The Real Scandal

I've not written a lot about the economy and the bailouts of financial institutions mainly because others have posted much more lucidly than I could on the economy. The financial failures and bailouts are so complicated, such a mess, that it's all rather mind-boggling to me. However, I did learn quite a lot by reading an article that I think Steve Benen linked to on his Washington Monthly blog. Because I didn't have time when I first saw the link, and because I really don't like reading long articles online, I printed the article and read it a couple of days later. Then I recommended it to Tom and Mary-Margaret. Not only does the article explain the craziness of the world market before everything crashed--as illustrated by financial behavior in Iceland--it's also an eye-opener about gender roles in Iceland. And, despite its depressing story, financial disaster, it's rather entertaining, too. See it here: Michael Lewis, "Wall Street on the Tundra," Vanity Fair, April 2009.

Less entertaining, but to the point, is Robert Reich's post on The Huffington Post: "The Real Scandal of AIG," posted March 15th. Online news sources and blogs have been headlining the latest scandal at AIG, the over $165 million bonuses the bailed-out institution (which received over $170 billion in taxpayer money) is paying executives, with most of that money going to the Financial Products Unit that was instrumental in causing the company's huge losses. Here's the last paragraph in Reich's post :

Apart from AIG's sophistry [the company's argument that it is legally bound to pay the bonuses and that it must also do so to retain "talent"--the very "talent" that caused the company's problems] is a much larger point. This sordid story of government helplessness in the face of massive taxpayer commitments illustrates better than anything to date why the government should take over any institution that's "too big to fail" and which has cost taxpayers dearly. Such institutions are no longer within the capitalist system because they are no longer accountable to the market. So to whom should they be accountable? When taxpayers have put up, and essentially own, a large portion of their assets, AIG and other behemoths should be accountable to taxpayers. When our very own Secretary of the Treasury cannot make stick his decision that AIG's bonuses should not be paid, only one conclusion can be drawn: AIG is accountable to no one. Our democracy is seriously broken.

Oh, and I have also followed the Jon Stewart and Jim Cramer/CNBC tempest. We usually watch Jon Stewart the evening after the original broadcast. (I'm the only one who is willing to stay up to 11 p.m. on weeknights, so we catch the re-broadcast at 9 p.m. the following evening.) I knew Jon Stewart's interview with Jim Cramer had hit the bigtime when the Lehrer News Hour covered the story in one of its 10-minute segments.

Update, 7:30 a.m. March 16th: Make those bonuses $450 million! And here is another reaction to the bonuses at AIG: "More on Bonuses at AIG," posted by Hilzoy at Washington Monthly.