If you think this economy is a mess now, imagine what it would look like if the business community started to worry that the government would start abrogating contracts left and right.It's in re the AIG bonuses. Hey, a deal's a deal. If Uncle Sam wants AIG to ask the employees who'll be receiving those bonuses to forgo their bonuses, that's one thing; contracts can generally be renegotiated if all the parties agree. But if the Feds just jerk the rug out from under entirely legal, ordinary agreements, where does it stop? What's next?
One part of "next" would be, Wall Street's already low confidence in the Administration would flicker out. The only meaningful skill remaining would be the ability to influence the government to benefit your employer or yourself, a state of affairs many citizens think is already too frequent.
Does it sting, handing over a tiny percentage (do your own math -- $165*10^6/$170*10^12, multiply by 100, keeps comin' up .0001% for me)* of the bailout to some of the same talent that already steered AIG onto the rocks? Sure it does. But it stings a million times more -- literally! -- to be bailing them out at all. We're stuck with that.
EDIT: 165*10^6/$170*10^9, so 0.1%. Arrgh! See comments.
The big bonuses are big, set against my pay or probably yours. Compared to the total bailout, it's like leaving a penny tip for bad service, so the waitperson will know you didn't just forget.
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* So I rounded.
9 comments:
Uh-oh. Check that decimal point. I think you meant 170* 10^9, not ^12.
It ought to be .1% of the bail-out they received.
Regardless, the feds are still being pricks about it.
jb
I know better (or should) than to debate with you, but Tom Friedman made some good points on TV this morning:
1) AIG “pulled a Madoff”. They sold insurance policies with no tangible assets to back them up. They took the money knowing that when payoff day came, there would be nothing in the till. That’s fraud. And the very people receiving these bonuses are those who designed and sold these policies (credit default swaps).
2) If not for the bailout, AIG would have gone into receivership. There are lots of consequences of this, good and bad, but one of them is that a bankruptcy court judge could simply declare the bonus contracts to be just another claim against the company’s (nearly nonexistent) assets, and worth pennies on the dollar.
But, like I said, I know better than to debate with you! Mrs. Turon did not raise any idiots. Came close, tho’.
The government is already starting to abrogate contracts. Look at what they're proposing to do to the mortgage market. If your loan is under water, they're forcing banks and mortgage companies to alter the original terms of the loan agreements (a contract by any other name). In many cases, they're actually talking about reducing the amount owed on the principal...the original amount of money loaned out.
If I were a mortgage banker, I'd certainly be EAGER to jump into a business where the dot-gov can simply tell me that my contract is worthless. Why, I'd be jumping with joy for the opportunity to loan out money, knowing that a certain percentage of those loans are simply going to be declared to be worth only a percentage of what they were (supposed) to be valued at.
I know you're an anarchist, but I've always felt that one of the proper functions of government was enforcing contracts (along with preventing the initiation of the use of force or fraud). Now the government is functioning to destroy contracts, in complete violation of the rights of (at least one of) the parties to the contract.
Our government has gone from protecting individual rights to destroying them.
By their criteria, I should be able to send them $10.00 and call it my tax debt for 2008.
Hey, I only renegotiated my 'contract', using their formula, right?
Oh jeeze, Rabbit, if we're going to be renegotiating the social contract, I think I'd better be out of the orifice this week...
Aw, rats!
In particular, a billion is 109 = 1 000 000 000 in the American system and 1012 = 1 000 000 000 000 in the European system. For 109, Europeans say "thousand million" or "milliard."
Also, look up "ex post facto" and "bill of attainder". Just bothersome technicalities, I'm sure.
As for the politicians making such a big to do over what AIG does with money given to them by the government, *AHEM*.
http://www.opensecrets.org/orgs/recips.php?id=D000000123&type=P&state=&sort=A&cycle=2008
And does anyone know how to insert an url?
Three words for those who think Government won't abrogate contracts-
Fourth Liberty Loan.
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