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Ian Bremmer
Author

Ian Bremmer

Ian Bremmer is author of The Fat Tail: The Power of Political Knowledge for Strategic Investing (with Preston Keat) and president of Eurasia Group, the global political risk consulting firm.

Outrage Is an Unaffordable Luxury

The issues of bonuses for AIG employees who contributed to the financial crisis and are now being bailed out by taxpayers resonates strongly with Americans. People are upset and we know Congress is going to run with that. But the Obama administration cannot afford the luxury of outrage. The challenges they face are simply too great.

Having the Obama administration spend the better part of a week going after AIG is reminiscent of Congress calling Roger Clemens to testify when he was caught juicing. The Congress and executive branch have more important things to do. To give just one example: Confirmation of many Treasury Department appointments are still pending. As a result, Secretary Geithner is working with a skeleton crew, at a time when the United States faces the biggest economic crisis since the Great Depression. Congress must push those appointments forward immediately.

The issue is not whether bonuses for failed business practices, paid for by taxpayers, is right or not. It's just that the issue pales in the context of the big picture. And the big picture is that the financial rescue plan, for which Secretary Geithner is now responsible, has yet to convince markets or the public that it will restore America's financial health. With so much at stake, the administration can't afford to get into the weeds, becoming arbiter and judge on individual corporate cases.

President Obama has already come out and presented himself as wanting to be the country's Auto Czar, Health Care Czar and Balanced Budget Czar. Now, it seems, he also wants to be Populist Anger Czar. But he simply can't afford to fail at being Superman: This is not a time to overpromise and underdeliver.

We need to recognize what everyone knows but only Larry Summers seemed daring enough to say: That AIG is legally obliged to pay bonuses. In fact, it is Congress that failed to limit bonus payouts when it crafted the legislation that funds financial bailouts. When the government acts like it is going to undo a valid and legally binding agreement because of populist resentment, it sets a dangerous precedent that attaches a political-risk premium to every contract made henceforth.

It's an utter waste of government time and money to go on the offense and direct senior government people to do something about the bonuses, no matter how distasteful. Not to mention, Congress is busy today putting AIG's senior management through the wringer, when many of those now in power at AIG were in fact not on duty when the ship went down. Edward Liddy, AIG's current CEO, for example, was appointed in September last year to help get the life boats out.

If we really want to start blaming people, we can blame the AIG executives who led the company at the time of its worst mistakes. But we can also ask: Where was the SEC? Where were the ratings agencies who were supposed to do due diligence on the company's practices? Where were the investment advisors making recommendations not to invest?

There is no shortage of blame to go around. But there is a shortage of time and political will, which should not be squandered on hopeless cases like this one.

By Ian Bremmer

 |  March 18, 2009; 3:00 PM ET
Category:  Economic crisis Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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Since we now have the nation's first "affirmative action" president (Geraldine Ferraro was exactly right, absent Obama's playing to race and the media stampede to prove what a liberal society we have, there is no other candidate of such limited credentials except for speech-making and "acting cool" who could have possibly been considered with such a pathetic track record) -- I suppose it is predictable that some will lobby as you have for affirmative-action "outrage." Setting aside outrage-as-comfort-food, it is true that the nation's dilemmas rest on the backs of a few in both parties, government, business and the corporate mass media. But that is not the same as saying that all policies are equal, that all paths lead to the current economic catastrophe. The policies that are feeding the fires as Rome burns are principally those of politicians led by Barak Obama, Hillary Clinton, Barney Frank, Nancy Pelossi, Harry Reid, et cetera. Your waving the dark banner of some unspeakable "changes" (are you threatening something?) cannot be any more daunting than what we face already. Whether you agree that the lunatics have now taken over the asylum, Mr. Bremmer argues, and I agree, that vilifying a few executives at AIG is a stupid waste of time and distracting from the issues before us. I would say the same if Obama, Clinton, Frank, Pelossi, Reid, etc. were Republicans. But they are not.

Posted by: hjsg | March 22, 2009 12:15 AM
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HJHG: It appears that you are very selective in your outrage: Democrats only, which is one reason we as a nation are in deep doo-doo: quite frankly the right and the left hate each other more than we love our country. So be it.

The public's current outrage is not focused on one party or the other, it is focused broadly on corporations, our politicians, and the media, all who have been scamming us for decades.

