Populist Outrage Over AIG Bonuses Scaring Private Investors Away From Buying Toxic Assets

from the backlash... dept

Before anyone gets that upset, I'll say that I'm pretty much in exact agreement with Adam Davidson from NPR's Planet Money when it comes to how to feel about the AIG bonuses that were big in the news last week. It's definitely disgusting and troubling to see the money handed out that way, but it's really a tiny sum in the big scheme of things, and there are a lot bigger and more important things that the government should be focused on. Besides, the populist anger is really misplaced -- often directed at the current management or the recipients of those bonuses, rather than those who put in place the contracts that made those bonuses required. But, the very fact that Congress spent so much time on it highlights something we warned about earlier this year: as soon as the government steps in to help a business, it's going to greatly hamstring what that company can do, since its every move will be extra-scrutinized and critiqued. That will certainly limit what many companies are willing to do.

And we're seeing that right now. With the administration spending the weekend trying to convince private firms to buy up a bunch of the "toxic assets" out there, many are (reasonably) worried that they might face AIG-bonus-style backlash. It makes them a lot less willing to act, exactly at a time when we need private firms to step up and clean up the mess.

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  1. icon
    Pangolin (profile), 23 Mar 2009 @ 8:26am

    Outrage not enough

    There's an excellent article on the root cause of this "Crisis" over at Rolling Stone.

    http://www.rollingstone.com/politics/story/26793903/the_big_takeover/

    It's really good and explains why AIG is so important to this mess and how THE ACTUAL PEOPLE getting these bonuses deserve them (NOT) and just how screwed up the actual "bail out" is. It ought to be called a PARDON rather than a bail out.

    If you are upset about the bonuses wait till you read this.

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