These are not performance bonuses.. They are "retension bonuses" desinged to hold on to the people who came AFTER the d-bags that mucked everything up and are supposed to oversee the rehab of AIG. It is the CLEAN UP crew who are being demonized by the Feds and media.

2.) These are contractual obligations that were in place when the bail out hit, and were specifically protected (I.E.-> we WANT these guys and gals to KEEP WORKING at AIG to pull it out of the nosedive, if possible).

3.) It should scare the hell out of any libertarian that the goverment thinks (according to Chuck Schumer) that it can arbitrarily nullify a contract.

4.) It should DAMN WELL scare the hell out of ANYONE that the Feds can decided to hit your pay packet with a %100 tax if you become politicallly unpopular, or they can get in a populist sound bite on CNN.

kinnath|3.18.09 @ 2:08PM|#

Institutional shareholders who own huge chunks of stock routinely give their proxies to management - effectively exercising no control despite their holdings.

And the greatest feature of a free market is that those institutional shareholders are now being punished severely for their past actions.

This is not a bug in the system and should not be viewed as s justification for the federal government to come riding to their rescue.

Sean W. Malone|3.18.09 @ 2:10PM|#

Hey Tony - I agree with you, you can't claim that having money taken from a person by force (called taxes when done by government) is theft and also say that it's ok to pay the police. It's still theft.

It's why under this cold, limited government exterior, there beats the heart of a complete wacko anarcho-capitalist :P

On a more serious note however, I can argue that as all taxation is legalized, societally-sanctioned theft, the use of it to pay for anything must be VERY carefully restricted and the only circumstances that it might even be considered should be ones which intrinsically benefit all citizens (like national defense). I can also argue that the world of my true choosing, I would create a voluntary and pay-per-use system for funding government.

Sean W. Malone|3.18.09 @ 2:12PM|#

Or rather, for funding services... government is a slightly different matter.

|3.18.09 @ 2:14PM|#

They are "retension bonuses" desinged to hold on to the people who came AFTER the d-bags that mucked everything up and are supposed to oversee the rehab of AIG. It is the CLEAN UP crew who are being demonized by the Feds and media.

What about the people receiving 'retention' bonuses who are no longer employed there?

Sean W. Malone|3.18.09 @ 2:15PM|#

|3.18.09 @ 2:17PM|#

It's why under this cold, limited government exterior, there beats the heart of a complete wacko anarcho-capitalist :P

You don't need to tell me this.

On a more serious note however, I can argue that as all taxation is legalized, societally-sanctioned theft, the use of it to pay for anything must be VERY carefully restricted and the only circumstances that it might even be considered should be ones which intrinsically benefit all citizens (like national defense).

Except for the theft part, I agree with you. I just think there is a broader range of services that can benefit all people, and not even in a direct 1:1 ratio sort of way. Some social goods can be more useful than the sum of their parts.

classwarrior|3.18.09 @ 2:17PM|#

Contracts by financially insolvent firms get torn up all the time. That is part and parcel of bankruptcy. Strangely, the writers of Reason never seem to have these qualms about the sanctity of contracts when it comes to collective agreements with unions.

|3.18.09 @ 2:18PM|#

Kinnath, I've often wondered why people don't realize that negative consequences for failure are a *feature* of any free-market.

It's kind of one of the more important ones too... You know, what with encouraging people to be careful with their decision making.

Why should I have to suffer for the bad decisions of other people? If that's how the market works I want some goddamned controls on it so that I don't have to pay for others' mistakes, such as, say, suffering through a depression.

Zeb|3.18.09 @ 2:18PM|#

Some Guy,
I am not trying to say anything about the wisdom or appropriateness of the bonuses, or the quality of reasons for giving them out. My only point is that the bonuses themselves have nothing to do with AIGs failure (the people who get them do, I don't disagree), they are tiny in comparison to the money involved there. On the other hand, the UAW's unwillingness to budge on their contract does contribute directly to the demise of auto makers.
I'm not trying to make any point about unions, executive pay or anything like that.

ed|3.18.09 @ 2:20PM|#

What about the people receiving 'retention' bonuses who are no longer employed there?

I believe they're called "busboys."

Sean W. Malone|3.18.09 @ 2:20PM|#

"I just think there is a broader range of services that can benefit all people, and not even in a direct 1:1 ratio sort of way. Some social goods can be more useful than the sum of their parts."

