The Banality of Outrage
By Al Giordano
Everybody’s "outraged," the media tells us, except that, um… we’re not.
The latest outrage-du-jour, we are told by a very loud chorus of powerful media and politicians, is the revelation that the troubled financial giant AIG - recipient of $170 billion in bailout funds and loans – has devoted 0.1 percent of that amount to $165 million in previously contracted bonuses for its executives.
Yes, it's wrong. And like most of capitalism, it's unfair. But does it surprise, or represent anything different than what has been happening for decades? Ask yourself: "Am I really 'outraged' by this piece of news?"
To note that corporate culture’s longstanding overpayment to executives, and the corresponding disparity with the pay for those who do the heavy lifting in the workplace, has ill-served society (I remember writing a paper on it in high school in the 1970s as it pertained to excessive oil company executive salaries) is not exactly a new or novel concept.
The only new angle on it is that for the first time in decades, the United States has a president who has vocally identified it as a problem. Back in early February, President Obama said, “For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis isn't just bad taste - it's a bad strategy - and I will not tolerate it. We're going to be demanding some restraint in exchange for federal aid - so that when firms seek new federal dollars, we won't find them up to the same old tricks."
Now, I don’t know about you, kind reader, but while cheering that historic 180 degree turn in the direction of the US head of state’s attitude toward Wall Street greed, I sure wasn’t under any illusion that the corporate sector would immediately stop practices that became standard operating procedure, particularly under presidents Reagan, Bush I, Clinton and Bush II, at the president's first declaration that he'd tackle the problem. And so when I, along with many of you, learned yesterday that AIG is still up to its old tricks I confess that while, yes, it was bothersome, annoying, irritating, and many other adjectives, I did not feel “outraged.” Outrage requires a certain amount of surprise combined with magnitude before it rears its head from this corner. Otherwise, it's just the daily information highway road rage that some seem to need to get the adrenaline flowing.
I have felt outraged at key moments in recent years by various human events: Like learning, in 1999, that President Bill Clinton, when he came to Mexico for an “anti-drug” summit, stayed in the mansion of a drug trafficking banker (some similar outrage seems to be sweeping France right now over the same thing). But when something outrages me, I try to do something about it that goes beyond mere expressions of my angst via public tantrum (as I did then). Other things that have outraged me in recent years were the march to war after September 11, 2001, and the subsequent revelations that torture was suddenly back in the Pentagon’s playbook… I was outraged by the US complicity in the attempted 2002 coup d’etat against an elected government in Venezuela and continue to experience outrage that 12 million undocumented immigrants in the United States are kept under inhumane conditions by the refusal of Republicans and Democrats in Congress, as recently as 2007, to gather up enough votes to put them on a path to citizenship. We all encounter matters that shock our consciences.
Outrage can't be a daily constant except for the emotionally unstable among us. But when we do experience it, if we don’t then roll up our sleeves and do the heavy lifting of investigating and organizing a path out of the circumstances that cause it, the screeching just seems to be more attention-seeking and self-centered behavior.
And so when Reuters tells us, as it did in a headline today - Recession-weary Americans outraged by AIG bonuses - and reports that, “While U.S. President Barack Obama tries to claw back bonuses paid to AIG employees, Americans facing pay cuts and job losses are outraged that some refuse to share the pain of the recession,” I’m skeptical that “outrage” accurately describes the reaction from most working class and poor Americans. Once again, we are being told by those in power what we feel and think, and yet there’s the sense that those - most of them with university degrees - writing such words haven’t a clue as to how we feel – much less, how we live – even as they make such claims.
The Washington Post led an online chat today with a “Professor of Corporate Law, Corporate Finance and Securities Law” from Yale titled "Public outrage over AIG." Oh, right: a Yale professor must understand our plight enough that can now tell us what we are feeling and thinking, too.
Then comes US Senator Charles Grassley (R-Iowa) to suggest that he's so outraged that AIG execs should kill themselves.
