Thursday, March 19, 2009

C-J nails an editorial

A nice effort from the editorialists in the C-J...

About those bonuses to AIG executives: First, let's all vent.

It is, of course, ludicrous that, according to CNN, 73 American International Group employees, including 11 no longer with the insurance titan, received bonuses of $1 million or more after mismanaging the company into the epicenter of the global financial crisis. The firm lost $61.7 billion in the fourth quarter of last year and has received more than $170 billion in the federal economic rescue effort....

Anger, however, is not an answer to how the situation should be handled, and it is not a reliable guide to pivotal economic issues.

President Obama and congressional Democrats express determination to recapture the bonuses, most of which were paid last week. That's fine if they can do it without causing even greater damage. The bonuses are infuriating but legal, paid in accordance with filings AIG made with the government in advance of the payments.

Republicans are busy blaming the administration, primarily because the Treasury Department reluctantly approved the payments, even though Bush administration fingerprints are on the AIG bailout, too....

The favored instrument on Capitol Hill for recovering the money, which totals $165 million, is a confiscatory tax...That might work. But should it be tried? Edward M. Liddy, whom the feds brought in to manage AIG, warns that eliminating bonuses may run off the only AIG experts capable of detoxifying the company's $1.6 trillion derivatives portfolio. In that case, the economic calamity could be vastly expanded.

Mr. Liddy might be wrong, but it's important to weigh his advice...


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