I agree... a lot of services benefit all people. But you're making a big assumption suggesting that such services should be provided via force.

kinnath|3.18.09 @ 2:23PM|#

Why should I have to suffer for the bad decisions of other people? If that's how the market works I want some goddamned controls on it so that I don't have to pay for others' mistakes, such as, say, suffering through a depression.

Boo-hoo

People get fucked over by the consquences of other people's bad behavior in every aspect of a free life.

Grow some balls and deal with it.

Sean W. Malone|3.18.09 @ 2:25PM|#

Tony... You shouldn't generally have to suffer from the bad decisions of other people, but you're totally ignoring how we got here - and that was after years and years of government intervention resetting the rules of the game to avoid any loss and encourage lots of risk.

Big surprise when risks are taken, and at some point the wolf catches up to itself and the house-of-cards comes tumbling down.

So yeah, sometimes, people are going to make honest mistakes even in a totally free-market system (though I would argue that those mistakes would be DRASTICALLY less influential on uninvolved parties), and recessions are going to happen from time to time as over-abundance of supply causes prices to come down and a temporary tightening of the collective belts.

You think you can just mitigate that by writing a couple laws?

Ups and downs are part of life buddy... Might want to get used to it and protect yourself from their more painful effects by planning for your own future instead of waiting for someone else to save you.

|3.18.09 @ 2:26PM|#

Depression? Ha! If the banks had been allowed to fail and the market allowed to adjust, we'd be seeing signs of a recovery by now. Instead, the government just had to act and just had to scare the players in the economy into a hole.

Sean W. Malone|3.18.09 @ 2:27PM|#

*Note: I said "honest" mistakes because - just to pre-empt you - if you're the victim of fraud or theft, then you go to the police & courts.

|3.18.09 @ 2:29PM|#

On the other hand, the UAW's unwillingness to budge on their contract does contribute directly to the demise of auto makers.

No. Blaming the unions is typical rightwing bullshit. The workers could have been paid $0 and it wouldn't have made a hell of a lot of difference.

Making this case is a quick way to paint yourself as a rightwing shill.

What about the people receiving 'retention' bonuses who are no longer employed there?

Retention bonuses are earned and payable if you stay through a certain date. That date has come and gone at AIG, the retention bonuses cleared by Congress were earned and payable.

They earned their bonuses by staying per their contracts. Why should they give them back?

It is obvious there will be no more bonuses at AIG of any kind for the indefinite future. Why should they stay?

What Congress and the administration, in their infinite idiocy, have guaranteed with this clown show is a flight of talent from the banking and financial sectors, and the end of what was once deemed an essential tactic: bundling good banks with bad banks in bailout packages to shield the bad banks from runs and shorts.

Sean W. Malone|3.18.09 @ 2:31PM|#

"No. Blaming the unions is typical rightwing bullshit. The workers could have been paid $0 and it wouldn't have made a hell of a lot of difference."

What kind of crack are you on Tony? Just curious...

TofuSushi|3.18.09 @ 2:31PM|#

Why should they give them back?

They don't need to give them back. The government needs to rectify their theft by taking them back.

kinnath|3.18.09 @ 2:32PM|#

Kinnath, I've often wondered why people don't realize that negative consequences for failure are a *feature* of any free-market.

Paraphrasing from memory: "Pain is an integral part of the learning process -- Unfortunately, we sometimes do not survive our most profound learning experiences."

|3.18.09 @ 2:33PM|#

What kind of crack are you on Tony? Just curious...

I'm not going to be a pedant and ask for evidence. I'm just saying blaming unions, ACORN, Fannie Mae... rightwing bullshit not connected with reality in any way.

TofuSushi|3.18.09 @ 2:34PM|#

Right on Tony!

kinnath|3.18.09 @ 2:40PM|#

The problems afflicting the legacy US name plates are legion. In order of priority:

A deeply entrenched management that has some fantasy of still living in the glory days

A deeply entrenched engineering community that can't produce clean sheet designs because they are not capable or they are not permitted to do so by the deeply entrenched management

A deeply entrenched manufacturing community that has succeeded in extracting long-term committments from the deeply entrenched management that simple cannot be sustained and yet cannot be broken outside of a bankruptcy court

A meddlesome federal government that repeatedly attempts to reengineer society without regard to the collateral damage that may be caused by meddling and a complete inability to learn from past lessons.