Fox News conducted a panel on “Outrage over AIG bonuses” with such tribunes of the people as Mort Kondracke and Charles Krauthammer.
US Senator Sam Brownback, picking up on the theme, is also “Outraged” by AIG Bonuses.
All these talking heads are somehow reflective of the public? I don't buy it.
The Baltimore Sun editorial board titled today’s screed: “A financial outrage: Our view: Americans should be infuriated at bonuses awarded by AIG.”
The usual gaggle of bloggers that describe themselves as “progressive” have the nobs turned up to eleven on the AIG bonuses, and for them – in tandem with the big media correspondents – they want a scapegoat and are calling for the head of Treasury Secretary Tim Geithner – who was confirmed for that post on January 26, just fifty days ago. Chris Bowers at Open Left ended a blog entry this afternoon instructing the President: “Fire Geithner.” (I don’t mean to pick on Chris – he should take it as a kind of compliment that I still do peruse his headlines and read some of his posts long after I have given up on bothering with the predictable screeds of the Hamshers and Sirotas and Krugmans out there in whose tar pit he wades.)
When Obama nominated Geithner to Treasury I was glad for two main reasons: One, if not him, it would have likely been Larry Summers and, two, Geithner – despite his evident talents – never personally chose the big money corporate jobs offered him throughout his career. He’s always worked outside of the private sector, for less than his pay scale. He’s a public servant by nature, not a revolving door type (see Rubin, Robert, Secretary of Treasury under Clinton, Bill, for an example of the latter).
And I don’t see how anybody can make an accurate judgment on the job Geithner has done so far just 50 days into a flight that must cover a distance of 18 months to two years before you or they or I will know whether the moves he’s been making now will land the airplane in the terrain of economic turnaround.
And I can’t honestly say that I respect anybody that does claim to know that, because of the complexity of the problem created not just by George W. Bush’s policies, but by those of Reagan, Bush I and Clinton, too.
What I do see is that the moves by the new administration have been bolder than at any point in our lifetime: including a Stimulus that was the largest public expenditure on anything ever in the history of governments or capitalism, along with the rest of the steady output progressive measures already ordered executively or signed into law.
To me, gearing up the “outrage” to call to remove the pilot of the economic plane in what would be the first hour of a 14 hour trip reflects erratic behavior by those passengers: the amount of time and distance lost landing the plane all over again to get a new pilot (or Treasury Secretary) confirmed and saddled up into the cockpit would delay the eventual landing by even more time than we’ve already been in the air with this one.
The Obama administration, not surprisingly, has the same view, and is sticking with its economic pilot.
White House Press Secretary Robert Gibbs, during today’s briefing, used the words “outrage” or “offensive” in one form or another at least 14 times (that’s Lenny Bruce 101: if you use a word enough times it loses its drama) and also stood solidly with the flight plan and with Geithner in the pilot’s seat:
I do know that Secretary Geithner last week engaged with the CEO of AIG to communicate what we thought were outrageous and unacceptable bonuses; that Secretary Geithner received a commitment to lessen some of the bonuses for senior executives, a promise for the restructuring moving forward; that obviously this bumped up against a contractual deadline of March 15th, but that the Secretary of Treasury did as much in his legal power at the time to lessen the impact of what we all understand is outrageous…
I think the President and all of America are outraged about is the message that any bonus like this sends; that as I said yesterday, and as the President said, it offends our common sense. It offends our values. It sends the wrong message by giving and rewarding the very entities which took a company like AIG with a hedge fund placed on top of it, and ran the entire company into the ground to the point where taxpayers have had to inject $170 billion. I think everybody is offended by every aspect of that…
The President is satisfied that we are taking the steps necessary to recoup this money, but, again, is completely outraged at the entire process that has led us to this point, that has provided the very employees, AIG Financial Products, the very employees that have found the taxpayers on the hook for tens of billions, hundreds of billions of dollars, receiving the wrong message through a bonus -- he finds that offensive. That's why he's instructed us to take the steps -- all steps that we can, humanly possible, up to that deadline, and after that deadline to recoup that money…
Barack Obama came in and there was a new sheriff in town on executive compensation. He changed the way we did business here and the way Wall Street did business, by instituting the toughest executive compensation rules that had ever been entered into, changing the lawlessness with which all of this was governed prior to that announcement.
