Buried Planet

This past Tuesday Senator Dodd (CT-D.) declared that he was not responsible for the loophole that allowed AIG executives to hand out $165 million in bonus pay. Today he has admitted to adding the loophole and has blamed the Obama Adminstration for insisting on the change.

In a dramatic reversal Wednesday, Sen. Chris Dodd confessed to adding language to a spending cap in the stimulus bill last month that specifically excluded executive bonuses included in contracts signed before the bill’s passage.

Dodd, D-Conn., told FOX News that Treasury officials forced him to make the change.

“As many know, the administration was, among others, not happy with the language. They wanted some modifications to it,” he said. “They came to us, our staff, and asked for changes, and the changes at the time did not seem that obnoxious or onerous.”

But the provision has become a flash point for criticism amid the controversy over $165 million in bonuses given out by AIG after securing more than $170 billion in federal aid. The language in the stimulus bill wasn’t specific to AIG, but some have expressed outrage that it appears to have created a loophole.

This was a decision backed by not a single Republican in the House and only three Republicans in the Senate. As for the specificity of the language in the bill, it is well-known that Congress masks the beneficiaries of pork by using tortured language. This is all assuming anyone was able to even read the massive porkulus bill in the first place! Obama declared that if the bill wasn’t passed quickly American might never recover, and so Democrats smashed the bill through Congress, largely unread.

ABC quotes OpenSecrets.org’s list of which politicans received the largest donations from AIG:

1. Dodd, Chris (D-CT) Senate $103,100
2. Obama, Barack (D-IL) Senate $101,332
3. McCain, John (R-AZ) Senate $59,499
4. Clinton, Hillary (D-NY) Senate $35,965
5. Baucus, Max (D-MT) Senate $24,750
6. Romney, Mitt (R) Pres $20,850
7. Biden, Joseph R. Jr. (D-DE) Senate $19,975
8. Larson, John B (D-CT) House $19,750
9. Sununu, John E (R-NH) Senate $18,500
10. Giuliani, Rudolph W (R) Pres $13,200
11. Kanjorski, Paul E (D-PA) House $12,000
12. Durbin, Dick (D-IL) Senate $11,000

Interesting, that the two politicians who received the most money are blaming each other for allowing the bonuses? As far as I’m concerned the bonuses are fair play. We could have just allowed AIG to fail and the CEOs would have gotten what they deserved. Instead, St. Barack decided to trump the market and save the company, and now he’s insisting that the CEOs act not on the basis of self-interest but in a manner that serves his political posturing. Am I the last person who thinks that businesses should make decisions on the basis of business, not politics?

Why is there no public outcry when professional athletes receive huge salaries for what amounts to hitting a ball around? No one declares them ‘greedy’ and urges Congress to take the money away from them. If the government and Americans in general want to decide who gets bonuses in a company, than they should have just bought AIG en toto and nationalized it. Instead, they made AIG (and other companies) into chimerical parodies of themselves — profits remain privatized and the risk incurred is now socialized — the worst of both worlds!

So - nationalize AIG (and when the next scandal hits, no one will care because the government is expected to run things abominably) or let it remain privatized and let it fail when the market decrees that it should fail. In the coming years we’re going to duplicate the mistakes that Japan made in the early 90’s — they propped up failing banks. They called them ‘zombie banks’ — they would have ceased to be ‘alive’ economically if the Japanese government had not reanimated them with constant infusions of capital. Instead, let these companies wither and die so that new companies can replace them when the market conditions allow for it.

All the government is really doing at this point is trying to preserve a status quo, forestalling the recovery, for the sake of politics. They need to appear to be ‘doing something’ about the economy, and it does not matter to them if they are helping or hurting the economy, just the appearance. Government leaders like Obama keep wondering when the credit markets will improve, but they can’t seem to realize that they are the 800-pound gorilla in the room causing the paralysis in the first place.

No one wants to borrow or lend any money right now. Why is that? It’s because the government keeps on fiddling around with the rules. Imagine that we’re all playing poker. Suddenly Barack Obama decides to be the dealer. I find three aces in my hand, but when I slap down my hand expecting to have won, Obama tells me that aces are now deuces and deuces are the new aces. So I lose. This continues for a while until aces become aces again, but after a while no one wants to play — not until the rules become normalized. Markets hinge on the assessment of risk - ask any mortgage lender. If people are unable to gauge their risk, they tend to hold onto their money.

Keep this in mind the next time you read about how Congress is considering a special tax to extract the AIG bonuses away. The CEO’s have signed contracts. But contracts won’t mean anything in an Obama Nation. No, if there’s political gain to be had (or political pain to be avoided) the rules of the game will be voided or changed. Obama & Co. will continue to be amazed that no one wants to play.