The plaque outside AIG's downtown HQ
I was going to write an angry piece on the AIG bonuses, the kind that uses a flamethrower to incinerate the subjects of my wrath. Then I took a walk down to AIG headquarters on Pine St. in Lower Manhattan. Unlike the offices in Greenwich, CT where the financial products guys reportedly work, an office which was receiving death threats, the main office downtown didn’t have any gawkers or thrill seekers (other than me).
I find this surprising. After all, to hear the internets tell it, people are spitting mad over the legalized Madoff make-off with tax payer money. (MoveOn cites the NY Times to estimate the AIG bailout is $500 from every tax payer in the USA.) And yet no one was storming the castle in downtown Manhattan. If anything, the corner of Wall and Broad, the place where a statue of Washington looks out on the NYSE, was buzzing with happy tourists.
He looks so serene.
Or maybe he’s just squinting to read the blurb on J. P. Morgan that sits outside the house that Capital built.
J. P. Morgan looks at tourists on Wall St.
Either way, the Obama administration’s reaction to AIG’s shenanigans is confusing at best. Geitner knew about the bonus money — it was public months ago — but rather than give the money away bravely with a rationale out in front, they chose to give it on Saturday night at the low ebb of a news cycle suggesting that they knew it was wrong. Then they sent out their minions (e.g. Summers) to express outrage at the injustice of it, and in the same breath justify it. I thought Obama and his people were supposed to be media savvy — at least more so than the inept McCains of this world.
Actually, when you think about it Obama’s first two months have had a touch of the Bush blessing: a crisis allows the president carte blanche and a sky high approval rating to implement cherished ideological goals. Is that maybe part of the problem? Cuz all of a sudden it seems like the Obama people are doing the same thing the Bush people were doing: hyping the economy, downplaying structural weakness, and misdirecting attention from massive malfeasance. For example, Summers was telling us on Sunday that even though “We’ve got an economy that’s losing 600,000 jobs a month,” and that the economic downturn is “probably not going to stop imminently,” U.S. Treasury bills “are the asset of choice for people around the world,” and low stock prices offer “the sale of the century.” Doesn’t that doesn’t sound depressingly like Bush era Newspeak?
Of course, self-styled conservatives can find a way to both justify rewarding losers and insisting that the rule of law is sacrosanct. This from a fun little operation called 247WallSt.com (the article is called “The Cost of Doing Business”):
In a moment of lucidity, Lawrence Summers, a former Harvard president who is now the Obama financial czar said that abrogating contracts would led to a precedent that would ripple through the legal system and cause business and the public to lose confidence in the rule of law. To hear Summers talk the action would be worse the Lincoln’s suspension of the right of habeas corpus.
My favorite phrase is “in a moment of lucidity.” As if Wall Streeters have been swimming in lucidity (probably bought on the free market), that was only muddied by unwarranted government intervention.
The mud is not coming from inept government meddling, however; it is coming from that head hammering, fuzzy-sick feeling you get from an extreme free market hangover. The problem isn’t that government is going to interfere with markets — which is really a metaphor for the personal freedom of entrepreneurs to do whatever they like in pursuit of a quick buck. The problem is that the government still wants to kiss the free marketeers’ asses and avoid doing the necessary — and painful job — of giving the free marketeers what they know is their just reward: punishing poverty. I mean, isn’t that what they told us the free market “red in tooth and claw” was supposed to do? Reward innovation and punish failure?
Summers says he’s outraged but this is a nation of laws: “We are a country of law. There are contracts. The government cannot just abrogate contracts.” In the words of Douglas McIntyre:
Whether AIG employees got large bonuses, especially since they probably had contracts to guarantee the compensation, is irrelevant in the overall effort to turn the course of the recession.
But, there will be Senators who cannot resist the urge to spend days in front of cameras questioning how some of the taxpayer’s money went into the hands of people who may or may not have deserved it. Afterward they can spend the evenings in their offices smoking expensive cigars and sipping cognac.