Other than that, the future looks so bright we all have to wear sunglasses . . . .

Sean W. Malone|3.18.09 @ 2:44PM|#

"I'm not going to be a pedant and ask for evidence."

No... of course not, who needs evidence...?

OH WAIT... I have gobs of it. How about everyone on here who isn't a statist provide just one piece of it backed by a link for Tony.

I'll start, towards Unions:

Any time government force (law) is used to modify price (wages are a price paid by employers), that modification necessarily reflects a cut-back in some other way. If an employer has $1M with which to pay wages, and each Union Worker is allotted $100k salary + bonuses, he can employ 10 workers. If that suits market demand for his products and falls in line with the minimum per-worker compensation he could be paying... fine, but if it is (and it is almost always) far above what he could pay non-union workers for the same job/quality standards - say the market rate is only $50k in salary/bonuses, he could have employed 20 people. The remaining 10 people will never know how much they lost out on by not getting the job at all, but the union itself caused their unemployement.

From Reisman:

"The actual effects of labor unions are arbitrary inequalities in wage rates, mass unemployment, and substantially lower real wages for the average worker. Labor unions are aptly described as a leading vehicle of what von Mises called "destructionism."

Whenever a union succeeds in obtaining above market wage rates for its members, it also reduces the number of workers who can be employed in its field. This is because of the operation of one of the best established principles of economics: Namely, the higher the price of anything, including the wage of any kind of labor, the smaller is the quantity demanded of that good or labor service.

Thus, workers who could have been employed in the lines controlled by labor unions are instead displaced and forced to seek work elsewhere. The added competition of these workers in other lines then serves either to depress wage rates in those other lines, thereby resulting in an arbitrary, union-imposed inequality in wage rates, or, if those other lines are also unionized or are forced to pay union wages in order to avoid becoming unionized (which is often the case), to cause still other workers to be displaced. It should be clear that to the extent that the effect of union activity is to depress wage rates in other fields, the union slogan "Live Better, Work Union" turns out to mean "Live Better by Forcing Other Workers to Live Worse.""

Sean W. Malone|3.18.09 @ 2:46PM|#

One option for reading:

http://mises.org/story/1861

Russ 2000|3.18.09 @ 2:52PM|#

To allow the government to change the terms now is despotic.

Amen.

Szasz's point is still the clearest - The threat to freedom isn't tyranny, it's speciousness.

The blather out of the POTUS is the same as always: "I was wrong and I'll appoint someone to take full responsibility for it."

Kolohe|3.18.09 @ 2:56PM|#

3.) It should scare the hell out of any libertarian that the goverment thinks (according to Chuck Schumer) that it can arbitrarily nullify a contract.

This doesn't bother me so much.

4.) It should DAMN WELL scare the hell out of ANYONE that the Feds can decided to hit your pay packet with a %100 tax if you become politicallly unpopular, or they can get in a populist sound bite on CNN.

This does.

The first two points are also correct, but it should have be clear from the get go that this is a 'clean up' crew not a 'rescue' crew. And at any rate it should be made clear now.

AIG Delenda Est.

Lefiti|3.18.09 @ 3:19PM|#

I hope the Denver Post goes under soon, and that right-wing loon David Harsanyi is looking for work but never finds it.

LiddySmackDown|3.18.09 @ 3:21PM|#

God that man was handed a turd to polish and managed to just go through getting beat about the head and shoulders with a raw 10 day old fish and still made Congressman look like a drooling bunch of retards.

God this whole mess is, well it's a fucking mess.

|3.18.09 @ 3:23PM|#

1) Libertarians hate unions, so when a government bailout of the Auto's means Union contracts don't get ripped up in bankruptcy - they say, "BULLSHIT - let the company sink." Because they'd like to see the Unions get hosed.

2) Libertarians hate government intervention, so when AIG gets bailed out and 0.1% of the money goes to pay bonuses, they say, "BULLSHIT - let the company sink" But think that the contract should be honored if the company isn't going to go bankrupt. They shrug their shoulders and think, "stupid, but the bonuses are not the biggest issue."

Add to that, that many libertarians see Union "contracts" as coercive by nature, and you can see why the priorities are that way.

