What? There’s Gambling in this Casino?

Posted on March 25th, 2009 by admin in Political Economy

Our Congress has spent weeks in a populist frenzy about bonuses paid, with Congress’s own authorization, to certain executives at AIG who were, supposedly, the very same men who destroyed AIG, thereby reqiring subsequent government bailout. How dare they get bonuses for such a monumental failure, said the congress in righteous rage.

It finally was publishjed today that everyone of those system destroyers is long gone from AIG, and the currently targeted bonuses go to true innocents.

As Holman Jenkins writes in the Wall St. Journal, 25 MAR 09:

“There is not a shred of justice in the hysteria that followed. As AIG chief Ed Liddy explained on the Hill last week, the people receiving retention bonuses were not the same people who launched AIG’s unhedged housing bets that brought the company down. Those people were gone. Their pay is already being clawed back.

Those who remained had been asked a year ago to stay and work themselves out of a job. In accepting the terms offered to them, they committed no offense (say, failing to pay taxes). Their only crime was possessing marketable knowledge — all the more marketable because of the opportunity for hedge funds and other counterparties to profit from AIG’s distress. Had the company submitted to Chapter 11 rather than a government takeover, a bankruptcy judge might well have authorized identical incentives to minimize losses and maximize recovery for legitimate stakeholders.”

As Mark Twain reputedly said, “No one is safe when Congress is in session.”

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