So I think it would bear some going back to any of the critics of the President's genuine outrage and ask them what they did or didn't do to change the way executives are compensated before Barack Obama got to town as President of the United States -- and in one of his very first announcements, financial announcements, argued for a change going forward in the way we compensate executives…
The President understands the outrage of members of Congress. The President understands the outrage of every single American that finds what has happened for AIG, what has happened to our banking and financial system -- that the American people find how we got here, why we're here, and the steps that we regrettably have to take to stabilize that system -- why there's great offense and great consternation about it…
The President finds it outrageous and offensive for any of these bonuses to exist…
And so “The Outrage Lobby” – from Chuck Grassley and Sam Brownback to the aforementioned Netroots bloggers – won’t be getting the inside track on the declarations of "outrage" this time around. Nor will those that imagine themselves with torches and pitchforks – but have never used either as work tools with their own hands – be able to harass Geithner out of the pilot’s seat (once again demonstrating their impotence at getting much of anything they want done). And I think that’s all good.
That said, are We, The People, really so “outraged”? And did the AIG bonus revelations that came out yesterday – no polling has been done on it as of yet – really raise the national rage-o-meter?
Dana Milbank of the Washington Post cites a poll that came out before the AIG bonus story that indicates that the public was already weary of the bank bailout signed last year by President Bush:
A Pew Research Center poll out yesterday found that 87 percent of Americans are bothered by the bank bailout -- and that was before word got out about the bonuses at AIG, which was rescued by an earlier federal bailout.
So far, so good, but then he joins the “pack journalists” and “pack bloggers” in assigning additional road rage to We, The People, while offering no evidence with which to measure it:
The rising anger helps to explain why Obama's towering support has slipped to mere mortal levels. The Pew poll put the president's support at 59 percent, down from 64 percent last month, while a CNN poll found Obama down 12 points from early February.
...the administration's bully-pulpit strategy isn't keeping pace with the spreading anger. Lawmakers erupted over the AIG news yesterday with demands for repayment and even a breakup of the insurance group.
Here are two relevant pie charts from a CBS Poll taken March 12-16 that demonstrate just how off-target Milbank and the rest are in their claims:
Now, compare that with this chart, from the same poll:
Get it? There is no connection between the majority of the public’s views about the bailout of banks, or automakers and those toward the President (and, it’s a safe presumption, that goes for his Treasury Secretary as well).
Yet Jim Vandehei of Politico, in the Washington press corps echo chamber (that so many bloggers put themselves into while claiming to be distinct from it) rails: "Why did it take so long for the president and senior lawmakers to get so worked up?"
In fact, as previously documented and linked above, it was the President that identified the problem back on February 4, after years of Republican and Democratic presidents alike that wouldn’t even speak of the matter of executive pay, much less the need to curtail it.
Nope, this is no more than the daily poutrage given an extra echo chamber by the very same corporate media that also overpays its executives while underpaying everyone else. Next week they’ll all be expressing their “outrage” about something else, and assigning it to the rest of us that simply aren’t shocked nor surprised nor blaming those that didn’t cause it – and are in fact acting to do something about it – for a bad situation that has been decades in the making.
For the rest of us, life and organizing go on. And we’ll look back at all this talk about our supposed “outrage” just as we have throughout the past year at the other manifestations of Chicken Littledom and faux-progressivism: just another tantrum by the usual suspects that got a day or two of news cycle from the corporate media led, itself, by greedy and overpaid executives.
