Over the last 24 hours it seems like every politician and media outlet has tried to outdo all their peers in mustering up as much populist rage against AIG as possible.
This includes some of the leaders you'd expect to be more reserved like Fed chairman Ben Bernanke, who went out of his way to express his "anger" at AIG on an unprecendented interview on 60 Minutes, and our President. As the Wall Street Journal reported:
"President Barack Obama said Monday that he would "pursue every single legal avenue to block" $165 million in bonuses to American International Group Inc. employees who were in part responsible for the insurance giant's near collapse."
It didn't matter which party a politician represented. For example, Republican Senator Charles Grassley of Iowa went even so far as to suggest that AIG executives consider committing suicide as honorable executives in Japan would do in a heart-beat.
It was hard to find someone in politics or the media to take a different stance on the matter. But there were some. Case in point was Andrew Ross Sorkin of the New York Times, who takes a look at the whole situation in a broader perspective:
"A staggering $165 million — for employees of a company that nearly took down the financial system. And heck, we, the taxpayers, own nearly 80 percent of A.I.G.
It doesn’t seem fair.
So here is a sobering thought: Maybe we have to swallow hard and pay up, partly for our own good. I can hear the howls already, so let me explain.
Everyone from President Obama down seems outraged by this. The president suggested on Monday that we just tear up those bonus contracts. He told the Treasury secretary, Timothy F. Geithner, to use every legal means to recoup taxpayers’ money. Hard to argue there.
“This isn’t just a matter of dollars and cents,” he said. “It’s about our fundamental values.”
On that last issue, lawyers, Wall Street types and compensation consultants agree with the president. But from their point of view, the “fundamental value” in question here is the sanctity of contracts.
That may strike many people as a bit of convenient legalese, but maybe there is something to it. If you think this economy is a mess now, imagine what it would look like if the business community started to worry that the government would start abrogating contracts left and right.
As much as we might want to void those A.I.G. pay contracts, Pearl Meyer, a compensation consultant at Steven Hall & Partners, says it would put American business on a worse slippery slope than it already is. Business agreements of other companies that have taken taxpayer money might fall into question. Even companies that have not turned to Washington might seize the opportunity to break inconvenient contracts."
Our leaders are already trying to do everything in their power (or so they think), to restore investor confidence after the bankruptcy of Lehman last year. Just imagine what they'll have to do to restore confidence in the sanctity of contracts in business.
But for now, it sure feels good to be part of a lynch mob.
You'd think we would learn a lesson on the slippery slope when we let our politicians and media lead us by our worst emotions after 9/11. And unfortunately in this instance, you'd be wrong.