If you want to play the game "If this outrages you, why are you ignoring this [fill in the blank] which is equally outragous" so be it, but it only serves to divert focus from the subject at hand, a wealthy elite who demand huge compensation from people who are jobless or might be jobless soon, and are too clueless to understand why. Evidently only peasants should suffer.

This issue, by itself, is admittedly a gnat on an elephant in the grand scheme of things, but it was the gnat that broke the damn of outrage that has been building up around the country. In some ways we're fortunate because this anger and outrage, if locked and allowed to grow could eventually erupt in violence. I suspect Congress and the wealthy who live is a bubble of their own have no idea just how angry the rest of the country is.

I hear the outrage every day. I think it is healthy and well deserved. Healthy because I think it will result in some massive changes in the future, changes that our current leaders in congress and the media (and maybe you and I) aren't going to like at all.

Posted by: Trakker | March 20, 2009 11:15 AM
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Mr. Trakker, this comment, then onto life beyond blogs: While prizing your outrage, what do you think about Clinton and Obama crony Franklin Raines, who walked away scott-free from "cooking the books" so he could take tens of millions in bonuses from Fannie Mae, a publicly-chartered enterprise that fueled the economic collapse at its very foundations? Plus, Obama's and Clinton's other cronies who did the same at Fannie Mae in behalf of personal wealth and political self-interest. I'm far less shocked by the idea of private business people looking for profits and income, including some who are greedy even if their contracts are legal. I'm much more concerned about the irresponsibility and hypocrisy of politicians like Barry Obama, Barney Frank, Chris Dodd, Hillary Clinton and others who not only stoked the fires of financial melt-down but are now trying to cover by sending the economy into a multi-trillion-dollar death spiral. (Take a look at what the highly respected Trends Research Institute is saying about the Panic of '08 turning into the Collapse of '09 and a Depression worse than '29.) Obama and the clowns running Congress are more concerned about their own power, wealth, egos and political dogma than on fulfilling the public trust. We can expect some corporate jerks to be self-serving (most business people are not and have been the backbone of building this country), but it is the political power-brokers who are trashing people's jobs, companies and mortgages in the long run -- not to mention gutting free enterprise and open government. What Mr. Bremmer is clearly advising is not the absence of outrage per se, but directing the energies Americans have left on the truly outrageous challenges before us. In that regard, I am certain that neither friends, family nor neighbors out of work or losing their homes -- nor, I think, will history -- regard highly the skill of jacking around on Jay Leno.

Posted by: hjsg | March 19, 2009 11:20 PM
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I don't mean to be rude Mr. Bremmer, but outrage is the only luxury many of us have left.

The people you appear to be defending are pulling down salaries and bonuses that take the AVERAGE American 20-30 YEARS to earn! What galls us is that people making this kind of money failed miserably. Where was the oversight from management?

All we know is that capitalism failed us, our politicians and government failed us (but government is the problem, not the solution, right?), our press failed us (badly), and we the people failed to detect the BS we were being fed.

I've reached the point where I'm almost willing to let Wall Street and AIG and the banks fail and let the chips fall. It may be the only way we can rid ourselves of the rich, smug, pompous, leaders (government and corporate) who have been blinded by the glow of their imagined brilliance, and who have never had to take a calculator to the grocery store to insure they aren't embarrassed at the checkout.

No sir, AIG employees may be smart, and they may work hard, but they aren't 35 times smarter or harder working than say a factory worker (I know because I've been there).

If we can't afford outrage, then maybe we're beyond saving.