What you DON'T libertarians saying is, "Void the union contracts illegally, but pay the bonuses at AIG." There is no double standard, just a difference in emphasis.

Not a Right Wing Shill|3.18.09 @ 3:25PM|#

"No. Blaming the unions is typical rightwing bullshit. The workers could have been paid $0 and it wouldn't have made a hell of a lot of difference."

No, if the workers had been paid zero, then the company's O&M would have been reduced even to a figure much lower than their competitors'. In fact, I seem to recall reading that reducing UAW's pay to about $20/hr. would be all that it would take to be in line with Toyota, VW, etc.

But the UAW won't accept $20/per hour; they'd rather dig in, cross their fingers and hope that the don't end up with that $0/hr deal.

And don't even get me started on those idiotic job bank costs. The UAW is Aesop's scorpion writ large.

Q: So why'd you sink GM when you knew full well you'd drown too?

A: Because I'm the UAW.

Babe|3.18.09 @ 3:27PM|#

"Right on Tony!"

So tiresome...

|3.18.09 @ 3:48PM|#

Sean,

Nice rant against unions. I was referring specifically to the troubles of the automobile industry.

Sean W. Malone|3.18.09 @ 4:03PM|#

"Nice rant against unions. I was referring specifically to the troubles of the automobile industry.

DUH!

You don't see how that applies??? The Union costs the American automobile industry far more and makes them far less productive than their Korean & Japanese counterparts. They have consistently produced vehicles at a poorer quality and without the features that customers are willing to pay for at the rate they'd need to cover the American industries heightened expenses. The fact that this applies to other industries as well is rather immaterial - anytime you have artificially high costs which affect your product's price and have to compete with people who do not have the same costs, you're going to come out the loser. And that's assuming the US industry was creating cars people actually *liked*...

I mean... geesh... This level of math is pretty easy to do.

Michael Ejercito|3.18.09 @ 4:06PM|#

Kinnath, I've often wondered why people don't realize that negative consequences for failure are a *feature* of any free-market.

They do realize that, and that is why they hate the free market.

|3.18.09 @ 4:11PM|#

Sean,

Nice rant against unions. I was referring specifically to the troubles of the automobile industry.

He says, implying that they are not in any way interrelated. This is appallingly dishonest.

|3.18.09 @ 4:28PM|#

I'm saying the discussion about whether unions are good is different from whether unions are responsible for the auto industry's troubles, which is simply a matter of fact you are perfectly capable of looking up.

BTW I still don't understand libertarians' problem with unions.

Sean W. Malone|3.18.09 @ 4:36PM|#

Tony, the "fact" I'm perfectly capable of looking up is that the American auto industry hasn't been able to compete with companies from abroad - largely due to increased costs, specifically labor costs.

How is this refuted anywhere? Do you want to bother making a counter argument or are you just going to keep playing dumb?

And if you don't understand the problem with unions, go re-read what I posted. It was quite clear. Unions result in higher unemployment and lower *overall* wages, and higher prices for goods & services produced by unionized companies. To make matters worse, it is accomplished typically by force and legislation.

|3.18.09 @ 4:48PM|#

Tony: "BTW I still don't understand libertarians' problem with unions."

Are you sure you read Sean's post? It sums up the problems libertarians have with unions pretty well. They reduce market efficiency.

|3.18.09 @ 4:53PM|#

They reduce market efficiency.

So do lots of things libertarians are in favor of. So does a lack of lots of things libertarians despise.

But how can you possibly justify restricting willing contractual arrangements among people to further their interests? No government coercion. Just peaceable assembly. I really don't get it.

Unless you're just corporate shills like the think tanks that fund you?

|3.18.09 @ 4:57PM|#

Tony: "Unless you're just corporate shills like the think tanks that fund you?"

I would love some think tank funding about now.

Tony: "But how can you possibly justify restricting willing contractual arrangements among people to further their interests? No government coercion. Just peaceable assembly."

Who is talking about restricting willing contractual arrangements among people to further their interests? Although I think those assumptions are arguable.

|3.18.09 @ 5:00PM|#

Thanks so much for this post and article, which I'll just call Exhibit [large number] for why libertarians aren't taken seriously. Much better idea to let AIG, Citi, BOA and all the rest fail. Think how much better off we would all be now if only that had happened.

