The American public has finally found a corporate villain for channeling its frustrations
Since the financial crisis began, Americans have been looking to vent their anger over a situation they can't control but are going to have to pay for. It wasn't easy to find a target at first. After all, the arcane dealings in collateralized debt securities and credit default swaps made it hard to understand what was going on, much less know whom or what to blame. Bear Stearns and Lehman Brothers could have done in a pinch, but they left the playing field early on.
But in American International Group (AIG)—the largest recipient of federal bailout dollars so far and the apparent architect of so many flawed financial deals that its own magnitude of failure is ensuring its life-support—politicians, pundits, and Page One punsters have found their perfect subject. And the news that AIG execs in its financial products division were getting $165 million in bonuses while the company was taking billions from the government pushed public anger over the edge. (AIG says it has to pay the bonuses to keep talented employees.)
Here's a sampling of public discourse over AIG in recent days:
TAKE A HINT FROM THE JAPANESE: Senator Charles Grassley (R-Iowa) said that AIG execs should take responsibility by resigning or killing themselves. In a Mar. 16 interview with a Cedar Rapids radio station, he said: "I suggest, you know, obviously, maybe they ought to be removed. But I would suggest the first thing that would make me feel a little bit better toward them [is] if they'd follow the Japanese example and come before the American people and take that deep bow and say: 'I'm sorry,' and then either do one of two things: resign or go commit suicide." (A day later, Grassley clarified that he wasn't serious about the suicide part.)
AN 'ANGRY' OBAMA: President Obama has taken some criticism for his sometimes cool manner when critics say he should be hot under the collar. AIG was Obama's latest chance to unleash his inner tough guy, when he used an announcement of small business initiatives to attack the company's "recklessness and greed." "How do they justify this outrage to the taxpayers who are keeping the company afloat?" Obama said. "This isn't just a matter of dollars and cents. It's about our fundamental values."
INQUISITION: Not surprisingly, AIG took heat at a Mar. 17 Senate Banking Committee hearing on regulating the insurance industry. "One way or another, we're going to try to figure out how to get these resources back," said Christopher Dodd (D-Conn.), the panel's chairman. "This is ridiculous," exclaimed Senator Jon Tester (D-Mont.). He said AIG executives "need to understand that the only reason they even have a job is because of the taxpayers."
TAX IT BACK: Congressional Democrats vowed on Mar. 17 to pass heavy taxes on bonuses paid to employees of firms receiving federal bailout funds if AIG doesn't return some of the money given out as bonuses. "Recipients of these bonuses will not be able to keep all of their money," said Senate Majority Leader Harry Reid (D-Nev.). "If you don't return it on your own, we will do it for you," said Senator Chuck Schumer (D-N.Y.).
In the House, Representatives Steve Israel (D-N.Y.), and Tim Ryan (D-Ohio) introduced a bill that would that would tax at 100% bonuses above $100,000 paid by companies that have received federal bailout money. "We will use any means necessary," said Ryan. "It boggles my mind how these executives can be so unaware of what the American people are going through."
'REWARDING INCOMPETENCE': Representative Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said on the Today show that paying the bonuses is "rewarding incompetence." Frank added: "These people may have a right to their bonuses. They don't have a right to their jobs forever."
BEN SLAMS THE PHONE: In an interview that aired on Mar. 16 on CBS's 60 Minutes, Federal Reserve Chairman Ben Bernanke did not address the bonuses but expressed his frustration with the AIG intervention. "It makes me angry. I slammed the phone more than a few times on discussing AIG," Bernanke said. "It's—it's just absolutely—I understand why the American people are angry. It's absolutely unfair that taxpayer dollars are going to prop up a company that made these terrible bets—that was operating out of the sight of regulators, but which we have no choice but to stabilize, or else risk enormous impact, not just in the financial system, but on the whole U.S. economy."
CONTRACT LAW: Lawrence Summers, Obama's top economic adviser, said: "The easy thing would be to just say…off with their heads, violate the contracts. But you have to think about the consequences of breaking contracts for the overall system of law, for the overall financial system."
STOKING THE FLAMES: Tabloids are finding AIG a handy bit of fodder, and the company's name fits neatly into a headline. Some examples from St. Patrick's Day: "A.IG. IS A P.I.G." (New York Daily News); "OUTR-AIG-E" (San Jose Mercury News); "BAILOUT RAGE" (Chicago RedEye); "BONUS BLOWUP" (am New York); and "OH NO YOU DON'T" (New York Post).
FULL ACCOUNTING DEMANDED: From a Dallas Morning News editorial: "As much as it pains us to consider, AIG and other companies will probably require additional financial aid from government coffers. Taxpayers deserve a full accounting of how their dollars are being spent. Companies that require a taxpayer bailout to prevent a global catastrophe don't get to dole out dollars in executive compensation without serious questions being asked and conditions imposed. We hope Congress and the President have learned this lesson well."
'BEST AND BRIGHTEST': From a New Jersey Star-Ledger editorial: "AIG officials have, understandably, been hard-pressed to defend this bonus and retention boondoggle. But that hasn't deterred them from trying." As [Edward M.] Liddy, AIG's president, told Treasury Secretary Tim Geithner, the payments are needed "to retain the best and the brightest talents" to run AIG.
Surely he jests.
"This band of 'best and brightest' just blew a $62 billion hole in the company. What's to retain? Heads should be rolling. Besides, is there really that much cutthroat competition for such an overpaid bunch of losers? Maybe there is—which would explain a lot about what passes for talent around lower New York City these days and, if so, is downright frightening."
DEFLECTING ATTENTION: The Wall Street Journal, in a Mar. 17 editorial, says that the furor over the bonuses is shifting attention from the fact that many of the AIG counterparties that received billions in payments funded by the federal government are overseas financial institutions. "Given that the government has never defined 'systemic risk,' we're also starting to wonder exactly which system American taxpayers are paying to protect. It's not capitalism, in which risk-takers suffer the consequences of bad decisions. And in some cases it's not even American. The U.S. government is now in the business of distributing foreign aid to offshore financiers, laundered through a once-great American company."
LATE NIGHT JOKES: MSNBC news show host Rachel Maddow, on Late Night With David Letterman: "Sometime in early 2008, that company signed contracts with its employees that said: 'Even if you cause the company to fail and nearly bring down the worldwide economic system, you will still get a bonus'…I mean, who writes those contracts?"\
MORE LATE NIGHT: Jon Stewart on The Daily Show: "They say angry populism is all the rage, literally. It's been building for months, simmering. But our proletarian rage was so unfocused. If only someone would step up and put on the 'kick me' sign…Any money AIG saved on bonuses they chose to give to their favorite charity—The Punch the Children Fund."