Obama and the Press are Destroying AIG and the Economy With It (Part II)

I argued here that, among other things, the AIG brouhaha is just another example of how Obama and the Congress, goaded by the so-called mainstream media (SCMM) are destroying the economy with arbitrary laws that seek a fanciful economic and social justice. All the swirl creates uncertainty, and that uncertainty is preventing recovery and destroying the economy. I argued there is nothing wrong with letting AIG run its business the best way it knows how, including paying bonuses to retain its employees. I concluded that if the government crosses the line and enacts a special bonus tax aimed at creating 'social justice' or 'economic justice' against AIG bonus recipients then it would not stop. The witch hunt for the big incomes will be on, and it will be Game Over. The Obama policy is 'social justice at any cost'.

Others see through the SCMM created fog. Let us start with Terence Corcoran of the Financial Press in Canada, who wants to know: Is this the end of America?:

Helicopter Ben Bernanke’s Federal Reserve is dropping trillions of fresh paper dollars on the world economy, the President of the United States is cracking jokes on late night comedy shows, his energy minister is threatening a trade war over carbon emissions, his treasury secretary is dithering over a banking reform program amid rising concerns over his competence and a monumentally dysfunctional U.S. Congress is launching another public jihad against corporations and bankers.

The monumentally dysfunctional US Congress shocks the world:

As an aghast world — from China to Chicago and Chihuahua — watches, the circus-like U.S. political system seems to be declining into near chaos. Through it all, stock and financial markets are paralyzed. The more the policy regime does, the worse the outlook gets. The multi-ringed spectacle raises a disturbing question in many minds: Is this the end of America?

He concludes with the observation that our clueless lawmakers are ageing self-serving demagogues who have spent decades warping the U.S. political system for their own ends and our law-making that is riddled with slapdash, incompetence and gamesmanship. Well, that could be true about a lot of places, but we cannot afford it, nor should we tolerate it. It is arguably still the golden age of Rome in the US, but for how long? Corcoran does not believe we have long, as he is tuned into the the end game of the Obama domestic policy:

Expansion of government spending, plunging the U.S. into unprecedented deficits, is without parallel. In economic policy, through regulation and control of energy output, financial services and monetary expansion, the U.S. government has embarked on a fundamental reshaping of America. It is designed, in short, to bring on the end of America.

Powerline sees the incompetent bumbling and wonders if we still even have a constitution: Are We A Banana Republic?

I'm stupefied to find that some people are defending the constitutionality of Nancy Pelosi's discriminatory, confiscatory and retroactive tax on people who receive bonus income from companies that got TARP money. I would have considered it a bright line rule that the government can't identify a class of unpopular people and impose a special tax on them. What's next? A 100% income tax on registered Republicans, retroactive to last year? If Pelosi's bill passes muster, why not?

If the Pelosi bill is actually enacted into law (which I still think is doubtful) and upheld by the courts, there is no limit to the arbitrary power of Congress. In that event, we have no property rights and there is no Constitution--no equal protection clause, no due process clause, no impairment of contracts clause, no bill of attainder/ex post facto law clause. Instead, we are living in a majoritarian tyranny. ...--imagine, say, Congress enacting a surtax on the incomes of all homosexuals in response to a notorious case of homosexual molestation--then the idea that the Constitution affords us any sort of protection against arbitrary government power is an illusion.

Even the Vice President's Economic Adviser says the plan "may go too far in using the tax code as a tool for retribution."

On the appropriateness of the bonuses: I argued that AIG needs to retain those employees to succeed, and the economy hinges on their success. Powerline also agrees there is nothing wrong with the AIG bonuses:

• All of these payments, as to AIG's troubled financial products division, are retention bonuses, not performance bonuses.
• The money is not going to anyone responsible for the implosion of AIG--those people, who were in the credit default swap area, are gone.
• These retention bonuses were promised to AIG employees who are responsible for winding down the company's financial products division. At the beginning, this division had a potential exposure of $2.7 trillion. Winding down AIG's book of business in this area was a dead-end job, and there was a great likelihood that the people responsible for the work, who knew the most about the products involved, would take jobs elsewhere.
• In late 2007 or early 2008, AIG made a deal with these employees: if they would stay at AIG until specified conditions were met, i.e., either certain business was wound down or a given period of time had elapsed, they would receive a specified retention bonus.
• As to all of the employees involved, they satisfied the terms of the bonus by wrapping up a portfolio for which they were responsible and/or staying on the job until now. As a result of the efforts of this group, AIG's financial products exposure is down from $2.7 trillion to $1.6 trillion.

Krauthammer on the appropriateness of the bonuses: he sees no problem with the bonus money going to "the only ones who know how to defuse the bomb they themselves built."

Krauthammer also weighs in on the looming disaster for our country as well and believes our "$14 trillion economy hangs by a thread composed of (a) a comically cynical, pitchfork-wielding Congress, (b) a hopelessly understaffed, stumbling Obama administration, and (c) $165 million." On the imminent failure of AIG under continued pressure:

...we are going to poison the well for any further financial rescues, face the prospect of letting AIG go under (which would make the Lehman Brothers collapse look trivial) and risk a run on the entire world financial system?

And on the legality of AIG's action, and the arbitrary and capricious nature of Congress:

And there is such a thing as law. The way to break a contract legally is Chapter 11. Short of that, a contract is a contract. The AIG bonuses were agreed to before the government takeover and are perfectly legal. Is the rule now that when public anger is kindled, Congress will summarily cancel contracts?

