There has been an enormous hue and cry in the last few days about the bonuses paid to some executives at AIG for last year’s work. Even the guy in the White House made threats against these people and likewise the chorus from the politicians is loud and strong. They make it sound like these folks robbed an armored car carrying your money in it. As I have written before on these pages I have had some dealings with AIG in the courtr0om in times past and I frankly don’t like them. I found them to be unfriendly and not inclined to deal fairly with others. I have no sympathy for their plight. However I do have a regard for the rule of law and I don’t like hypocrisy at all. It is especially the undeserving that test our devotion to the idea of the rule of law. It is easy to agree with the rulings we like and to applaud the contract interpretation that matches our own inclinations. It is when the recepient of the the law’s favor is not likeable that our mettle is tested. This right- wing semi -Liberaterian does have a real passion for our rights and that rule of law. It is what allows us to move up the step ladder of success in our country and prevents plutocrats from becoming embued with the power of the law on their side. The law is on the side of right, not the side of any ideology. At least that is the way it should function. Let’s review a little history here and see if the current outrage fits the circumstances or is merely a convenient cover for political ploys.
First, it is my recollection that AIG did not go knocking on the door of the Feds asking for anything. It was the Feds that dictated how things were to be done. No money had to be advanced to AIG. Its primary business is insurance and those companies are regulated by the States, not the Federal government. It also had a holding company and other subsidiaries involved in the market trading. I have written before that the company and its shareholders might well have been better off if they had allowed the holding company to file a Chapter 11 and if any of the insurance companies were indeed insolvent then they would have been placed into receivership by the respective State regulators. From the reports it appears that the insurance portion of their empire was sound and profitable. It was the other market trading businesses that were the losers–the ones dealing in those credit default swaps and such. There is no doubt such a move would have been better for the shareholders of AIG. I don’t know what their prospects would have been for a successful plan of reorganization but at least they would have had a chance. The main creditors were not holders of insurance policies with loses but those parties they dealt with on the swaps. You have seen in the last few days were most of the money went that they paid out from the funds given them by the Feds. It was for those institutional lenders, banks, and private investement houses ar0und the world.
The Feds came in and insisted that AIG agree to their program and agenda. The company was denied the option of even seeking a Chapter 11 and the shareholders were not allowed to vote on the agreement in advance. The Chapter 11 would have prevented all those bonuses from being paid. The bankruptcy proceeding would have voided those contracts and those executives would have had a claim like everyone else owed money. The bankruptcy does allow a priority claim for wages and salaries but it is limited to a few thousand dollars. If negating those contracts with employees was so important there was a way to do it. The government foreclosed that avenue and accepted those contracts when it used force majuere to seize the companies.
These people all had contracts and apparently performed as specified in the contracts and earned their money as much as anyone else. I mean what social justice is there for a rock star with a high school eduction and limited command of the English language earning hundreds of thousands for a one night concert? He performed and got paid. These people had contracts. They continued to work and perform their duties. No one asked them their opinion of the government takeover. It was imposed on them. Do I like it that all that money went to them? No I do not. But I am glad that the rule of law prevailed and very dismayed that these people are now being threatened publicly by our highest officials. It is outrageous that they were paid these hugh sums of money but the outrage would be if the Government extorted the money back from them. The Government should have to honor contract rights like the rest of us. The Government took the company the way it found it. The government had options. Now it is having buyer’s remorse. The government should follow the law and indeed it should be setting the example. If they can squeeze and hammer these people then they can do it to you.
It is that time of year for the ladies to start their spring gardens and flower planting for the season. Tulips are about ready to be planted and those other colorful flowers of spring. The azaleas and crepe myrtle are in bloom not along with the dogwoods and the redbud trees. They always seem so bright after the gray of winter time.