AIG, the Bogeyman, and You

Nothing stirs the soul like a good Bogeyman, and the Obama administration is pressing forward to blame all of the ills of the administration’s ill-conceived rescue packages on AIG. Of course, given that we, the American people, own 80% of the AIG common stock, why would the political class of all parties vilify this straw-man villain? We own this company, folks. It is time for our elected officials to start acting like shareholders rather than the petty, incompetent government bureaucrats they are. Make this company work. Make it make money.

Let’s start with the headlines across all of the networks, including Fox News, highlighting all of the foreign banks that were “rescued” by the American taxpayer from channeled funds through AIG. Get real. AIG is an insurance company that insured all of those toxic assets (see “mark to market” commentary) that are owned worldwide by all sorts of international financial institutions. Of course they are going to pay out claims. That is what they do, and that is precisely why it needed the money. That is why AIG was too big to fail…it insured the world on these derivative instruments. Why are we shocked? Why is Congress shocked? They paid out claims, and stopped a complete world financial meltdown. Good for them.

Now let’s look at the bonus payments. These were first and foremost contractual obligations to company employees, management or otherwise. The company owed the money, so they paid it. The money was owned primarily to foreigners, mostly British, who could give a rip about Barney Frank and his inept cohorts. If Congress did not want the money to be used for payment of contractual obligations, it should have said so when it gave AIG the money. Tim Geithner, Barney Frank, and Chris Dodd were running the show….what did they think the money going to be used for…salaraies and insurance claims. That is what AIG does. If you want the employees of AIG to work for nothing, say so, and watch our investment go down the toilet real fast. If anyone should return part of their salaries or bonuses, it should be the Bozos in Congress running this farce of a show. THEY DON’T KNOW WHAT THEY ARE DOING!!

Here's the deal with these guys. AIG let its bonus plan be known in April of last year. Everybody knew about it. When the first money went to AIG under Bush, Tim Geithner was the architect of the plan. He knew about it then. When Obama gave AIG an additional $30 billion two weeks ago, Geithner knew it then, and Obama most likely knew about it then. In Februrary, Senator Olympia Snow (R - Maine) tried to add an amendment to the Obama stimulus plan to limit these types of bonuses to $100,000.00. It was defeated. Sen Chris Dodd (D-Conn) then added an amendment expressly authorizing these types of bonuses for contracts entered into before February 11, 2009. It passed and was part of the stimulus package that passed Congress. You know, the one nobody read because Speaker Pelosi had to to go to Italy. First Senator Dodd denied he knew what was in the amendment, even though it was known as "the Dodd amendment." Now, he has changed his story and said Treasury (re: Geithner) made him do it. And these are the people you want running our health care system?

The amount of this money, no matter how distasteful to us, represents only about 1/10th of 1% of the money we have invested in AIG. Where is the outrage for the 3/4 trillion dollar stimulus package that nobody read? Where is the outrage for the 9000 earmarks in the omnibus spending bill? This is a classic case of substituting a diversionary bogeyman for the true problems. Those overzealous congressional hypocrites should be ashamed, so should the press, and so should Barack Obama. Me thinks thou dost protest too much.

This is the danger of having the government own substantial portions of what is basically a private business. If the government didn’t want to deal with these kinds of issues, it should have let AIG fail, and the let the chips fall where they may. Same with the TARP funds that banks either voluntarily took, or were forced to take against their will. Politics cannot bleed into the running of any private enterprise, especially financial enterprises. What is good for AIG, more likely than not will not play well in Peoria.

Congress is now grandstanding threatening to tax the bonus money at 90% after the fact. Many of these folks are in Great Britain and don't care. More importantly, that kind of law is expressly forbidden. It is called a Bill of Attainder and is forbidden in Article I, section 9, clause 3 of the Constitution, not that anybody cares. I do. If Congress can do it to these guys, it can do it to you. While it may play well to the television cameras, the fact of the matter is our Congressional leaders, and Obama's Treasury Department blew it.

Whether we like it or not, we all have a stake in AIG. As the case with all shareholders in publicly traded companies, the government should keep a watchful eye on the business. On the other hand, it controls the stock and can change the Board of Directors if it doesn’t like how the day to day business of the company is going, or wishes to change the direction of the Company. Use corporate governance to change it. But for God’s sake, quit bad mouthing our investment for populist political points with the voters and move the operation of the company out of the political arena.

Picture Courtesy Flickr Creative Commons: jdiggans