Well said, and Krauthammer also agrees that Obama has "been far more interested in his grand program for reshaping the American social contract in health care, energy and education" than the economy."

Tom over at OpinionForum says it better than I do:

These bonuses are a small issue compared to the totality of the economic crisis. Yet we have the President and Congress seizing on it to whip up the public because, it would seem, they don’t have a clue what else to do. Our leaders are playing a mass violin concerto while the economy burns.

There’s no excuse for the ignorance that characterizes the people sending threats to AIG and the people lobbing firebombs across the blogosphere, not to mention the politicians instigating them. All the information necessary to understand what’s really happening is readily available in the media, including media outlets not normally considered to be pro-business.

In a separate article, published at the start of the circus on March 17th Tom had already accurately captured the salient facts:

President Obama is outraged, Senator Chris Dodd is threatening to tax the people receiving those bonuses at a 90 percent rate, Representative Barney Frank is mumbling something unintelligible, New York Attorney General Andrew Cuomo wants to subpoena AIG’s records, Senator Chuck Grassley suggested that AIG executives commit suicide, and the company is receiving threats.

The AIG bonuses are meant to keep key executives, and we probably need that to happen. The bonuses are provided for in contracts that were in place and known to exist before the bailout took place. The legislation itself provides that existing contracts will be honored. The amount of money involved is a minuscule percentage of the bailout money AIG received, and it’s small compared to the AIG bailout money that’s going to other businesses, some overseas (money laundering, anyone?).

All of this information is available in the media. Does the Obama Administration and Congress think we just won’t notice–that we won’t pay attention to anything other than their histrionics?

I argued that perhaps we should never have bailed out AIG, that bankruptcy would have been preferable. Not only are bankruptcy proceedings the usual method for dealing with situations like AIG's, but they routinely approve retention bonuses. But now that we have bailed them out, we must not let Congress meddle or let the SCMM goad them into meddling, as continued harassment of AIG will only lead to its failure. The position that I argued the government should take is:

‘We knew about these bonuses. We explicitly gave AIG the bailout money with that knowledge. Moreover, we are not going to retroactively tell AIG how to run its business. If we had any doubts about AIG’s success, we would not have bought the company.’

If Obama and Congress had doubts about AIG, its management or future, but still mortgaged our grandchildren to the tune of $200 Billion, then why do we still leave Obama and the other 'tards in power? Throw them out. Every one of them.

I also dragged the CRA into the morass: I implied then and say now that the outrage, both genuine and invented, about how AIG is running its business is misplaced. I implied that bonuses do not reward the people who caused AIG's problems, and -- Carl and I may differ on this point, but -- I blamed the government forced (CRA) lending to unfit borrowers as the cause of the current economic decline. I enjoy Mark Perry as he expands on this argument.

Bobn disagrees on the CRA responsiblity for the economic decline. I am unmoved by Bobn's analysis. Bobn essentially argues that the bad debt is not overwhelmingly sub-prime, so the CRA isn't the cause of the problem. I say that it is irrelevant whether the bad debt is sub-prime, the bad-debt was created by the bursting of the real estate bubble caused by wild speculation. The speculation was fueled by, among other things, the CRA. The tipping point phenomena applies. However, I have opened my eyes to the myraid of causes for the recession, and so I put CRA in the category of 'significant contributor' for the time being.

Finally, here OBAMA is on Leno; this is why the SCMM loves him:

MR. OBAMA: And, you know, the immediate bonuses that went to AIG are a problem. But the larger problem is we've got to get back to an attitude where people know enough is enough, and people have a sense of responsibility and they understand that their actions are going to have an impact on everybody. And if we can get back to those values that built America, then I think we're going to be okay.

Obama is king of the 30 second soundbite. A vague statement about a problem and says we need to change our attitude. You could drive a truck through that. However I agree with this one -- we should get back to the values that built America. They are based on freedom and opportunity, not tax and spend.

Those who decry the AIG bonuses are missing the real outrage: Obama's 'social and economic justice' agenda, and his willingness to drive the country to depression to achieve that end. Indeed, if he didn't not have a crisis to address, there would be no opportunity for his 'social and economic justice' reform. If the crisis didn't exist, he would invent one. He loves the SCMM for priming the AIG bonus pump, and the SCMM loves him. And they are willing to do anything to protect him, as Fred Barnes notes in the March 30th Weekly Standard:

His allies are moving to protect the president. In a political emergency, this is the highest obligation of everyone in the administration. The president must be distanced as far as possible from decisions that led to the problem, even if he is made to look out-of-touch or actually incompetent.

In the AIG case, Obama is like a cuckolded spouse, portrayed by administration officials as the last person to learn about the bonuses, though he signed the economic stimulus legislation with a provision assuring they'd be paid. A front-page account in the Washington Post played along, absolving the entire administration of blame. Attributed to "government and company officials," the story said Federal Reserve officials were at fault, having failed to alert anyone in the administration, much less Obama, in a timely fashion.

The Wall Street Journal correctly worries this isn't a trivial issue:

When does a single policy blunder herald much larger economic damage? Sometimes it's hard to know ahead of time. Few in Congress thought the Smoot-Hawley tariff was a disaster in 1930, but it led to retaliation and a collapse of world trade. The question amid Washington's AIG bonus panic is whether Congress's war on private contracts and the financial system is a similarly destructive moment.

Sobering thought.