AT ANY COST
(Update: Fred Wilson bravely weighs in with his thoughts on "Financial McCarthyism" as well following a recent discussion. He makes some very good points on the subject. The comments there are especially interesting, on both sides of the issue.)
Happy days are here again, at least for today, as the markets enjoyed a 500 point rally, giving us all a day to catch our breath. It's a happy day for some politicians as well, who can claim credit for going to battle on our behalf and winning a victory on the AIG bonuses. As the Wall Street Journal reports with this headline, "AIG Executives to return $50 million in bonuses":
"New York Attorney General Andrew Cuomo said late Monday that 15 of
the top 20 recipients of $165 million in retention bonuses from American International Group Inc.'s Financial Products unit have agreed to give back their bonuses -- amounting to an excess of $50 million in cash.
Of the $165 million in controversial bonuses, 47%, or about $80 million of it, was given to Americans, Mr. Cuomo says. He is aiming to recoup that amount for AIG. He added that some non-Americans, beyond the reach of his jurisdiction, have returned their bonuses. Mr. Cuomo says his office is working both with AIG executives and with individual bonus recipients to get the bonus money back."
How did they manage to do that? According to press reports, the AG's office talked to the recipients, urging them to do the right thing, adding that they:
"...see no public interest in revealing the names of people who return their bonuses..."
"...he acknowledged that returning the money is a difficult decision for many people in the unit who were not involved in creating the problematic transactions that helped topple AIG."
Unsaid here is that there was an implicit, open-ended threat that those who didn't return their bonuses, could see their names released to the public.
Remember that many AIG employees have received death threats, and have to lead their lives with increased security. This issue came up at the House hearings with AIG CEO Liddy, as this clip shows:
So the choice for an AIG bonus recipient in the above settlement, was to "give the money back", even if they had nothing to do with the AIG downfall, and had committed no crime, OR risk their name being released to the public at large, with all the risks and costs that entails.
Talk about an offer they couldn't refuse.
As much as the end result of all this may be great for taxpayers, one can't but feel a little guilty about the manner in which the results were accomplished.
Reputation, and the security of one's family are amongst the most precious things for most of us.
A government threatening the loss of either of those things, explicitly or implicitly, especially when the individual has not been charged with any crime, does not feel right.
If anything, the whole episode feels like reputational waterboarding. It's a sad continuation down the slippery slope of Financial McCarthyism I've been worrying about of late.
And though it may have paid off in the short-term, one wonders what at what cost long-term in terms of what we're really about.
One might ask of the executives, what reason do you have for being paid by the government? There seems to be a sense of entitlement that prevents these people from understanding that their organizations have lost the risk game. They took their gains and now don't want to accept the losses.
This is truly privatizing gains and socializing losses - just played out with salaries and bonuses.
Posted by: Alex Tolley | Wednesday, March 25, 2009 at 01:44 PM