Rep. Barney Frank has just called for the federal government to take over AIG as a way of making it easier to claw back the $165 million it paid to executives working for the financial products division that created a worldwide calamity in credit-default swaps. Democratic Sen. Charles Schumer is calling for Congress to tax the living daylights out of the bonuses. Republican Sen. Charles Grassley is calling on the AIG executives to either resign or commit hara-kiri.
I'm calling on President Barack Obama to stop listening to these guys.
Over the course of his campaign and through most of the first two months of his presidency, Obama has shown admirable restraint and focus in keeping his eyes on the prize of two major economic goals: creating 3.5 million to 4 million jobs and getting credit flowing again. True, the unclogging of the country's financial plumbing is taking longer than many would like. But I'm willing to give him a bye on that one, because that's a pretty tough piece of plumbing to do overnight.
Now, however, the president seems to have taken his eye off the ball and gotten sucked into the publicity vortex of the likes of Frank, Schumer, and Grassley—and seems bent on throwing public tantrums about the greedy insurers (although it's not the ideal role for the cool-headed president).
The idea, it seems, isn't anymore to pull the economy from the verge of an abyss but to pile up on whomever we think got us into this mess. We poured billions of taxpayer dollars into AIG, and the company has the temerity to pay out huge bonuses to the greedy executives! For shame! Let's put them in the stock, throw pies at them, and make them wear barrels!
Hold on. Wasn't the point of injecting all that money into the financial system to strengthen the banks, avoid runs on them, and get credit flowing again to those blessed taxpayers? This wasn't charity—it was done with the best kind of self-interest in mind. The pundits on television seem to have developed collective amnesia about this and followed Congress in defining the goal of the federal government in this as Lord High Executioner.
As Andrew Ross Sorkin points out in today's New York Times, it's by no means clear that the government could or should abrogate AIG's bonus contracts with its executives. Whether the government can void such contracts is a legal matter still to be determined; whether it should is a question that the president needs to think about in a quiet room, far from the noise of demagoguery. Who would work for or honor contracts with a company if they knew the government was primed to step in and kill any contract it doesn't like?
It's time for the president to lift his sights above this petty blame game and get on with the work of fixing the financial system. Lord knows, there's plenty of it to do.
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