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AIG and the Miracle of Economic Stimulus

Like everyone else in America, I’ve been watching the AIG saga unfold with eager anticipation.  At first, I was in the “too big to fail” camp.  The sheer size of AIG, added to the complexity of its product offerings and coupled with the magnitude of its global positioning, suggested to me that the consequences of allowing AIG to fail far outweighed the risks of government bailout.  So I was in favor of TARP money for AIG.

But a funny thing happened on the way to where we are today.  Companies like AIG and Citigroup have had to learn that partnering with the government isn’t always an ideal solution.  When you go crawling to the government for anything, (or anybody else for that matter), you give up control of your business.  In other words, the people who now own you want some say in how you run your business.  Memo to AIG and Citi (and any other company in similar circumstances):  If you don’t want a guy like Barney Frank telling you how to run your shop, then don’t do stupid things.  If you go crawling to the government looking for a handout or bailout because you did stupid things, then the government has the right to tell you how to spend this money.  If you don’t like it, then don’t do stupid things.  Otherwise, tough.

Since the original AIG bailout, our taxpayers have seen a number of curious develpments, specifically a $787 billion “economic stimulus” package and, shortly thereafter, a $410 billion Omnibus Spending bill.  Both were sold to America as stimulus, even though they were laced with garbage and earmarks, with the result of containing very little actual stimulus.

This week, the entire city of Washington DC is “outraged” at the amount of bonuses paid to AIG employees, some $165 million.  Politicians everywhere are jockeying for position behind microphones to express their enmity over what they consider to be duplicitous and outrageous behavior.  No one has considered this from the average AIG employee’s perspective.

Suppose you’re the average AIG employee.  You’ve been a good employee and have driven solid revenue increases to the company and/or controlled costs.  You’ve done everything that’s been expected of you and were not involved in any of the stupidity that got your employer into the trouble that it’s currently in.  If fact, the only reason AIG has been kept afloat for as long as it has is because of your efforts.  Last year, you were told if you worked hard and hit all of your targets, you’d receive a bonus to reward your efforts.  There were no stipulations that the bonus, if paid by the US Treasury, would be null and void.

This week, you received your bonus of $50,000, and with that money in hand, you were planning on stimulating the economy:  perhaps trade cars, a little home improvement and take the family on a much needed vacation.  Now, Washington is telling you that they are taking the money back because they’re outraged that AIG has the temerity to reward you for doing an excellent job.

Am I the only one in America that has a problem with this?  The federal government just spent $1.2 trillion to stimulate the economy because apparently they know best how to do that, but a private citizen can’t.  And, in the foolishness that defines Washington, they fail to see that a $50,000 bonus gets taxed at rates ranging from 28% to 35%, so they see a significant amout of the money back in the form of tax receipts anyway.  The hacks in Washington need to hold themselves to the same standards that they try to hold the rest of us to.

Finally, Larry Kudlow had this to say in a piece on RealClearMarkets.com this morning:

“And as for the $165 million or so in AIG bonus payments, the Obama administration — including the president, Treasury man Tim Geithner, and economic adviser Larry Summers — knew all about them many months ago. They were undoubtedly informed of this during the White House transition.”

Well, if that doesn’t want to make you throw up the day after St. Patty’s Day, nothing will.  Maybe some day we’ll see a candid politician.  But then again, candid politicians don’t get elected.