The Corner

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Emotions and Money Don’t Mix


Andrew Sullivan’s blog pointed to my post on AIG bonuses, and subsequently published the reactions of two readers who presumably spoke for many others. (By the way, I find this practical encouragement of debate to be a great feature of The Dish).

Both letters express a high degree of irritation with the situation at AIG – I’ll stipulate that I share this emotion — and present alternative courses of action. The first letter, for example, argues that the bonuses should be structured as back-end success fees. For all I know, going through a legal procedure to change the bonuses to such a structure would be an approach which would lead to greater success for us as owners of AIG. But I don’t know nearly enough to be sure that’s right, and in my judgment, neither does this correspondent, neither do the various senators and congressmen who represent us and neither does the professional staff at Treasury. Maybe we could run a national plebiscite on how to structure the AIG comp plan for fiscal 2009?

Of course, this doesn’t sound like an irresolvable problem. In rough analogy to a shareholders committee or Board of a company, we owners, via our elected representatives, could go hire an expert to try to figure out answers to questions like this. What would an ideal candidate look like? He would be untainted by any prior involvement with AIG or any type of scandal, but would also have deep financial industry experience. In a perfect world, he would have run an enormous insurance conglomerate like AIG successfully. Oh, and he would be public-spirited enough to take this job for $1 per year; though we’d want to make sure that he had some equity, so that he has financial incentives that are closely aligned with those of the taxpayers. We could give this person real authority by making him CEO and Chairman of AIG, and charge him with getting in and cleaning up this mess on our behalf.

The thing is, we have already done this. The guy’s name is Ed Liddy. He advocated paying the bonuses as being the best course of action. Is he in the con too, or is he just incompetent? What replacement do you expect will do better?

Commentators on both the Left and Right seem to think that if only we could get the right person to take over these companies and clean up the financial mess, everything would be OK. All it takes is somebody competent and honest, because the answers are so obvious. A rotating series of scapegoats has been created. Paulson? Fool. Geithner? Moron. Liddy? Stooge. It’s funny how their idiocy didn’t seem to surface so much in their prior careers.

Maybe the issue isn’t with the men we’ve selected, but with the problem we’ve asked them to address. Some problems don’t have solutions. The American electorate seems to be intent on re-learning the lesson that how to effectively manage socialized means of production is one of them. The tuition for this course tends to be pretty steep.