Posted by: Trakker | March 19, 2009 9:59 PM
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Barry, you say that your administration has "inherited" this economic situation. From whom have you inherited it? Is it possible that you and the purer-than-caesars-wife Democrats had a hand in it as well? After all, in the Senate you (Hillary Clinton and others) stood at the front of the food trough for political rake-off contributions from Fannie Mae and AIG both. You helped stampede the reckless lending that has now caught up with us, and you never complained a peep about AIG at the time. Now you are waving your arms and pontificating about your outrage over bonuses allowed in a bill that you force-fed to the American people without letting anyone have time to even read it (another of your campaign's broken promises). Now we learn the bonuses were allowed because of pressures from "the Treasury Department" -- meaning you and your feckless Treasury Secretary Timmy Geithner. But leaving that aside, let me ask you this: While you are demanding back all the bonuses from AIG, are you also going to demand back the bonuses paid to your pal and Clintonite Franklin Raines? Raines was caught red-handed cooking the books at Fannie Mae while pursuing your policies to make bad mortgage loans for the loonie marxist social engineering indoctrinated in you from an early age and devoid of your ever having spent one day managing a business. (Your previous economic achievements, other than getting your Middle East pals to help you buy your own million-dollar mansion, was (a) funneling millions in public dollars to your Syrian-connection-crook-campaign-fund-raiser Rezko for Chicago housing schemes that collapsed and left the poor just as homeless as they were before; (b) refusing to account for the millions of dollars pouring into your unprecedented campaign piggy-bank from China, Iran, Saudi Arabia and other foreign donors; and (c) refusing to report fully and honestly to the American people about who exactly made a $550 billion + raid on deposits within two hours in September 2008, thus swinging the election to you.) Back to the first issue: Raines fudged the numbers at Fannie Mae to boost his own bonuses and walked away with tens of millions in personal wealth while Fannie Mae went up in smoke. Barry, while you and your economic-genius-friends Barney Frank, Charlie Rangel, Nancy Pelossi and Harry Reid are engineering dubious tax schemes and confiscation of private property from AIG executives, do you have any intentions of taking back the ill-gotten bonuses from Franklin Raines?

Posted by: hjsg | March 19, 2009 2:35 PM
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AIG executives and Wall Street bankers, with help from their bought and paid for corrupt government high officials, are economic terrorists looting the American taxpayers.

Posted by: Mickey2 | March 19, 2009 1:58 AM
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Man, the Republicans are trying to make the Democrats look bad on everything they do. FOX news is talking like this bonus fiasco is going to rocket them right into the drivers seat. And I can't believe that they're calling for Geithner to resign. It's because of the Republicans with their free market, we don't need the Government telling us what to do that we're in this mess. They don't want to talk about what got us here, only how we're screwing up trying to fix it.

Posted by: HemiHead66 | March 18, 2009 7:37 PM
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I'm sorry Mr. Bremmer but it's your kind of logic that helped get us here to start with! Ah no time to worry about the small stuff let's write another $1 trillion worth o Credit Default Swaps !

With this kind of logic, we could easily be part of a crumbling society as we speak...The line has got to be drawn somewhere!

Are you saying that the Government shouldn't be involved here because the private sector will take care of this? That's EXACTLY how we got here.

Somehow your logic, even on an international basis has holes riddled thru it. Sorry, but your message is falling on deft ears in this context. Go peddle your wares at Fox...

Posted by: rbaldwin2 | March 18, 2009 5:07 PM
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Obviously, the money is a rounding error in the pile of dough heaped onto this miscreants; the “best and brightest” of our nation! The problem is the class attitudes of these and other corporate owners and managers who have come to believe that they are so important to the success or failures of their companies. My experience is while these glorified “Caesars” can certainly lead their companies to failure; it is generally the hard working employees and operating management that creates the successful business in spite of its pandering Senior Management! Whether it is redecorating executive offices, putting semi-precious stone walls in elevators to empress their bankers, changing the company logo, branding sports stadiums, doing 4X, 10X, or 100X improvement programs, or other colossal wastes of company resources to demonstrate their power and importance; senior management is generally people who have gone far beyond their level of competence!
For Banks and Insurance companies to be allowed to become “sexy” innovators of financial products; essentially being allowed to print private money with debt securitization, then gamble with these “new” securities that are bundled into new stratified tranches, or tranches of tranches, or even tranches of tranches of tranches, leveraged higher and higher and then insured against defaults when even the eternal optimism of such gamblers is exceeded…we have serious problems and issues!
Banks and Insurance companies need to return to the conservative, bland, clunky pedestrian companies needed to ensure that our financial systems are prudent, responsible, and solvent! Wall Street needs to forget go-go liquidity which is essentially more gambling with little to no benefit to our society; requiring all transactions to have a minimum of 96 hours between trades, taxing all income equally, and ending the tax incentives for allowing Wall Street to play with retirement monies will begin to address the faults of the last 20 years of excess!
To complete the correction, all of the current generation of financial whiz’s need to be barred from further work in government or financial companies!

Posted by: Chaotician | March 18, 2009 5:03 PM
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arby1 said:
"He's going on the Leno show... Maybe he misses the love-in of the campain."

