Oops I did it again...

I can’t help myself. AIG is still in the news and I still want to rant about it. So the AIG leader says that without market competitive bonuses he can’t keep the top talent required to run the company through these rocky times. I say “good, you don’t deserve them.” Let’s not forget that when times were good these guys ruined everything. What makes you think they’re the ones to lead us through the bad times?

Now Freddie Mac and Fannie Mae are talking about bonuses too. You can bet they’ll trot out the same old rationale. It’s a safer bet than a mortgage backed security. To that I say “tough”.

(Note: my employer is not being bailed out and did not pay bonuses this year. Maybe we should have applied for some of that bailout money so we could have gotten bonuses.)

Here’s how I see it: bailout equals bankruptcy. Once you’re bankrupt you lose your business even if it keeps running. You have to have a judge’s OK to blow your nose. Your employee unions get broken. Your management gets forced wage cuts. Your pension goes away and million dollar bonuses evaporate. Why? Why is bankruptcy so tough on the employees? Simple: you screwed it up, you’re lucky to stay in business, and this has to be really unpleasant, otherwise you’ll just screw it up again. A bailout should work the same way. Rather than a nice cushy safety net, it has to be so awful that these morons won’t do it again.

Today, the US House of Representatives passed a bill taxing these AIG bonuses at 90%. That’s the stupidest thing I’ve ever heard and is really transparent. But if you can establish a practice that says “when you’re bankrupt and/or being bailed out, it will be so awful that you won’t do it again” then we might be on the right track. Not getting huge bonuses gets you started down that road real quick.

Sound too harsh? Maybe but let’s break it down. Suppose you get a new puppy. Every time the puppy has an ‘accident’ in the house you give it a treat. When do you think the puppy will stop crapping on the living room rug? Well, how about when you start rubbing his nose in it instead of giving him Milk Bones. It’s amazing how often things can be solved with the simple notion that it’s just like training a dog.

I get it that bad things happen to good people and these poor AIG executives are just trying to make a living. But… Am I supposed to feel bad for these guys not getting a bonus? Do they feel bad for me not getting one? Do they feel bad for all the people that have lost their homes or jobs? I reckon there are at least 73 unemployed Americans who deserve the million dollars more than the idiots so central to the condition of those Americans being unemployed in the first place. Or we could use the $165 million to fund a few new homeless shelters – we certainly need more of them now thanks to those goofballs.

More importantly, we need to rub these AIG noses in their own shit a few times and if it starts with no million dollar bonuses then so be it. And if they can find someone who will let them keep soiling the carpet then so be that too. But as long as it’s my carpet – which it is – I’d like to start rubbing a few noses (and not in an Eskimo kissing sort of way.)

If I had a million dollars (if I had a million dollars)...

You've seen it a hundred times. A homeless man begs on the street corner holding a sign saying he will work for food, bless you, etc. You hand him the spare change from your ashtray (or is it an accessory tray these days?) Once he collects enough spare change he dashes off to a nearby liquor store for a bottle of fortified wine, gets drunk, and starts all over the next day. You feel cheated and want your money back. Think about it this way:

• Homeless man = AIG
• Spare change = your taxes
• Mad Dog 20 20 = executive bonuses
  

Spare change is becoming less and less spare these days but not for the lucky few who are getting bailed out… our government just handed 73 AIG executives bonuses in excess of $1 million each. Somehow, someway these cats qualified under some sort of plan for $1 million bonuses. Let’s see how that plan might look:

• Did not understand financial markets? Check
• Did not understand risk associated with financial investments? Check
• Proceeded with risky financial investments anyway? Check
• OK, here’s your million bucks.
  

I finished my taxes the other day and qualified for $93 worth of Recovery Rebate. Someone somewhere figured that $93 was a meaningful amount of money to either (a) ease my pain, or (b) get me to buy something.

Ease my pain? I have an IRA at Fidelity that has lost $30,000 in the last 12 months. But $93 in tax credit makes it all better. Really. Thank you. Get me to buy something? Done. $92 last week on a movie (with popcorn) and a live music show (with dinner). Pure discretionary spending – just what the economy needs, right? I have officially done my part for the economic recovery. What’s holding it up? Have the rest of you done your part? Spent your $93?

So 73 AIG executives run the company into the biggest bailout ever and get $1 million (or more) for the effort. They are so successful at failing that no one has ever failed on this scale before. Well, maybe Adam and Eve, but otherwise no one! I, on the other hand, pay my bills and succeed in troubled times by being careful and conservative. I get $93. I could have had a lot more fun being irresponsible if I knew it would lead to a $1 million. A million bucks would really make a difference.

There is one thing the AIG guys got right that our government got wrong. If you’re going to give someone money, make it meaningful. $93 doesn’t cover a month’s worth of cable TV in my house. I was going to the movies whether I got that $93 or not. I just spent $95 on a plumber and $198 on a sprinkler repairman. $180 to tune up a motorcycle. $279 on motorcycle tires. $93 just isn’t enough to change my behavior.

You know how much is enough? Well, let’s start with a million bucks. I would buy a new house (or two given this market), a new car, and new appliances. I would create jobs (hire someone to clean my new houses and cut my new lawns.) I would travel. I would spend $1 million.

All the Democrats who say spending is the key to recovery would love me. All the Republicans who cling to trickledown economics would be thrilled. So give me a million bucks America and I’ll help this economy out.

Seriously, I don’t know a lot about financial markets or the risk associated with crazy investments. Surely that’s worth a million dollars?