Thursday, March 19, 2009

Amid "the outrage over the AIG bonuses," don't forget the other 99.9%.

And I'm not using "99.9%" loosely to mean "the vast majority." That's the actual figure: the total of the bonuses paid to AIG employees are about one one-thousandth of the AIG bailout. (The bonuses are just under $200 million; the bailout is just under $200 billion.)

Noam Scheiber, at his financial-crisis blog on The New Republic called The Stash, says:

I'm starting to find the obsessive "what did Geithner/Obama know and when did he know it" line of questioning a little tedious. Yes, it's worth establishing a rough chronology so we know if public officials are telling us the truth. But the endless preoccupation by my colleagues in the media--when did the Fed tell Treasury, when did Treasury tell [Tim] Geithner, when did Geithner tell Obama--is getting a little ridiculous. This just wasn't a huge substantive mistake. It was a small substantive mistake--we're talking about a tiny fraction of the $200 billion we're floating AIG here....
He then quotes a passage from a recent Washington Post article that "gets at the absurdity of it all" (boldface added by Scheiber):
During this period, Geithner's primary concern was keeping the financial system from collapsing, a source said. The compensation packages for AIG employees were hardly, if ever, brought up, another source said. Other staff members at the Fed and Treasury were in charge of the compensation issues and only briefed Geithner, sources familiar with the matter said. Once nominated for the Treasury post in December, Geithner recused himself from affairs related to specific firms.
Scheiber adds:
[H]ow much would we even want a Treasury secretary to focus on $165 million in bonus money while there were hundreds of billions of dollars in bailout money flowing to AIG and other companies? Doesn't seem like that would be a particularly good use of his time beyond a certain point.

The problem, of course, is that if you don't mind the politics of a situation like this, it can quickly cripple your efforts to do anything else. But, again, that's a reason for the press to treat it like a political fiasco ("please tell the American people what you're doing to make this right") not a substantive fiasco (Watergate-style badgering). The coverage seems to me a lot more in line with the latter than the former.
I don't have much to add since I think Scheiber is pretty clearly correct about all this.

Just one more point. I remember partaking in the outrage over the big investment banks' CEOs "taking private jets to hold out a tin cup to Congress" last year. For a moment there, it felt really important. Then I saw some story about CEOs making a point of not taking their private jets. Now, you can say that's too little too late. But let's say, for the sake of argument, that you actually admire the CEOs' abnegation. It occurred to me: does that really change anything important? I mean, I think it's good to avoid taking private jets because of the monstrous financial and environmental costs. But it's not as if I was going to be any less outraged about the need to bail them out no matter how ascetic their lifestyle choices were. Unfortunately, there's such an enormous amount of money at stake that a few million dollars swishing around here and there just doesn't change very much. I care very little about these people's moral purity; I care a lot more about what's going to happen to everyone else.


Unknown said...

This is Obama's big test. Does he cave to the Democrats in Congress and sign the 90% tax bonus bill?

I don't think he will, but if he does, he's lost my vote.