Now, what was it that we are supposed to be outraged about today?
Email this page
I'm outraged!
Submitted on March 17th, 2009 by bonkers (not verified)...at your lack of outrage!! How dare you, Giordano!?! Don't you know we're going off a cliff!
thanks
Submitted on March 17th, 2009 by valdivia (not verified)long time reader new commenting. Could not agree more. Am I happy about the bonuses? No. Am I outraged? Not at this. I am outraged at the fickle support that this adminsitration gets. 50 days in we have already heard coutless of times about Geithner having to go, about how Obama already failed etc. I am so tired of this I am going to disconnect for at least a week because it seems like the familiar dance of freaking out and then not fraking out just drowns out the long game. I am in the long game and have made a decision to give Obama and his team at least until 2010 to get this country back on track.
Thanks for the sanity, as always.
outrage
Submitted on March 17th, 2009 by mr. whipple (not verified)"And I don’t see how anybody can make an accurate judgment on the job Geithner has done so far just 50 days into a flight that must cover a distance of 18 months to two years before you or they or I will know whether the moves he’s been making now will land the airplane in the terrain of economic turnaround."
Now, now Al....don't you know that the LW bloggers were calling on Geithner to go two weeks ago because the market was crashing, and the *reason* it was crashing is because he was young and wet behind the ears and couldn't project the necessary confidence to the market? And then when the market rose *this* week, a new reason had to be found...and it's the AIG bonuses and because Obama won't nationalize the banks.
And the only obvious reason that Obama won't nationalize the banks is because TG is a corporate stooge who only takes care of Wall Street and has the innocent, naive Obama totally bamboozled?
A Modest Outrage
Submitted on March 17th, 2009 by Bill ConroyOK, for anyone who is into outrage psychology, at one point does it press the spirit toward satire?
Did Jonathan Swift reach that crecendo with "A Modest Proposal" — his 1729 essay on eating poor Irish children? If it was not outrage that led him to pen that now famous proposal, then certainly the advancing of the proposal was deemed an outrageous act by some in his time, even though he meant it as satire.
Is it possible AIG was acting in the same spirit in penning it's "Coporate Responsibility" statement, still up on its Web site?
So I suspect the outrage over the AIG bonuses really stems from a fundamental misunderstanding of it's corporate culture of satire. After all, it's not like they are eating children, right?
Right On!
Submitted on March 17th, 2009 by Eli Ackerman (not verified)Would I like to see fraud investigations of AIGFP pursued? Absolutely. But am I any more outraged by this fairly predictable face-slap than any of the others we've experienced since 2000ish? Not really.
Obama's got a HUGE task to with this banking crisis and unemployment problem and the country seems to believe (if one cares about empiricism) that we're now at least on course for eventual recovery.
This is clearly some unthreadable Beltway needle, a set of weird artificial hurdles for Obama to jump over.
"Sure he says he's outraged. But is the President outraged enough?"
It's just like campaign season.
"Sure Senator Obama is black, but is he black enough?"
As for Geitner, I'm not enthralled with his performances on television but nobody actually has a freaking clue what he's up against at his actual job. Seems totally ridiculous to start calling for his head now. You'd maybe want to wait for the 6 month job evaluation
And only a fellow Philly sports fan like Bowers would put Geitner on the chopping block after just 60 days on the job. Just like we should have benched Ryan Howard after his slow start last year or dumped Donnovan McNabb for Kevin Kolb after we lost to the Bengals.
@ Bill Conroy
Submitted on March 18th, 2009 by Laura M. PoyneerOr perhaps the copywriters at AIG are merely working to develop their talents in fiction writing. This seems a particularly fine example of the form, worthy of admiration!
Al, thanks again for providing an oasis of sanity and reason.
Outrage at what?
Submitted on March 18th, 2009 by Kimo (not verified)The US government owns 80% of the firm. But they choose not to exercise control. If anyone is really outraged over the payments, tell Treasury to take control. It would make more sense than passing a law to tax the payments at 98%.