Notice McIntyre’s dissimulations. In the first place crime doesn’t matter, and in the second place government is always more criminal than Wall Street. (I imagine a mythical American cowboy yelling “McIntyre should be horse whipped!) Andrew Sorkin of the New York Times tried to justify the bonuses day before yesterday by appealing to the “sanctity of contracts” line and the argument that the bonuses are “retention pay.” As Sorkin says:
But another possible explanation is that A.I.G. knew it needed to keep its people. That is the explanation offered by Edward M. Liddy, who was installed as A.I.G.’s chief executive when the government effectively nationalized the company last fall. (He is being paid $1 a year.)
The parenthetical sentence at the end is particularly grating. It sounds like your grandmother excusing the gay pedophile priest because he did a penitential pilgrimage to the Holy Land last year. But his argument was a house of cards anyway as Cuomo proved yesterday. He said, “Eleven of those who received ‘retention’ bonuses of $1 million or more are no longer working at A.I.G., including one who received $4.6 million.”
Everyone knows that this is legalized theft on the part of the money men. It’s just common sense. You don’t have to have a Juris Doctor’s degree to know that Dick Fuld sold his $13 million dollar house to his wife for $10 to avoid financial punishment for his financial failure at Lehman Brothers. You don’t even need a high school diploma to know that these guys justified their massive wealth by saying it was the reward for taking massive risks. And the flip side is that if they fail they deserve to lose it all. They claimed to have brass balls, but in the collapse of AIG they showed they were crooks, and worse, cowards. And they want me to pay to get them out of hock.
I say, no way. And legal excuses don’t hold water. Lawrence Cunningham, a law professor at GWU, writes in an Op-Ed today that there may be many valid reasons to void these executives’ contracts, not the least of which is fraudulent conveyance — the same trick Fuld used to protect his $13 million dollar house from being seized to pay off his debts. That is supposedly the option that Cuomo is looking at. Barney Frank says that because AIG is owned by the US government, the government can do what it likes with the contracts. I think he’s right. And who was arguing for the sacrosanctity of the contracts of the laborers at GM, Ford, and Chrystler?
But Barney Frank is an important player in this drama for another reason: never mind FDR, the imperial presidency has been growing steadily since Andrew Jackson. With the exception of Andrew Johnson and Bill Clinton Presidents have gotten stronger and the Congress more feckless and deferential until the public trusts the Head Man in Charge unconditionally and distrusts legislators whom they know are publicly paid crooks (see McIntyre’s opinion above). But the wave of populist anger over over-paid and under virtuous executives might put faith and drive back into the Congress as the people’s voice in government. Gone is the myth of the Higher Man, the Great Leader, because he has proven to be as selfish and cowardly as we are ourselves. Arrived is the moment when a body of people, working together with a mandate from those they represent, assert the blanket rights of the people over the special dispensations of the exceptional individual.
Pseudo-conservatives of the Reagan/Bush mold will scream that this is just socialism, but it’s not. It’s democracy. Take as evidence the alliance of Republicans from the deep south and the midwest with guys like Frank on the AIG bonus debacle. Neoconservatism (what I like the think of as pseudo-conservatism) allied populist anger over cultural issues with neo-liberal (that’s right LIBERAL) economics to create the Bush coalition. We’re all familiar with its features: Rich people convince poor people to vote them into office on the promise that they will one day make their poor allies rich too. Well the poor conservatives just discoverd that was indeed a political ponzi scheme, and they’re out for blood. Expect to see a political realignment wherein Democrat neo-liberals and big business Republicans have more in common than populists on either side of the aisle. Right now the President’s administration is full of the former type of Democrat, and they are on the wrong side of history. Don’t expect Geitner to stick around for long. the reckoning is only beginning.
culturalcapitol.com 
5 comments
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March 18, 2009 at 5:18 pm
rbs - Quick Daily Insights (Politics and Such)
Interesting. If you proceed with the premise — “markets… really a metaphor for the personal freedom of entrepreneurs to do whatever they like in pursuit of a quick buck” — then your entire opinion of the American working class may be skewed to a point where your opinion piece is irrelevant to reality.
