I’ll probably get flamed for this post, but enough already about the investigation into the bonuses at AIG! Let them keep it and move on, stop this crazy idea of taxing those bonuses after the fact. It’s infuriating to see how the politicians are jumping on the bandwagon to get their soundbites in - and blaming AIG execs, the feds, etc for this bonus mess. It’s even more crazy to me that we’re spending time creating legislation to handle the bonuses which total $165MM compared to the more than $182B pumped into the company. Are we now going to tackle stupid decisions at Merrill, GM, Ford, and the hundreds of other banks that have taken taxpayer money? Did we expect the government to be an expert at nationalizing private companies or providing good oversight? C’mon folks, get real, the government will not solve our problems! It’s pretty darn stupid to spend $165M in bonuses, but then again, it’s pretty dumb to have the government invest in assets that no sane investor or person would touch. Can someone tell me why we are spending our collective energies on trying to collect $165M when we should be focused on the bigger issues? We are wasting our time and resources going after these incompetent managers because it’s easy to, it makes the politicians feel good and look like they are on our side. It’s totally ludicrous. If these companies can’t make good decisions, then why is the government investing in these companies and chasing good money after bad? Think about it - we are deleveraging the world over with prices coming down, banks divesting their bad assets, and loans hard to come by. Guess who is leveraging upward big time? The government, and if we’re not careful, we’re recreating the problem, only this time we’ve created the biggest AIG of them all, the government.
Again, it will be the small businesses and entrepreneurs that turn this ship around, we need to stimulate small businesses and entrepreneurs not failed industries and companies. Imagine if we had put $162B into small businesses in 2008… Enough ranting, time for some solutions:
1) Stimulate small businesses. How about tax credits for hiring? Reward companies that can actually hire in this environment. Don’t go too far, the goal is not to hire for the sake of hiring, but make it attractive so businesses can invest for the future.
2) Stimulate investment. Give companies faster depreciation schedules for spending money in 2009 for equipment, software, technology. Incentivize them to invest. Again, not so they spend haphazardly, but to increase investment for those who are holding back.
3) Stimulate new entrepreneurs. Teach people to start companies and not rely on big business for employment. Deploy volunteers, entrepreneurs, lawyers to give back through free seminars with no strings attached. Provide more online resources on how to bootstrap and get a business off the ground.
There are certainly lots of other ideas, I’d love to see the government invest in more education, re-training for those in the automobile industry, promoting long-term growth for the country through technology development and mass transit solutions (much like the highway system under Eisenhower). We should be investing for the future and taking the time to rethink long-term stimulus, this is not a short-term fix. More dollars into failed industries is not going to be a long-term solution. We’ve got a long ways to go. If we recover too fast, I fear we’ll end up back where we are. Much like the recent run-up in stocks, we’re due for a huge bounce lower. We , as individuals, cannot rely on government, we need to take responsibility for ourselves and for our neighbors. Save and invest more. Stop blaming AIG, the government, the banks. Let them do what they need to do. Get started on your business, invest in people. Not only will you succeed, but the world will as well.
Andy, your entrepreneurial abilities far outstrip your abilities as a public policy commentator. Please drop a line if you get back to writing about start-ups!
Oh that’s constructive.
Maybe if people with entrepreneurial abilities were involved in public policy we wouldn’t be in this ridiculous massive bailout BS shenanigan we are in?
James Suriowecki at the New Yorker argues that AIG outrage is an example of altruistic punishment, an idea from behaviorial economics that people will suffer as a group to punish freeloaders and shirkers.
I do not agree with what they did about handing out the bonuses, but I do agree that we should stop putting all of our focus on it. Everyone needs to start focusing on money making activities and that does not include bi*ching about AIG!!
Do you agree??
Hey Andy,
You’re right on the money regarding politicians and their soundbites. They jump on every media witch hunt to prove their wholesomeness. But people are smarter than that. All the focus is being put on millions, when the problems are measured in BILLIONS. So yes, give them the bonuses and lets go after the real problems.
By the way, here in Nebraska a corporate jet was being built for a large financial institution. When the media blew up over the idea of spending money on such wasteful things, the order was canceled and many people working on the jet lost their jobs. Ironic.
Thanks for posting, Andy!
Hey Andy…I agree it’s pretty silly to ask the government to invest in bad companies, and then get mad when those companies…GASP…make more bad decisions.
I do disagree a bit with your solution though for stimulating small businesses. I think small businesses are the solution too…but stimulus shouldn’t come from the government with tax breaks, etc. Government is the problem here. Everything they’ve ever managed has been less efficient than free market counterparts and gone over budget (public schools, NASA, prisons, etc etc).
People will always spend their own money more carefully than they will spend someone else’s. Thousands of individuals betting with their own dollars on the next successful company (aka the free market) will perform better than a handful of government officials deciding how to spend our money for us. America seems to have forgotten this is what made it prosperous for so many years…the closer we get to the government overseeing various pieces of the economy the closer we’ll get to North Korea’s economy.
Government is the problem exactly. That’s why a tax break is in essence them getting out of the way -very different from managing. True stimulus is the government getting out of the way.
Andy, dead spot on! I don’t know that any of those AIG folks deserve those bonuses but at this point, does it really matter? We’re spending absurd amounts of time and energy focusing on $165M when $60+ BILLION of the AIG bailout money was sent over seas. America - do you really think that we’ll ever see that money again? Hellzzz no! Why aren’t people more upset about that? Geez America - can’t you see the forest for the trees? Evidently not.