Sean W. Malone|3.18.09 @ 5:03PM|#

Peaceable assembly is opposed by no one Tony, but perhaps you ought to check your premises on what constitutes "peaceful"...

If a Union was an entity where all the workers of a company got together and sent one representative to the boss who said "Hey Mr. CEO, we all got together and agree that it's time for a raise - we're all prepared to leave if we don't get one."

Then Mr. CEO can say "Ok, I value you as employees, I want you to stay, let's make a deal" or "Psh... you ungrateful jerk, get out of here then!"

However, Unions use government force to get what they want, which is imo an inevitability when your alternative is having non-union workers pick up the slack.

How do your bargaining demands during a strike have any teeth if an employer can just find other workers to do your job? The *teeth* come from getting lawmakers involved.

Sean W. Malone|3.18.09 @ 5:07PM|#

BC... I'm genuinely confused:

"Exhibit [large number] for why libertarians aren't taken seriously."?

It would seem we (libertarians) have been consistent on A. recognizing the systemic cause of these boom/bust - monetary expansion cycles, B. advocating for companies like AIG to succeed or fail (in this case) on their own merits and not dragging taxpayers into the equation at all, and C. criticizing politicians for making dumbass moves.

Is this why we're not taken seriously? Seems AIG is about as far from libertarian as you could have gotten on any front.

</|3.18.09 @ 5:09PM|#

I love the smell of FAIL in the morning.

|3.18.09 @ 5:17PM|#

Are you sure you read Sean's post? It sums up the problems libertarians have with unions pretty well. They reduce market efficiency.

Let me try:

Unions, as they currently exist in America, are an artificial creation of the state that, whatever their effects on market efficiency, impose limits on the rights of employers and employees to contract.

|3.18.09 @ 5:19PM|#

Tony: "But how can you possibly justify restricting willing contractual arrangements among people to further their interests? No government coercion. Just peaceable assembly."

Tony, if you think union contracts are "willing contractual arrangements", you are indeed gullible. No company would enter into those arrangements if it wasn't forced to by law.

|3.18.09 @ 5:22PM|#

Unions, as they currently exist in America, are an artificial creation of the state that, whatever their effects on market efficiency, impose limits on the rights of employers and employees to contract.

Okay, if this is true then you could be said to be consistent. I apologize for reminding you that the think tanks that fund your movement are corporate shills.

|3.18.09 @ 5:27PM|#

Damnit Tony, please tell me where I can get in on this think tank funding and corporate shilling you keep mentioning. I need some supplemental income.

Your guilt by association claims are silly. I'm a free market shill that reads a free market website therefore I'm a corporate shill? Maybe I just share the ideas?

Sean W. Malone|3.18.09 @ 5:41PM|#

I also want to get some phat cash for being a corporate shill. How do I do that?

|3.18.09 @ 5:56PM|#

Unfortunately the industries propping up your quaint ideology don't believe in redistribution, so you likely won't see a dime of the money they use to influence Congress and public debate.

onesided|3.18.09 @ 6:00PM|#

Union contracts aren't arms length and intervened with by federal law. They are coercive by nature.

Sean W. Malone|3.18.09 @ 6:02PM|#

"Unfortunately the industries propping up your quaint ideology don't believe in redistribution, so you likely won't see a dime of the money they use to influence Congress and public debate."

You really have no clue what libertarian ideas are all about do you?

I don't support a single company that would use a single dime on influencing congress. The very idea of a corporation using government to benefit themselves is, by it's fundamental nature, oppositional to a free-market system.

How do you not get that? I'm not here going "Corporations should do whatever they want + get sweet ass public funding, subsidies & special benefits!"

I'm here, as are the rest of us saying, that government "help" is just as harmful as any other kind of intervention. The libertarian ideal is that *no one* gets special treatment and no one uses congress to get what they want.

|3.18.09 @ 6:16PM|#

Tony: "Unfortunately the industries propping up your quaint ideology don't believe in redistribution, so you likely won't see a dime of the money they use to influence Congress and public debate."

And here is the fundamental problem. Far too many people today in America think freedom is just a "quaint ideology".

|3.18.09 @ 8:54PM|#

"Kinnath, I've often wondered why people don't realize that negative consequences for failure are a *feature* of any free-market."

They do realize that, and that is why they hate the free market.

Negative cosequences for everyone!!!