The man is an absolute irresponsible egomanic. He leaves town amid
the crisis to speak before crowds in California and appear on Leno's
show. He feeds his ego with applause while 'Rome burns'. Unbelievable.
.

Posted by: Billw3 | March 18, 2009 4:26 PM
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You argue that the "big picture" is the success of the financial system's resuscitation. I would argue that another piece of the '"big picture" is the accountability of the people we trust with our money. When politicians royally mess up, Americans have the luxury of firing them. When AIG royally messes up, we don't.

To me, this is not a side show, it's at the core of our societal values. What's at stake is whether or not we, as a country, can punish wrong-doers, no matter how powerful they happen to be.

Monetarily, yes, this is 1/1000th of what we've given to the company at large. This isn't really a fight about money; it's a fight about accountability. You may call it finger-pointing, but if we come out of this crisis and responsible parties (in whatever capacity) aren't humbled into thinking a little harder the next time they spin the roulette wheel, then we're doomed to repeat this cycle ad infinitum. Maybe we are anyway - human nature being what it is - but at least we can put a few generations between each major bust.

Finally, you appeal to the pragmatism of limited time & political will. I see your point, but I could argue that a victory in this instance would actually pay political dividends, as the general populace, overwhelmed and bewildered by forces completely out of their control, finally feel like that can claim real progress, however small. Economists love to talk about the bull/bear psychology driving fear in markets... what about the bull/bear psychology driving fear in our everyday lives? A little victory goes a long way these days.

Posted by: metavosk | March 18, 2009 4:20 PM
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A SPECIAL PROSECUTOR MUST BE APPOINTED

A.I.G. has long been a national embarrassment.

http://pacificgatepost.blogspot.com/2009/03/aig-national-embarrassment.html

A Special Prosecutor should be assigned and given wide berth to hunt down the malfeasance.

Posted by: JamesRaider | March 18, 2009 4:19 PM
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Sure, let them steal the taxpayers money.
The country is in the crapper.

Posted by: Billw3 | March 18, 2009 4:17 PM
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He doesn't seem to have too much to do, as he going on the Leno show. As Leno said "the only time a sitting President has done the show". Maybe he misses the love-in of the campain. With the challenge of curing cancer, among all the other things mentioned in your article, how does he have time to yuk it up on Leno. You know Letterman will be next. The campain is over...isn't it?

Posted by: arby1 | March 18, 2009 4:13 PM
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AIG Fair Dinkum!


From an AP news article 2009-03-18


Despite Liddy's announcement that employees were stepping forward to return bonus money, he ran into a wall of criticism from committee members.

Rep. Barney Frank, D-Mass., chairman of the Financial Services Committee, demanded that the company submit to Congress a list "of people who received the bonuses, whether they paid them back or not." If the names were not provided "without restriction," Frank warned, he would ask the committee to vote to subpoena them.

Liddy, while saying "we will obviously comply with the law," told Frank he was "concerned about the safety of our people."

He said he would only give the names of the bonus recipients on the basis of confidentially. He read aloud threats that AIG employees had received, including one that suggested that all bonus recipients should be "executed with piano wire around their necks."

Another one read: "If the government can't do this properly, we the people will take it in our own hands and see that justice is done. I'm looking for all the CEO's names, kids, where they live, etc."

Frank said he would consult with security officials, but that his request for the names stands.

For the American public, AIG now stands for "arrogance, incompetence and greed," said Rep. Paul Hodes, D-N.H.


NOTE TO LIDDY:

If the bonus benficiaries of AIG were not consumed with greed and truly valued their lives, families and posessions, they should step up immediately and return their bonuses with an apology to US taxpayers and with the guarantee that their names would be prominently displayed in the media on a list of those who chose to do the right thing. Period.

For those whose love of ill-gotton gains outweighs their common sense, beware!

I'll have no sympathy if I read that they were assaulted in AIG's underground parking lot or that their vacation house on Chesapeake Bay burned to the ground. What arrogance! What idiots to not see this coming!

Posted by: Portland1 | March 18, 2009 4:08 PM
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I agree 100%. But Congress will never pass up a chance to grandstand - it costs them nothing and makes it look like they are doing something.

Posted by: JoeA628 | March 18, 2009 3:59 PM
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