Why Taxpayers Should Pay the AIG Bonuses; Obama is Dead Wrong On This

Communists understand this.  If you lived under communism or studied their practices — you do too.

When my wife, who lived through the communist takeover in Vietnam, heard President Obama say the U.S. taxpayers should ignore legal contracts and not pay the AIG bonuses, she flew into a rage and said, “This is how it starts.  This is how the state sweeps away everything involved in legal free enterprise.”

The writer of the column below, Andrew Ross Sorkin, explained his thinking of the “Today Show” on NBC March 17, 2009.

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By ANDREW ROSS SORKIN
The New York Times

Do we really have to foot the bill for those bonuses at the American International Group?

It sure does sting. A staggering $165 million — for employees of a company that nearly took down the financial system. And heck, we, the taxpayers, own nearly 80 percent of A.I.G.

It doesn’t seem fair.

So here is a sobering thought: Maybe we have to swallow hard and pay up, partly for our own good. I can hear the howls already, so let me explain.

Andrew Ross Sorkin

Everyone from President Obama down seems outraged by this. The president suggested on Monday that we just tear up those bonus contracts. He told the Treasury secretary, Timothy F. Geithner, to use every legal means to recoup taxpayers’ money. Hard to argue there.

“This isn’t just a matter of dollars and cents,” he said. “It’s about our fundamental values.”

On that last issue, lawyers, Wall Street types and compensation consultants agree with the president. But from their point of view, the “fundamental value” in question here is the sanctity of contracts.

That may strike many people as a bit of convenient legalese, but maybe there is something to it. If you think this economy is a mess now, imagine what it would look like if the business community started to worry that the government would start abrogating contracts left and right.

As much as we might want to void those A.I.G. pay contracts, Pearl Meyer, a compensation consultant at Steven Hall & Partners, says it would put American business on a worse slippery slope than it already is. Business agreements of other companies that have taken taxpayer money might fall into question. Even companies that have not turned to Washington might seize the opportunity to break inconvenient contracts.

If government officials were to break the contracts, they would be “breaking a bond,” Ms. Meyer says. “They are raising a whole new question about the trust and commitment organizations have to their employees.” (The auto industry unions are facing a similar issue — but the big difference is that there is a negotiation; no one is unilaterally tearing up contracts.)

Read the rest:
http://www.nytimes.com/2009/03/17
/business/17sorkin.html?hp

Related:

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Grassley on AIG execs: Quit or suicide
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Related:
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Stimulus: Way Fewer Jobs Than You Thought

 Obama Tells “Turbo Tax” Geither To Get Back AIG Bonus Money; Dumb and Dumber

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Obama’s War On Banks: Backlash Stirring

From March 13:
Republicans: If You Can’t Agree On Core Values Now, Commit Harakiri

Does the bailout spree signal the end of democracy?

“A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship….

“Great nations rise and fall. The people go from bondage to spiritual truth, to great courage, from courage to liberty, from liberty to abundance, from abundance to selfishness, from selfishness to complacency, from complacency to apathy, from apathy to dependence, from dependence back again to bondage.”

These words – the author is unknown – are particularly sobering today. In the past few months, Uncle Sam has bailed out Wall Street, Fannie Mae and Freddie Mac, home-owners, banks, and US automakers, while the incoming administration promises a massive infrastructure investment.

Thomas Jefferson

Is it any surprise that cities, counties, and states are jostling for space at the federal trough? Who’s next? Big Media? Big Sports? Agribusiness?

By Randy Salzman
Christian Science Monitor

With the bailout “mother of all precedents,” it’s become difficult for Washington politicians to say “no” to any special interest that’s too massive, too economically important, or too well connected to fail.

Nor can politicians forget the poor. Or the crucial swing voters in the “struggling middle class.” And they can’t ignore seniors – AARP members are very vocal.

Virtually every group today is trying to meet with the Obama transition team to convey the urgency of its “crucial” spending requests. My local paper recently informed me that our area university is preparing its wish list for infrastructure dollars. Even the National Council for the Social Studies and the American Sportfishing Association have sent pitches to President-elect Obama.

Have we gone from “rugged individualism” to the complacency or even dependency of the national trajectory quoted above?

At the time of America’s founding, the Federalist Papers discussed the dangers of democratic politicians being forced to count on the votes and support of citizens or organizations too self-involved or uneducated to realize that short-term individual or group gain often precludes long-term prosperity.

And Thomas Jefferson sought to deal with politicians’ catering to their constituents’ convenience by founding the University of Virginia (UVA). He wanted an informed, intelligent, and thoughtful population in hopes of helping democracy survive. Today, sadly, UVA is the area university I read about in the paper seeking funds for its infrastructure wish list.

Read the rest:
http://news.yahoo.com/s/csm/20081222/cm_csm/ysalzman