(Boos)

No negative consequences for anyone!!!!

(Boos)

Negative consequences for some, minature American flags for others!!!

(Cheers)

jk|3.18.09 @ 9:08PM|#

I would think that a bonus would be tied to a company's profit and that some of the profit would distributed to individuals who excelled in the creation of that profit. Did AIG recently make a profit (excluding bailout money)?

To me, the outrage isn't about the bonus payments as much as it is about the business practices of AIG. I just don't see how a business can operate on the premise of handing out bonuses from non-existent profits.

Sean W. Malone|3.18.09 @ 10:39PM|#

"To me, the outrage isn't about the bonus payments as much as it is about the business practices of AIG. I just don't see how a business can operate on the premise of handing out bonuses from non-existent profits."

I appreciate this sentiment jk, however I have to point out that if we hadn't bailed AIG out, unless you were a share-holder (in which case I'd expect to be paid a dividend based on my percentage of ownership out of the total amount going to bonuses if no profit was made - providing further incentive to succeed), it's really no concern of yours.

This is where all this outrage confuses me. The only reason people have any right to be outraged is if they're directly affected - and a lot of us wouldn't have been that directly affected had the government not mortgaged our financial future on this jackassery.

I appreciate that a lot of people and a lot of banks were insured by AIG, but simply liquidating assets and having them bought up by another, more stable insurer isn't really as catastrophic as the government has made it to appear.

...and at least the damage would have been limited to participants instead of all the taxpayers.

Tim|3.18.09 @ 10:53PM|#

I thought any and all spending was keynesian stimulus, that it didn't matter what the money was spent on; it could be used to dig holes and fill them back in. Has congress and Obama finally figured out that not all government spending is created equal and that often it is counter productive?

jk|3.18.09 @ 10:55PM|#

I appreciate this sentiment jk

Ask my wife, I'm not a sentimental man.

Sean W. Malone|3.18.09 @ 10:57PM|#

"Has congress and Obama finally figured out that not all government spending is created equal and that often it is counter productive?"

No.

jk|3.18.09 @ 11:17PM|#

Maybe I'm just blabbing here, but it has not escaped my attention that college freshmen who enroll at a University's college of science or engineering and flunk the first hard math or physics test they get switch their major to business.

I have the impression that many of the people engaged in the world of big finance are not the sharpest knives in the drawer.

Sean W. Malone|3.18.09 @ 11:24PM|#

I think the only real thing you have to do to be good in that world is to have a high tolerance for risk, some basic math skills and virtually 0 long range planning abilities :P

|3.19.09 @ 12:04AM|#

I don't really see the point of applying free market principles to a market that is not free.

Sean W. Malone|3.19.09 @ 12:09AM|#

"Free-market" principles as in what?

I might agree, but basic economic principles like supply and demand, monetary & price theory and other such ideas apply no matter how free the market is.

|3.19.09 @ 5:33AM|#

"Imagine if George W. Bush had dictated unilaterally to General Motors, after it took billions of bailout cash, to cut the salaries of union workers retroactively because their leadership had negotiated sweetheart deals earlier. A line worker makes a pittance compared with an executive, but the principle does not change."

Article lost ALL credibility right here.

|3.19.09 @ 8:24AM|#

Sean: I am just saying I don't care about honoring AIG's contracts with it's employees after the government decides to give the company billions of dollars with taxpayer money.

Sean W. Malone|3.19.09 @ 12:28PM|#

Fair enough Rob, but I guess I'm just trying to say...

165 million is... what...

0.004.1% of the $4+ Trillion that the government has put us on the line for?

It just feels like a lot of government officials are trying to shift the outrage over to a few scapegoats who are doing precisely what their government contract said they could do, in order to redirect the blame away from themselves.

Also see: Chris Dodd claiming it wasn't his fault for a week, and then finally going... "Ok ok, fine, my bad."

Oh... and oops, AIG gave Dodd's campaign huge sums of money. Gosh, it's so surprising that the bill included provisions to allow these bonuses to be paid with tax money. But no, it's not our government's fault for giving the money in the first place, or failing that, bothering to make sure it was spent in a way taxpayers would have "approved" of... it's all corporate greed. Those jerks.

brandon|3.19.09 @ 3:21PM|#

What corporations in what industries lobby the government on behalf of anything resembling a free market ideology?

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