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economics

AIG

This is getting ridiculous. I can’t take any more of this “outrage.” First off, those bonuses were in the contracts of those employees. When you negotiate a contract, you try to get as much as you can, who among us wouldn’t have signed those contracts? Yes, it looks like they were stupid ones for AIG to sign, but they did. To my mind, it is symptomatic of a badly run company, as is going into the red by billions and billions of dollars.

So the employees signed contracts that were beneficial to them. Is it their fault that AIG got federal money? It does sound like one division (which did get bonuses) was largely responsible for the collapse of the company. But here’s the thing, absent federal bailout money, those people would not have gotten any bonuses because AIG would have been in chapter 11. Bad decisions usually end up hurting the people that make them.

The bailout money was designed to keep AIG running and part of that is honoring their contracts. Those people do not deserve they money that is in their contracts, but it is in there. A deal’s a deal. This bailout is what allowed the contracts to be paid, they are what prevented those people from being thrown out. When you prop up failed businesses, you end up being saddled with their bad decisions, why is this a surprise? It is exhibit “A” for why we, as taxpayers, shouldn’t be involved in companies like this, they pay amazing amounts of money to people that are first class screw ups.

Instead of the government owning up to their bad decision, they are outraged, OUTRAGED that money is being paid to the very people that got the company into that situation. Now they are going to take back that money by force. If the government didn’t want money going to people that didn’t deserve it, they should have allowed AIG to go through bankruptcy. One of the usual occurrences of chapter 11 proceedings is to remove management, remove or redo debt, and redo contracts.

What a bunch of buffoons we have in DC. What scares me even more is the general idiocy of the public at large. Yes, those people do not deserve to be paid, but why aren’t we angry at the people that bailed out the company instead of letting it go under? The government is what prevented just desserts from being distributed to the people that screwed things up.

One reply on “AIG”

First off, the bad decision started in exactly one place: “AIG is too big to fail”. Says who? If they totally screwed themselves, what exactly was giving tons of money to the exact same people that did the screwing supposed to accomplish?

Not to put too fine a point on it, but f**k ’em! Them and the big 3 auto makers, too.

I have been following the news of Ritz Camera as of late. What did they do when they filed Chapter 11? Get “bailed out”? Hardly. Shuttering the now-unprofitable Boater’s World division and condensing from 800 to 400 Ritz locations, which accomplishes:
1) reducing overhead
2) eliminating market redundancy
3) reducing total inventory needed to fully stock their stores, consequently reducing revolving debt to vendors.

Any of those sound like bad ideas? Not to me. Sure, some people will probably lose their jobs, but a lot more will keep theirs when the company returns to profitability.

Bailing out AIG because they are “too big to fail” may have been the worst thing that happened to them in the long run…

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