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If you read the headlines and the comments from the president and Congress, you'd think that AIG and its executive ninjas had snuck this bonus program by their watchful eyes. In reality, the government's outrage is a pretty distasteful combination of a populist pandering and lack of diligence than anything else.
The bonuses at AIG shouldn't be a surprise to anyone -- the company finalized the program back in late September and filed it with the SEC shortly thereafter. Furthermore, back in December AIG's CEO sent a letter to Congressman Elijah Cummings, a senior member of the House Committee on Oversight and Government Reform, walking him through the bonuses and the reasoning behind them.
So there's no reason that we should be hearing the outrage now -- besides, of course, the fact that now that the payouts have been announced our elected officials assume we need to see them shake their fists in a mouth-foaming rage.
But that's only the half of it
The feigned anger is only part of the problem here -- it actually gets worse. Despite the fact that the AIG bonuses weren't a secret, some prominent government officials were clueless about them anyway. Here's the AP with the call:
Explaining the sudden burst of official outrage, the White House for the first time on Tuesday night said Geithner learned of the impending bonus payments a week ago Tuesday; he told the White House about them last Thursday, and senior aides informed President Barack Obama later that day.
Here's a good question: Why did Timothy Geithner, head of the Treasury, only hear about these bonuses a week ago? Call me crazy, but given that the government has forked over some $170 billion to the insurer -- putting it up there with Fannie Mae (NYSE: FNM ) and Freddie Mac (NYSE: FRE ) in terms of government cheese banked -- you'd think the Treasury Secretary would want to be well briefed on every detail of the situation. But maybe not. After all, what's $170 billion between friends, right?
But it's all so darn frustrating!
If that's what you're thinking, then you have company. The country, if we break out a trusty cliche, is right between a rock and a hard place. Tim Rutten of the Los Angeles Times recently wrote of the bonuses:
All this for the guys who pushed over the first boulder in the current financial avalanche. And for what? So that American International Group Inc. can "unwind" its disastrous investments. It's a bit like a bank robber insisting he's entitled to a finder's fee for telling you where he buried the loot.
While law enforcement may not pay robbers a finder's fee for such information, they may give them other types of concessions for cooperating. In the case of AIG, we may all feel like holding our noses, but if we're going to spend $170 billion bailing them out, doesn't it seem worth it to spend less than one-half of one percent of that money making sure the company's financial products group is wound down properly?
And while we're at it
We might as well also put a lid on the other outrage that's come out of the AIG bailouts -- that is, the billions it doled out to counterparties such as Goldman Sachs (NYSE: GS ) , Bank of America (NYSE: BAC ) , Deutsche Bank (NYSE: DB ) , and Barclays (NYSE: BCS ) .
Where did everyone expect the money was going to go? It was well known that a, if not the, major problem at AIG was its exposure to credit default swaps, so should it really be such a shock that when the company received its bailout money, it spent a good chunk of it making good with the counterparties on those contracts? As above, either the outrage is purely political brownnosing, or the government is confused as to why it's giving AIG money at all.
We should be angry!
But there is legitimate reason that we should be angry. We should be angry that if these bonuses are not warranted, that they were not handled right from the outset. After all, they were put in place right around the time the government made its initial investment. Maybe we should be even angrier over the fact that instead of putting their heads together and working hard to find a reasonable solution to the financial problems, Congress and the president are busy climbing up on soapboxes and making sure we know just how angry they are.
Either way, I'm angry, but it's not at the folks at AIG.