According to every newspaper in the land last week AIG, the insurance giant whose toxic derivatives went a long way toward causing our economic crash, has requested consent from the federal government to pay out $250 million in more bonuses to their executives over the coming nine months.
That's the same company our tax dollars bailed out to the tune of from $160 to $180 billion (depending on who you read, but what's $20 billion one way or the other) because someone said they are “too big to fail.”
A lot of the bonus money is scheduled to go to employees of AIG's financial products division – you know, the same guys who wrote those toxic derivatives. They must be paid these bonuses, the argument goes, because otherwise they would all resign and there is no one else – nobody in the whole wide world - who understands how to “unwind” the mess at AIG and get the company back on a sound footing.
Another argument contends that AIG is contractually obligated to pay these bonuses and – by god – we are a country of laws and blah, blah, blah. Come on. High-priced lawyers find ways to break contracts every day; these contracts are no more binding than any other.
None of the people who destroyed America's and good part of the world's financial systems are being held personally responsible but they certainly are being personally enriched with taxpayer dollars while everyone else falls further behind.
Case in point: this arrived from Alexandra Grabbe whom I visited at her bed and breakfast, Chez Sven, last fall. She found it on Craigslist:
“Retired librarian needs small furnished room from now til January (possibly longer if mutually agreeable); do not drive, so must be close to public transportation; am currently living at the Berkeley Residence, but the rent has gone up and my pension has gone down (tied to stock market), so I need a cheaper place to live until I can start collecting [Social Security] in January.”
The desperation in that Dickensian public notice rips at your gut and the librarian is not alone. It has been estimated that the market crash last fall wiped out $3 trillion in personal wealth with elders taking the brunt of the hit in a triple whammy:
- Lost life savings
- Forced early retirement due to the unemployment increase
- Lost value of homes
I don't mean to dismiss the hardship on young and mid-age people but unlike elders, they have time to recoup and recover - as we did in previous recessions when we were younger. At our age now, elders have no choice but to tighten belts and live out our remaining years in reduced – in some cases, hugely reduced - circumstances. There will be no recovery for old people.
Which brings me back to bailouts and bonuses. Consent of the federal government is not needed for AIG to pay the bonuses. According to reports, they have requested discussions on the issue with federal compensation czar Kenneth Feinberg only for “political cover” so to avoid the public rage that ensued following their last bonus round in March. If my gut reaction is any indication, it won't work – not that public rage will change anything.
The federal government has shown no inclination, so far, to regulate the financial industry (such as reconstituting the Glass-Steagal Act that served so well to protect us from the excesses of Wall Street after the Great Depression until Congress killed it). The new AIG bonuses are just a small, public glimpse into Wall Street's continuing business as usual, unchanged from before the crash.
Eighty percent of AIG and various percentages of other corporations may be owned by the federal government now, but that doesn't mean those companies are beholden to the public. In truth, the government is a wholly-owned subsidiary of the financial giants.
For a terrifying look at how the Washington/Wall Street axis works, don't miss this from The Atlantic. It will scare the pants off you as it has haunted me each time I have re-read it since its publication in May. Here is the introductory blurb:
“The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises.
“If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.”
So as the economy circles the drain, an old librarian seeks a furnished room in which to eke out a life while swindlers are awarded their ill-gotten gains. It is amazing how little has changed in 33 years and we are still as impotent as we were in Howard Beale's day:
At The Elder Storytelling Place today, William Weatherstone – Alzheimer's: Part 1.