Tuesday, November 18, 2008

Easterbrook on the Absurdity of the AIG Bailout

Those of us who are NFL fans enjoy Greg Easterbrook's column Tuesday Morning Quarterback. Football writing is his hobby, his day job is as a serious writer. He is a deft critic of govenment waste. In his TMQ column today he targets the AIG bailout. (scroll waaaay down to the section: Why Are Taxpayers Paying Lavish Bonuses to Retain the People Who Screwed Up AIG?)

The money being shoveled to AIG is simply vanishing -- AIG isn't even telling the Treasury Department what the money is for. When the General Services administration buys pencils, many layers of auditors check the deal. Isn't it a tad naive to think $152 billion can be entrusted to a firm with a demonstrated track record of financial mismanagement and that money is not going to be looted? The Treasury Department's handling of AIG appears to be spectacular irresponsibility with public money.

Now, about the $503 million in tax-subsidized bonuses to prevent "top employees" from "exiting the troubled insurance giant." The top employees of AIG are the ones who drove the company into the ground by making crazy deals, taking on bad debt or promising to insure bad debt when they knew AIG lacked adequate collateral. Those "top employees" at AIG are either cheats or incompetents -- we want them to leave! They haven't demonstrated any financial expertise. Yet the same AIG top managers who did a terrible, terrible job are set to receive huge bonuses: an example of the problem that corporate bonuses are awarded regardless of performance

This bailout mania is looking worse and worse. The money is going to evaporate.

Bonus: If you like great football writing, this column is must read. I never miss it.

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