Put them in to receivership, sit down with every trade and see who we want to bail out and who we don't. Not all of the exposure is "systemically" linked to global financial meltdown. But we will never learn that as long as current AIG execs run the place.
Please cross post this at dailykos..
Submitted on March 18th, 2009 by Priscilla (not verified)They could use some calming down..
Really.
Submitted on March 18th, 2009 by Lisa in Oregon (not verified)Stewart and Colbert kinda spoofed this. Scapegoating and distraction.
Shock and possible awe (or at least revulsion)
Submitted on March 18th, 2009 by Roy MartinAl --
I'm usually right with you. But on this issue I think the Administration underestimated the intensity of the feelings this would unleash. Obama's focused on the big picture, but most people get caught up in anecdotes. That's why one story about a suffering puppy generates more emotion than a "shock and awe" campaign reigning down terror from the skis.
Rightly or wrongly, people are outraged. Rightly or wrongly, this needs to be addressed. Rightly or wrongly, Obama needs to get out in front or risk seeing his approval numbers slip substantially. I would be neither shocked nor awed if, at the end of the day, Geitner was forced to fall on his sword over this.
geithner, scapegoat du jour
Submitted on March 18th, 2009 by iheartzushi (not verified)Interesting take on why Timothy Geithner is having a rough time. Seems like he & Summers have made enemies in the White House:
http://www.prospect.org/csnc/blogs/ezraklein_archive?month=03&year=2009&...
http://www.prospect.org/csnc/blogs/ezraklein_archive?month=03&year=2009&...
Obama MUST
Submitted on March 18th, 2009 by D.Quayle (not verified)Obama must IMMEDIATELY fire Geithner, Summers and anyone else with any Wall Street experience, to be replaced by Joe the plumber, chain all AIG employees to their desks in orange jumpsuits until they have worked off their debts to society, then force all remaining CEOs to lick the boot of 20 proles per day.
Anything less would be a SLAP IN THE FACE to Hillary.
Outrage is real, Obama response isn't
Submitted on March 18th, 2009 by Nell (not verified)I agree that the _particular_ issue of AIG retention bonuses has an element of manufactured distraction: public unease and anger has been looking for a target, and this fits.
But, as it happens, the particular case raises a lot of the issues that made many of us deeply skeptical of the bailout in the first place: the egregious role of AIG's Financial Products division in the meltdown, the more than a whiff of indications that AIG insiders knew more than a year ago that fraud was involved and that the collapse was coming (the auditor who resigned when Cassano wouldn't let him look at the FP books being one canary in the coal mine), the inter-relationships among AIG counterparties (notably Goldman Sachs) and Paulson's bailout "plan" (the three-page stickup note saying 'give us the money with no questions asked or else'), Tim Geithner's having been involved in the TARP and therefore familiar with the AIG bonuses long since, the payment to the biggest AIG counterparties of 100% on the dollar rather than current market rates, and most fundamentally: the shifting stories, incoherence, and lack of transparency about what the taxpayer dollars and Fed transfers are really supposed to accomplish and how.
The continuing downward slide of jobs and housing prices and retirement funds has created plenty of real anger, and this particular issue focused it for a lot of people who didn't wait for the media to tell them to be outraged. That's not incompatible with the corporate media seizing on and whipping up the outrage further.
But however unproductive you and White House players might feel that focus on these bonuses is, nothing excuses the Obama team's Bush-like campaign to get us not to believe our lying eyes and blame _Sen. Chris Dodd_ for TARP provisions supposedly requiring that the AIG retention bonuses be paid. Jane Hamsher has performed a public service in comparing the factual record with the smears being pushed by cowardly anonymous sources in the administration (which the NYTimes is aiding and abetting by granting anonymity).
That kind of unnecessary, underhanded, and deceitful attack on an ally tends to make even sympathetic observers wonder what the attackers have to hide.
