All Abuzz About AIG
By now, everyone has heard about the debacle caused by AIG, a prominent member of “The Government Now Owns You” club, by paying out bonuses they were contractually obligated to pay out to a group of people who probably didn’t deserve it, but hey, contracts are contracts.
Once again, it’s the appearance that’s the big deal more than anything else. The $165 million dollars represented by the bonuses is less than 1% of the total dollars AIG received from the government, and Andrew Cuomo, Attorney General of New York state, subpoenaed them for the names of the people who received the bonuses, as if that tells us anything the state wouldn’t have known about within months anyway when they’d have had to claim that money on their taxes.
Of course, there’s also this matter of sending $12 billion dollars to Goldman Sachs, one of their,… well, I’m not quite sure what the relationship is. And this answer by Goldman Sachs spokesman Michael DuVally certainly didn’t clear things up any:
“Goldman Sachs has maintained that its exposure to AIG was collateralized and hedged. The majority of Goldman Sachs’ CDS (credit default swap) exposure to AIG Financial Group was collateralized. That means that Goldman Sachs had collateral. To the extent it wasn’t collateralized, Goldman Sachs hedged its exposure via the credit default swaps market. If the government had allowed AIG to fail, Goldman Sachs would have received its collateral. A credit event would be triggered, and Goldman Sachs would receive a payout from the credit default swap insurance that it had. This is from other counterparties.”
No sir, I can’t figure that one out. Luckily, I don’t have to. From where I’m sitting, it seems there really are two things that are bothering the powers that be right now, and, oddly enough, neither one is AIG’s fault.
The first thing is that there seems to have been no rules for how these companies that received bailout funds were supposed to spend the money. Personally, I believe contracts should always be honored unless some criminal action has taken place, or bankruptcy has entered the picture. So, if no one knew up front that AIG was committed to having to pay this bonus money, it’s not their fault. Sure, they probably knew about it, but no one is ever committed to giving up information they weren’t asked.
The second thing is the embarrassment being felt by the Obama Administration because of the heat they’re taking from the Republicans. Truthfully, I don’t think there needs to be any embarrassment, and if it hadn’t been this incident it would have been something else for the Republicans to jump on. To me, this is like putting up a tire swing, having someone say that someone’s going to get hurt, then having one child fall ten years later and making that person look like Nostradamus. It’s easy to see that no one in the government, either party, knew anything about these bonuses or this contract; no one is omnipotent, after all, so I wouldn’t be embarrassed. I would, however, be looking at the contract before I was out there making statements about how “evil” AIG is. And the government now looking to create special taxes for the people who received these bonuses,… for some reason, that scares me more than anything else, knowing that they could actually do something like that.
For the record, I’m not supporting AIG here. What I’m saying is that I’ve yet to hear one person or one news report say that the contract wasn’t valid. When I hear that, then I may have a different thought. Until then, at least to me, this is much ado about nothing.