Somewhere in a back-room in DC, a small group of powerful men fretted about how they could possibly redirect the public outrage over the soon-to-be-revealed details about the final disposition of most of $180 billion taxpayer dollars.
The sum was staggering, but that was a point in their favor. Once people start stringing phenomenal-sounding numbers together, be it hundreds of millions or hundreds of billions, it all starts sounding the same. So yes, the billions sent to Goldman Sachs, Societe Generale, and assorted smaller players would surely make the news, but if they could manufacture a sufficiently noisy scandal, they figured they could redirect public rage against those whose only crime was asking the government to stop their firm from going out of business. The distraction was so brilliantly executed, and the media so willing to lap up every tidbit of mock outrage, that all public discussion of those irrevocably squandered billions now seems like so much silence.
Does no one else realize what happened? Banks who decided to make risky loans, covered by these exotic policies, absolutely should have been forced to face at least some of the consequences of those loans. We didn't bail out AIG so much as we bailed out these banks whose fast and loose credit policies inflated the housing bubble and wrecked the global economy.
Obama was never outraged by bonuses. If he were, he could have said so last month back when Treasury was first alerted to the fact that they were about to be paid. But if the whole distraction engine hadn't gone into high-gear when it did, we'd all still be talking about how incredibly stupid our government officials were (and former candidate Obama prominently among them) to spend so much money to prop up AIG, without so much as an assurance from the assorted policy-holders that they'd be willing to accept a reduction in their payouts. Prior to the bailout, we had the leverage. The insured were facing the risk of getting almost nothing if AIG were simply allowed to collapse. For some reason, we discarded that leverage in our rush to fill the ultimate money pit.
It's an old saw that when the government has to bail out an institution for whatever reason, the investors and creditors are forced to take a major hit, and the taxpayers are always the first to be repaid once the business returns to profitability. Somehow I don't imagine that many of those billions will ever be recovered, and I don't think 80% of AIG is much compensation.
So why didn't it happen this time? I don't know anything for certain, but I don't believe it's mere coincidence that one of the largest holders of credit-default swaps was Goldman Sachs, and that prior to becoming Treasury Secretary, Hank Paulson was its CEO. He had to know how much his old firm was counting on those policies paying off, and if you think that wasn't an ever-present thought in his head as he was negotiating the original AIG bailout, then I've got a sweet deal on a bridge just for you.
But while I'm mad as heck over finding out where the money went, I'm angrier over the crucifixion going on over those bonuses. A few key people came up with the idea for these exotic policies that ultimately tanked the entire capital position of the world's largest insurer. For them, I have no sympathy. But they stopped selling them in 2006. The outrage over those key executives' compensation is already 3 years out of date.
So who got the bonuses this year? Most of them are just regular employees. Some of them might have had a hand drawing up those credit default swaps a few years ago, but they were just doing their jobs. And even the executives who were present when AIG reported that $60 billion loss in the fourth quarter aren't all responsible. They were simply at the helm when the federal government used their company as a conduit for passing money to assorted financial institutions.
In my book, $165 million dollars is so much less than $180 billion that I simply cannot fathom why people are even paying attention to it. Be mad, but not at the people who got paid for doing their jobs. Be mad at the ones who pissed away a trillion dollars (and counting) in Wall St bailouts.