But then, since you've quit bothering with Hamsher's "predictable screeds", you'd be blissfully unaware of this kind of behavior on the part of the administration you support so strongly.
outrage
Submitted on March 18th, 2009 by Munira (not verified)Thank you, Al. I knew I could count on you to say something sensible. I have to say my biggest disappointment is in the liberal blogs - huffpost, tpm, kos. I guess I expected them to be the voices of intelligent analysis, but I find that they are just as subject to groupthink as the rest of the media. Fortunately, their impact isn't as big as they think it is. So now Geithner's the scapegoat and once again, the bloggers think it's their duty to instruct President Obama on how to do his job. This same scenario has been played out over and over - throughout the campaign and the first days of this administration. Fortunately, Obama has always been one or more steps ahead of the bloggers and the media in general, and I'm sure this time is no exception. He'll deal with it, and we can help by keeping our heads. And people like you, Al, and Nate Silver help a lot by providing islands of sanity.
Rush Limbaugh
Submitted on March 18th, 2009 by D.Quayle (not verified)I hear corporate-sponsored Rush Limbaugh defended the bonuses on his show yesterday.
Al, why must you side with Rush on this issue? I'm OUTRAGED.
I can haz MSM job nao?
Distraction
Submitted on March 18th, 2009 by IVA (not verified)Thanks for the calm in the storm, Al. Eventually, this will pass. Obama will lose support, but hopefully ultimately he'll be judged by results, not optics.
@Roy: I couldn't disagree more with Geithner falling on his sword for this. This is not a game. Obama is our president. He cannot give in to the mob mentality. He's got to take this hit, along with Geithner and keep on going. If Geithner leaves, we.have.no.Treasury.Secretary. Do people understand that? This is not a position with people lining out the door hoping to fill. They can't even get a Dep. Sec. The knowledge needed, the "clean" background the person has to have...we will be beyond screwed if Obama has to start from scratch because Geithner didn't nix the bonuses.
cnn is reporting that Geithner is withholding the amount of the bonuses from the next installment of assistance. Additionally, the Treasury has entered into a contract with AIG for AIG to pay that money back - which means a double payment in essence. For whatever reason the head of AIG believes he needs to keep those execs to unwind things because they created the programs and algorythms that were used in these confusing practices.
Obama's in Cali doing 2 townhalls on his budget. He's doing Leno, 60 minutes, and a spot on ESPN, as well as Ed Schultz on Thursday. This is an unbelievable distraction.
Taking advantage
Submitted on March 18th, 2009 by Joel WiensI agree that there is no political "win" in this scenario in the cards for the Administration. This seems more like a "gothcha!" moment for the media and especially the George Wills of the world. "The Administration should have anticipated this!!" and "The Administration has a tin ear!!" are all examples of taking advantage of not being in the position of having to actually make any decisions, which Al has nailed by calling them armchair quarterbacks. No one has a very satisfying answer about what we should do with these credit agencies. No one is comfortable with telling them to just go F*$# themselves, and no one is sure how to control them without making them worse at what they were doing then when they were just pursuing profit. So now is everyone's big chance to project their own impotence and point fingers at the guys who actually have the job of doing something. Forgetting, of course, that if you think you have a better idea -- give it a try!
Oh, please post this on DK.
Submitted on March 18th, 2009 by Travis (not verified)Firstly, because many many people there should read this.
Second, while some may take heed and calm down, many there will get outraged at your lack of outrage.
Hilarity ensues...
the outrage du jour
Submitted on March 18th, 2009 by Jeff LarsonThe MSM needs a show to drive listeners to their shows and papers. The bloggers need to meet the deadlines and drive the click count. The politicians (both Rep. and Dem.) need a big splash like this circus to cover their role in the financial crisis. The last thing they want is the nation having a more rational discourse about the causes of the crisis and congress's lack of oversight at the time. (A number of consumer advocacy groups were approaching congress as early as 2001 about abuses in the mortgage market. They didn't get much listened to since Fannie Mae, Freddie Mac and a host of lenders and banks were some of the biggest campaign contributers to congress.) The Republicans need another log of emotion to throw into their manufactured resentment of Obama and his supporters.