Bigger question - despite whether you think the AIG bonuses should be paid or not - ask yourself how scary it is that the government can stick their big fat ignorant noses into business and overpower valid contracts whether they do it by demanding a return of the bonuses or legislate around it by taxing them on the back end. Wow - ask yourself what this means for “free” markets and capitalism in the future.
The size of the bonuses is not the point. The point is that we live in a world, with economies that are based on “incentives”, i.e. to award the good performance, and to punish the losers. The point is that these guys are losers, they suck at what they do, and to give them any bonus is a bad lesson for every kid out there, who wants to choose between becoming a good school teacher, or a lousy employee of AIG!
Wrong. Bonuses are not just to reward a good job done. Bonuses are, in this case, used as an incentive. Not as a reward. I’m guessing you are not an economist.
I wonder if it’s a coincidence that you and xkcd were on the same page, but I saw both pop up in my RSS feed today. If you haven’t seen it already, this should brighten your day.
http://xkcd.com/558/
You bring up a good point. I still think it is not fair that they got those bonuses but it would be wrong for the government to invent a special tax for it after the fact. I think they should return a large part of the bonuses but that is thier choice to make. Unfortunately, I think you are right about this being a minor loss overall in the scheme of things.
They got the bonuses, the Goverment Approved it in the AIG bailout bill. it was a bad idea, but the government is full of those. Lets get over it and move on before the government taxes everyones’ bonus because it deems that they don’t deserve them.
I’m happy to see this post. And happy to see non-economists taking this viewpoint. The AIG bonuses should be allowed. If you argue it then you do not understand the full scope of things.
If the government takes away the bonuses then businesses outside of AIG will fear that their contracts are not valid. This will really hurt the economy. And the bonuses are being paid in order to keep employees there. Yes, they may be responsible for what happened before. And therefor did not do a good job. But the bonuses are an incentive to stay. They are receiving death threats and offers elsewhere. Why not leave? And when everyone leaves, who would want to work for a sinking ship? So if the government bailed out AIG in order to prevent them from failing, then stopping the bonuses is moronic. It will just cause them to fail.
The market is everything. The government just messes things up, and hinders progress. Empirical evidence proves this.
Read this for a better explanation:
http://www.nytimes.com/2009/03/17/business/17sorkin.html?_r=1&hp
Good link and comment.
This is the best explanation I have heard yet and a good link to boot.
I’m even more surprised to read that the New York published something worth reading.
http://www.nytimes.com/2009/03/17/business/17sorkin.html?_r=1&hp
It’s good to see someone taking a reasonable stance on this situation. So many people are outraged but do not have the facts right.
The bonuses are a good thing. They are an incentive. For the workers to stay at AIG. AIG needs to keep their employees in order to clean up the mess they created.
First off, the bonuses are in the employee contracts. If the gov’t steps in and prevents the bonuses then the real value of a contract will diminish. Not just in AIG. Businesses will lose hope. And the economy will worsen.
Secondly, the employees are receiving death threats and can easily go elsewhere. Recruiters are picking them up like crazy. And if AIG loses their workers, who would want to start there? Nobody wants to get on a sinking boat.
You can argue whether or not the gov’t should have bailed them out in the first place. But since they did, then taking away the bonuses will just cause AIG to fail, which is the opposite of what all this money is spent trying to do.
If you argue and bicker over this, demanding justice, then you do not have a real understanding of the situation. Read up on it before you jump to conclusions. Take an economics class while you’re at it.
For more (better) information search the NYTimes website for “The Case for Paying Out Bonuses at A.I.G.” I tried posting a link but I think this comment system blocks that.
You know, in any case when the gov’t steps in and creates policies all productivity in the private sector (businesses) is slowed. The gov’t is bad for business. This is a perfect example. What scares me is that Obama will likely put in place (just like most democrats) business restrictions and regulations. That won’t help things. That will make recovery take longer. Businesses do the best when regulations are at a minimum. The market is everything.
I agree that the greed should have been squelched before but if examples are not made out of the current scenario there will be no change of attitude about “entitlement” by these small numbers of bad people.
You are right on the money, Andy. Further, the same naivete that makes the government think that they run and invest in businesses of every stripe is showing itself in foreign policy as well.
Thanks for posting this!!
Really? Is it really possible that this is the headline story for the third day in a row?
Reward or incentive…I’m not sure that it really matters, because in the end they are going to be spending that money the same way.
As another person said, let them have their money while we stop letting it consume our thoughts and energy. We all just need to stay focused on “creating” our own bonuses and staying creative and productive in this unprecedented space in history.
The Government got out of the way - that is why the whole mess erupted.
Greedy. Manipulative. Stinking. Money grabbers.
The people who were “due” a bonus are the very ones who got the world economy into the mess. You indicating that they should get the bonus is not what any proper business man would do if it was his own company.
Instead you would fire the shit out of the people that created the mess, not reward them. If anything - the people (traders, directors etc) working at the major corporations have done EXACTLY what those 2 idiots who made a video about Dominos have done.
They have destroyed public confidence in their respective company’s brands.
Will the same outcome come to ECONOMY WRECKERS as have come to “I just farted on a bit of pepperoni” people?
No.
Why?
Because people like you write crap like this and talk to others in a similar vein, who make sure congress don’t punish people for their mistakes when they have such wide ranging implications.
@Timothy:
Do you own a company? If so - At what point would you actually fire someone? From what you are saying - you’d give someone a bonus for financially crippling your company and continue to pay them in the HOPE they can revive what they have just crushed.
I am glad I do not work for you - you’d reward the wrong people.
This has been an ongoing conversation among some friends of mine, and I think yes they were wrong, but do we really need to harp on the situation any longer. I am still upset that we are bailing everyone out but the public. Where are the great ideas Obama had? Why are they not in place yet?