Edward Liddy, chief executive officer of American International Group and well known Democrat, today is to speak in Congress. Liddy told Congress Wednesday that he knew the public’s patience is “wearing thin,” but said bonuses paid by the of bailed out insurer were necessary. “We have to continue managing our business as a business — taking account of the cold realities of competition,” Liddy said in testimony before the House Financial Services subcommittee. Because of this, and because of certain legal obligations, AIG has recently made a set of compensation payments, some of which I find distasteful,” Liddy added. He further said he had asked every executive that had received greater than $100,000 to return at least a portion of their bonus, and some have already returned the money.
To be fair, Liddy just recently took over. And the guy is only making $1 a year…that is right, one dollar. So you kind have to give him a break. It is somewhat unfair to blame him for the audacity of handing out bonuses that were promised a year before he took over, especially while AIG still owes $180 billion to the taxpayer.
But that doesn’t mean that Congress won’t happily torture him in front of cameras for their own gain.
The more we learn about how the Administration handled this situation, the less to be pleased about. CNN’s Ali Velshi last night pointed out that the did a story on these bonuses at the end of January. And Congress appears to have been investigating these bonuses in November of last year. So for Timothy Geithner and Barack Obama to say they didn’t know about this is either not true, or shows gross incompetence. Yeah, neither choice makes me feel any better. And finally, there is a clear situation where Obama and his cohorts cannot blame Bush for their problems; this is a problem of their own creation. It is always a bad sign when reporters ask a president the question “What did you know, and when did you know it?“.
And to compound matters, the G.O.P. is jumping on the bandwagon. Chuck Grassley has been embarrassing, calling for AIG executives to commit hari kari. And the rest of the GOP, save some of the more rational congressmen, are willing to go along with this the mob. The only saving grace for Republicans is that most of them didn’t vote for the TARP in the first place, largely because of concerns like this.
And although Washington politicians are happy to have private individual citizens to give back money that they are contractually obligated to receive, yet they are not even spoken about the millions of dollars that people like Barack Obama, Chris Dodd, Hillary Clinton, John McCain, and Joe Biden have received from AIG for their campaigns. Anyone hear about the call for them to return the campaign money? Oh, of course not, because we all know the politicians are cleaner than the wind driven snow.
What the politicians are not willing to admit is this is entirely a mess of their creation. Obama and his administration could have force these bonuses off the table during the last bailout two weeks ago, when they handed $30 billion over to AIG. But they were not competent enough to know the bonuses were coming. Sen. Dodd specifically barred any regulations on bonuses. And for members now to start a lynch mob going after the ‘evil’ AIG executives…well, they may be bad, but the politicians deserve to join them. Some of the irrational action borders on McCarthyism.
Furthermore, the fake anger from the President was politically a huge mistake. Why? It was a short term strategic move, with terrible long term implications. We all know that Obama and Geithner are going to have to go back to Congress for more bailouts for banks, the car companies, and amazingly maybe even AIG. By provoking the massive anger in the public, Mr. Obama may have poked a tiger in the eye. And this anger may eventually come back to haunt them, because ultimately Mr. Obama and Mr. Geithner are likely to become the face of government bailouts.