Last fall as the American economy appeared to be slipping over the edge of an economic precipice, those in Congress were faced with some tough choices about whether to prevent giant businesses from going under– in order to spare the economy further economic trauma.
In the midst of all of the chaos and tumultuous stock tickers, then Treasury Secretary Hank Paulson made a bold announcement: he wanted congress to hand him a blank check for $700 billion so he could work his voodoo magic on the economy. In his thinly populated 3 page proposal, he also indicated that congress should mind their business about where he was going to put the money.
I was proud of the level of public engagement with elected officials, as the outrage of American’s translated into thousands of calls and emails to their representatives and senators. I was equally dismayed at the eventual decision of Congress- to essentially concede to Paulson.
Since that time the Treasury Department has doled out billions of dollars to many businesses- among them- $170 billion to AIG. What did AIG do after receiving their very own welfare check? They sent their employees to a luxury resort in California- a week long respite to the tune of nearly half-a billion dollars. Congress, in all of their indignance, rattled their sabers and made biting remarks to the media about AIG’s wasteful spending of tax payer dollars. BUT, payments to AIG continued.
Now that it has come out that AIG is distributing $169 million in bonuses to employees as a result of “contractual agreements”, Congress, and the President, are again parading around in anger. Give me a break. First of all- Congress set this all in motion last year when they opened the floodgates of corporate bailouts without significant oversight. Then, when discovering unscrupulous behaviors by AIG and others (see Merrill Lynch), Congress simply complained loudly- but made no significant attempts to right the problems.
Now we once again see the result of private businesses making decisions that would make most of us squeamish, and again the clamor is loud. Senator Grassley even went as far as to suggest AIG exec’s should commit suicide. Now the Senate & House are discussing legislation that would impose virtually a 100% tax on bonuses for companies that have received governmental bailouts.
The general frenzy with which the public, the president, and the congress have been swept up in over $169 million is almost comical. With another $30 billion scheduled to go to AIG, when all is said and done, AIG will have received over $200 billion dollars from American taxpayers- and we are upset over $169 million dollars? Seriously? Get real people. Lets direct at least some of this anger where it belongs- on congress for so poorly regulating the dissemination of taxpayer money.
Even looking past Congress’s culpability, lets think for a minute about the actual idea behind a 100% tax on a portion of businesses spending done in a legal manner. Did I miss something? First of all- many of those receiving the bonuses from AIG don’t even work for the company any more. Taxing AIG isn’t going to do a thing about getting the money back from those payees. Second of all- Congress needs to stop sending mixed messages. Either we are nationalizing businesses- where the government takes over control, and makes decisions for the business- and maybe this is the right thing in certain instances; or the government is simply providing financial aid to a business with some stipulations attached– and maybe this is the right thing in certain instances.
But trying to retroactively punish businesses for engaging in legal, albiet shady, practices, is not the job of the government, and recouping $169 million is nothing more than a publicity stunt- especially when another $30 billion is scheduled for release to AIG in the near future.
So what are the lessons?
1- Americans need a longer attention span. Lets not forget the actions that set these unregulated bailouts in motion.
2- Americans should not be duped by this publicity stunt. Sure AIG’s actions were reprehensible, but in the grand scheme of things, is $169 million the best thing we can think of to be angry about? Seriously?
3- Bailing out businesses that are “too big too fail” should be an indication, in the sage words of a C SPAN commentator this morning, that they are indeed “failing”. Congress needs to carefully consider what the root problems are in a business or industry before blindly throwing money at it. If they did perhaps they would discover that the problems in part, were created by those whom they would give fat checks to, to fix it.
Last fall Congress hastily got itself into the business of bailouts without proper research, debate, or forethought. The chickens are coming home to roost now, and its becoming pretty amusing to watch all the fingerpointing.
I for one, am pointing my finger right back at Congress.
Filed under: From the Editor |