AIG bonuses: Has the outrage gone too far?
Has the backlash against AIG has now degenerated into an ugly “mob scene,” with both President Obama and Congress adding to the vilification?
James Haas, 47, was until recently just another executive at American International Group. Now, said James Barron and Russ Buettner in The New York Times, he’s a pariah. Ever since the news broke that AIG had dispensed $165 million in bonuses, following its record-breaking $170 billion government bailout, indignant neighbors have been vilifying him. “You have to understand,” he said, with tears in his eyes as he stood outside his posh house in Fairfield, Conn., “there are kids involved. There have been death threats. …” Many of Haas’ AIG colleagues are under personal attack as well. Buses filled with angry labor and community activists drive up to their homes; outside their offices, protesters chant, “Jail them, don’t bail them!” and “Stop the bonuses, stop the crime, AIG crooks must do time!” Even after roughly half of the 400 executives were intimidated into agreeing to give bonuses back, AIG employees have begun slipping into and out of work, scrapping “tote bags or other items with the AIG logo,” and even hiring private security guards to man their long, winding driveways.
Enough is enough, said The Washington Post in an editorial. It’s hard to sympathize with anyone who got AIG’s thoroughly undeserved bonuses. But the backlash has now degenerated into an ugly “mob scene,” with both President Obama and Congress adding to the irresponsible attacks on AIG. This hooliganism culminated last week in “one of the more amazing and senseless acts of political retribution in American history,” said The Wall Street Journal. By a 328–93 margin, the House voted to slap “a 90 percent tax on the bonuses of anyone at every bank receiving $5 billion in TARP money who earns more than $250,000 a year.” This vengeful action sounds awfully like a bill of attainder—a law designed to punish a perfectly legal act after the fact—and it’s forbidden by the Constitution. By imposing an onerous tax on those who work for Citigroup, Bank of America, and many other banks, that law—if also passed by the Senate—would surely drive away many talented executives.
As a Citigroup executive, said Jonathan Clements in The Wall Street Journal, I would be punished by that law—but why? I just joined the company last year, and neither I nor most of my colleagues had anything to do with collateralized debt obligations or credit default swaps. Yet “once my total income hits $250,000 for the current calendar year, I will have no incentive to work a single day more in 2009.” How does that help the economy? It doesn’t, said Noam Scheiber in TheNewrepublic.com. There are a lot of “productive, non-nefarious people at bailed-out companies,” and to claw our way out of this recession, we’ll need as many competent executives “doing solid work and earning modest bonuses” as we can muster.
The public’s rage isn’t just about corporate bonuses, said Glenn Greenwald in Salon.com. It’s about the “corruption and rot in our establishment institutions,” in which the “financial elite” play by different rules, aided and abetted by their bought-and-paid-for pals in government. The super-rich’s greedy pursuit of even more millions has driven this country to the brink of an economic meltdown, and the outrage we’re witnessing “is long, long overdue.” It’s hard not to go ballistic, said E.J. Dionne in The Washington Post, over a system in which the top 50 investment fund managers took home 19,000 times the average worker’s salary—plus a huge bonus for failing. Getting rich from hard work is fine, “but there is no moral or practical justification for such levels of inequity.”
Joe Six-pack can fume at Wall Street all he wants, said Jonah Goldberg in National Review Online. But the hard truth is that once George W. Bush and Barack Obama decided to save financial institutions from their own folly, every American bought into the existing system. Don’t forget: If AIG had gone out of business, as it would have in a free market, “there would be no bonuses.” But we’ve essentially nationalized the company, and others, to keep them alive. With that choice came the bonuses, which were in pre-existing contracts and very much part of the Wall Street culture. So suck it up, people. “When you buy an elephant, you can’t refuse to buy the manure that comes with it.”