This whole business about the AIG bonuses is really getting out of hand. As outrageous as they are, it is really a distraction from the wider issues and just a quick way to create a scapegoat. One week it’s Richard Fuld, the next it’s John Thain, then Madoff, now the faceless but certainly greedy and mendacious people at AIG’s financial unit who got bonuses despite their unit’s cataclysmic performance.
The bonuses are indefensible and betray both the tin-ear of the politicians in charge of the bail-out and a strong sense of incompetence among the senior executives at AIG (surprise, surprise…). But demonizing these guys is ridiculous. Picture you are one of the men/women working in that unit of AIG that got the bonuses. Are you going to not accept the substantial bonus that they give you, which they were contractually bound to do? We can all get on our high horse about this, but if you quietly got a check for a million dollars that you felt you earned you wouldn’t turn it down. And I knew that there was nuance within the story about the people that were a part of that team that wasn’t out there, and today we had the op-ed in the NY Times that was really a resignation from someone from that very unit that sheds some of the light on the ambiguity I’m talking about.
Really, the issue isn’t with the people that got the bonuses. It is the people who were supposed to look after their companies and–even more so–the regulatory agencies that were supposed to watch them. I used the baseball analogy when arguing this with a colleague the other day. The baseball steroid scandal is something that I care a lot about. And it’s easy to demonize Barry Bonds, Roger Clemens, etc. And to a large extent those guys deserve it, in particular because of their reactions. But my beef is with the league for letting the steroid era flourish with the player’s union who fought tooth and nail on any initiative that would have led to testing and greater oversight. It is Bud Selig, Donald Fehr and Gene Orzo that deserve the blame. If you’re a player watching other players at a similar or equal level suddenly bulk up, hit monstrous homers and receive huge contracts that set them up for life, can’t many of us understand the impulse to do that, in particular as they were even testing at the time? I don’t want to digress too far, but that is the same thing with the people on Wall Street being demonized. Our government and regulatory agencies failed us. The villains I want accounted for are the numerous heads of the SEC who refused to take action when a whistle-blower gave them evidence that Maddof’s fund had to be just a scheme. If I was still a journalist I would be working on that night and day.
It is the people that allowed this era of lax regulation, easy credit and predatory lending to flourish that should be held responsible. And the more you think about, the more we as a society are responsible. The people in the midwest who would like to tar and feather anyone from NY who works in finance sure liked getting cheap loans and mortgages and $30 DVD players made in China, purchased at Wal-Mart. We all as a society saved incredibly little and lived above our means for a long time. Now we’re paying for it. Demonizing a handful of people who got bonuses that seem unfair might make us feel better for a moment in term of venting our rage. But it isn’t going to get us anywhere.