Not every entrepreneur is ill-intentioned.
March 18, 2009 at 5:35 pm
zachbreakpate
Uh, what are you saying rbs? skewed until it’s irrelevant to reality? What does that mean? I’m all for the working class. I’m a working class kind of guy. I have dirt under my nails and the whole 9. The issue isn’t with the working class, the issue is with the owner class. They say the market is a god that may not be questioned, but they treat the market — and our taxes — as their own personal bank account. Doesn’t it bother you that you paid some rich douche who never held a hammer in his life $500 of your money? His friends in government helped, sure, but it was his smooth talking about markets (and derivatives and ARMs) that made him “too big to fail” in the first place.
March 18, 2009 at 6:10 pm
rbs - Quick Daily Insights (Politics and Such)
I do construction work. I am the working class. I’m saying that what you are calling the owner class is as much a necessary part of the market as I am. I have no bone to pick with them, because the more money they transfer to each other and keep circulating, the more is available to me. Without these huge corporations, manufacturers and consortiums, we’d all be scrapping in our little towns for something to do and shopping in mom and pop stores for stuff they don’t have because big businesses aren’t making and supplying it.
The market is a non-human entity, which operates under it’s own universal laws. Its engine is human self-motivation — what you call “pursuit of a fast buck” — which we all inherently have, but many deny except as it applies to corporate executives.
Government intervention is the market’s worst enemy.
“Doesn’t it bother you that you paid some rich douche who never held a hammer in his life $500 of your money?” Only because my money became their money when Congress gave them my money.
Bottom line for now — I think most of this is massive hype, designed to get the population at large hating huge corporations, which apparently many do not need any help with.
March 18, 2009 at 8:16 pm
zachbreakpate
I feel sorry for you rbs. In the first place, you have replaced God with Mamon (which you call “The Market”). This is what you say: “The market is a non-human entity, which operates under it’s own universal laws.” Yikes. Here’s a verse from the Bible: “No servant can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other. Ye cannot serve God and mammon” (Luke 16: 13). (Mammon is the personification of The Market in the Bible.) So you’re telling me that if God tells you not to look into how crooks took your money, you will roll onto your back, show your belly, and obey. A question: Do you really think “the more money they transfer to each other and keep circulating, the more is available to me”? They weren’t circulating your money, or even their own — they were borrowing money in YOUR NAME to build themselves giant houses and take expensive vacations. It is true sometimes that “Government intervention is the market’s worst enemy” — but only when government colludes with business crooks to defraud the working public. I hate to be the one to kill your god, but markets are not superhuman. They are all too human. They are made up by humans, operated by humans, manipulated by humans, and undermined by humans. Government is the same. If you have corrupt people running the market, the market will be corrupt. If you have corrupt people running the government, the government will be corrupt. If you hate the government even though virtuous people are running it, you are a fool. If you trust The Market even though crooks are running it, you are a fool.
March 18, 2009 at 9:43 pm
rbs - Quick Daily Insights (Politics and Such)
If you think I’m unaware of corporate, government, or individual corruption, you are the fool. It’s here and there, all around us — but I will not put an automatic blanket indictment on a person or company just because the media or you say I should.
Then, since you serve God and not mammon (got to be one or the other), I assume you live on land given to you, or you live in someone’s spare room, grow your own veggies, work nowhere and draw no paycheck. The market enabling your paycheck in any way is sin.
If not, how do you justify using the market to make a living, assuming you do?
Your premise is, the market is evil. The antithesis of God. No problem. I have a balance between the two. My initial point is that too many among us are assuming AIG execs are all crooks and their profits are ill-gotten. We don’t know the facts. We don’t know the numbers. All we know is what the media and the Obama administration people are telling us. I think most of that is slanted hype. Now we have senators demanding a complete opening of the books. Good. If they turn out to be corrupt, I’ll decry them. If they don’t, then I will have given them the benefit of the doubt.
And by the way, don’t feel sorry for me.