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I waited to weigh in on the AIG situation because I wanted to wait for all of the facts to come out before I had an opinion. As much as I’m infuriated by the actions of AIG, I fear there is little we can do at the moment to turn anger and outrage into action.
AIG is a sad manifestation of all that is wrong with the corporate elite culture. A culture marked by greed, excess, and arrogance. The bubble several decades in the making has burst, and America is at a crossroads: we can return to a culture of rules and law, or fail to learn from the Great American Mistake, wait for the mob crowds to lose interest, and return to business as usual. AIG serves as the best example of what happens when the economic, cultural, and class gaps widens to the degree it has. America has over the past 25 years, and especially during the Bush administration, moved away from democracy, and is slowly transforming into an oligarchy. This case is more evident if we consider how the Bush administration has patently ignored the constitution and created arguably the largest expansion of executive power in American history.
Americans have every right to be angry. AIG has severely lessened, and in some cases, wiped out retirement savings. They wove the company into the fabric of the international economic community, becoming so inextricably intertwined, that their failure would have disastrous effects on the global economy – all based on a falsified assessment of corporate strength. And in the words of the villain’s in Scooby Doo, they “would have gotten away with it too” if the personal growth of wealth was commensurate with inflation and the rate of appreciation of home values.
Still, as angry as we are, the Democrats have to be very careful about how they exact retaliation. A 90% tax on the bonus money employees (and ex-employees) of AIG received is, by my account unconstitutional, when considering the Bill of Attainder article, or the ex post facto article that states we cannot punish an individuals, or group of individuals without a trial, or retroactively enforce laws, respectively.
The problem is the stimulus package as written, defended the bonuses of AIG executives. The verdict is still out on Senator Chris Dodd’s involvement in rewriting the part of the bill that allowed this AIG spectacle to transpire. Thus, we must find a workaround solution to get our money back that is constitutional, or Democrats will be no better than the republicans that flushed our constitution down the toilet these past eight years.
5 comments: on "Episode 45: Torches and Pitchforks"
tL,
We both posted on the issue and so if you don't mind I'll respond to your post and comments on my post on your blog. I figured you wouldn't mind.
Actually, I disagree with your comments about us not in agreement, I think we are pretty much in agreement on this one. I didn't cover much on the part of AIG wrongs, because that is what everyone was talking about. No one was talking about government's involvement in the problem. You did a great job handling it I thought. Also, if you look at my post, I wrote the blog right after the news broke and therefore didn't think I could cover their role and do it justice. I was well aware of the government's already.
I also am vastly impressed with your research on the matter. I have not talked to another soul that knows these are not merit but a retention bonuses. We are actually considering a retention bonus for employees in a business we sold off at my company. However, let me make the point that it was a stupid idea to retain these people when they so obviously ran that section of AIG into the ground. They should have outsourced to consultants or something. That's why consultants exists. The bonuses were also obviously poorly negociated.
However, this is in large part the result of bailing these companies out. When we do not allow them to fail, their bankrupt management philosophies are allowed to carry on. Had AIG gone into chapter 11, the law would have allowed for them to renegociate their contracts with these people. Once we bailed them out, we let them continue on business as usual. I know you were against TARP when it came out so I believe you will agree with me on this one.
I am relieved that you have pointed out the unconstitutionality of the bill passed and Chris Dodd's role in the allowing the bonuses to go through. I was also impressed with Obama's comments on the situation last night with Leno. I must also stand up and applaud the people that are returning the money on their own.
I disagree with the Bush comments. First, I feel that they are irrelevant to the issues going on today. Second, I see this as a CEO problem, not something percipated by any government action. Perhaps you can describe the Bush and big business tie in a little more detail for me. I do agree, Bush did expand the role of the executive branch to a degree that was wrong.
I hope I covered everything and I hope you agree we've found some middle ground on the issue.
I think there is a legal grey area when it comes to the constitutionality of these bonuses because there is no precedent for a bailout of this nature.
The government should be able to tell AIG exactly what it can and can not do with the money they got.
No bonuses of any kind for anyone, the top execs should be terminated with prejudice and pretty much everyone should be investigated for fraud.
AIG ran it's business for a long time just like a money laundering operation/scheme so maybe the Feds should initiate a RICO case, seize all the assets and turn AIG into part of the government bank.
To Alex:
I'm not quite sure there is a "grey area" here. If there is you better believe this will wind up in the supreme court. And it if does, and the taxes are allowed, that would be a landmark case that would really change the we prosecute people. I think this is wrong. I'm all for angry mobs picketing in front of AIG HQ with cursewords and eggs and toilet paper, but this law would be a VERY slippery slope for future prosecution without trial. After 8 years of the bastaridaztion of the constitution, I'd sure hope this doesnt make it out of the senate, or Obama vetos the bill. Obama is, after all, a constituational scholar.
To CGen:
I'm glad we are in agreement about AIG -- I thought you were pro bonus money for a sec, which made me nervous hahaha! I missed leno, so I'll catch it on hulu tonight! And I'll reply to your post on your blog... help increase traffic to it... it's always an interesting read =)
Although I am opposed to the tax on the bonus money because many of the middle-class sales reps there earn 80-90%of their salaries in this centuries old system. But can the govt. tax the bonuses? Without doubt! Why? Because the govt is the majority owner (at 80%)and since it forked over the money in the first place they can tax it. Remember when you received that stimulus money of $600, the could have elected to tax it as well.
I see where you're coming from Del, and Barney Frank posed te same argument, but I don't think there has ever been a case in American history where the government was a majority shareholder as it is now with AIG. It's dual role as regulator and business owner is a very slippery slope, because it would set what I believe to be a very dangerous precedent in terms of government ownership of buisness. If the next president was as tyrannical as Bush, and he needed more money in the coffers, there could be a legal loophole that would allow to buy a majority stake in a business, tax the crap out of it, and make money -- all because the government doesn't like its practices. The example is a bit extreme I admit, but the lack of a trial means there is a very serious checks and balances issue here.
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