The other side of the AIG coin…

People are leaving AIG, in droves…One executive has publicly resigned in the New York Times. The American public are yelling “yay” & “this is so great”.

I was one of the first people to complain about bonuses paid on Wall Street. However, I should have been more thorough in my critique. How easy it is to confuse the American public on the issue! In my opinion, the bonuses should never have been paid. Once given however, they should not be taken back. The taxpayers should have eaten this mistake and blamed the parties who were really responsible: our government.

It seems that Senator Dodd of Connecticut has much to do with this error (listen to Brian Lehrer: Dodd’s Role). Not only is he seemingly responsible for the loophole that allowed the bonuses to be paid, there are also questions surrounding his involvement with Countrywide. But our government is very intelligent and quick to shift the blame and scrutiny from those who are truly responsible. They put in place the bailout plan, and although it happened quickly, who doesn’t know about the large bonuses paid out to Wall Street executives? This is nothing new, and has been the subject of speculation for years now.

The American public is understandably angry and needs someone to blame. And the government is happy to shift the blame to AIG and their executives. But AIG is not solely to blame for this terrible economic situation: the government has a large role! They took laissez faire too far, allowed too many people to make uneducated decisions to invest in subprime mortgages, which are essentially the riskiest of loans!

You may think that it doesn’t matter. Who cares if executives leave AIG? But that is shortsighted. We as American taxpayers have already invested our money into this company. If it fails then that is our money that is lost. And it will fail if executives continue to leave the company without leadership.

Furthermore we are in a credit crisis. Our system requires the markets to be fully functional. If investors start to view United States government as one that does not adhere to previously existing contracts, we will have an even bigger problem on our hands.

It doesn’t matter now. The government is scrambling, the executives are leaving, and there’s not much we can do about it. I just hope that this does not do as much damage as I fear it will. Watching Obama on 60 minutes past Sunday I was struck by how much he seemed to stress the importance of not legislating in anger. Going forward I would hope that Congress would listen to this message before it’s too late to save this wonderful country. Remember: it only takes a couple of percentage points to run a recession into a depression. And we are not that far off.


~ by Reveye on March 28, 2009.

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