@Lisa in Oregon, thanks for the tip. It looks like Stewart and Colbert are going to continue to be part of my regular viewing.
Off with his head!
Submitted on March 18th, 2009 by Mark T (not verified)So, looking at Bowers, et al, it appears that despite the fact that it was widely believed that the entire world's financial system was in imminent danger of collapse last september, that Geithner, while moving dramatically in an emergency situation at the Fed to channel funds to avoid a such collapse, didn't stop and think thru the all the myriad implications involved in considering that one of the reciepients might show the incrediably poor political judgement to piss away a percent or two of those funds. Somehow this translates into gross incompetence on Geithner's part in their book.
This is equivilant of getting outraged at the heart surgeon who just saved your life in the emergency room because he embedded the price of a nice dinner he went out and had after the surgery to your bill.
I've been having a running discussion on Facebook with several of conservative friends of mine over this topic, and the 'mock outrage' portion of this episode is the one thing we all agree on.
@Roy Martin
Submitted on March 18th, 2009 by Kat (not verified)I'd be very surprised if Geithner resigns over this. President Obama's hallmark has been a refusal to dance to the tune of the chorus of the day ("Obama has to pick Hillary as VP or the Democratic Party will be irrevocably split! Obama has to suspend his campaign like McCain has or it will look like he is putting politics above the economy!)
Al, I'm mostly in agreement
Submitted on March 18th, 2009 by KJ Farrington (not verified)Al, I'm mostly in agreement with your post, but I don't we should underestimate the anger and frustration many Americans feel. Bailouts, TARP, bonuses, congressional hearings- we're seeing billions go out the door and not much coming to the actual taxpayer. We're seeing corporate fiends conducting themselves as if they are above any and all ethical consideration. We're seeing the full corrosion of our monetary policy, which has been allowed to run through Wall Street for decades. I do believe there is a justification for this outrage. I might add, that much of this anger is because Obama came to town promising all the change one could hope for, and he's beginning to look as though the financial industry may have its way with him as they please.
The real story is not AIG's Financial Products Division's bonusing, but rather AIG's relationship with other financial players. Elliot Spitzer has it figured out: http://www.businessinsider.com/eliot-spitzer-the-real-aig-scandal-isnt-t...
FWIW
Submitted on March 18th, 2009 by Ernest LeI've read a few blog posts by lawyers who dug into the language of the AIG contracts, and it seems that Geithner and Obama were stuck. The AIG contracts provided that these executives would receive bonuses of no less than what they got last year. Obviously, this is a gross distortion of what the use of bonus compensation, but that's the contracts were written. If there was a time to do anything about these bonuses, it was back when the government first agreed to the bailout -- i.e. during the Bush Administration.
Larry Summers' explanation that refusing to pay those bonuses would instigate lawsuits is irritating (especially when he started lecturing us that "we are a nation of laws"), but he is factually correct, according to the lawyers who read these contracts. When the executives at the Financial Products Division don't get their bonuses, you can bet they'll sue. What do you expect them to do? Understand that they f'ed up and should be grateful they still have a job at all? Even if AIG and the government win their lawsuit, the legal fees would be enormous and the headache simply wouldn't be worth it.
Also, these executives are in Britain, so Congress can't recover the money by taxing those bonuses.
I'm mad about this. But after all the shenanigans at Merrill Lynch, I don't think anybody who has been paying attention in the past few months can claim to be surprised. Al didn't use the term "Chicken Little," but I will. There are a lot of people saying that Obama will lose a lot of credibility and political capital over this, and I just don't see it. This is on AIG and Henry Paulson, if anybody. Give it a week and we will be talking about something else -- hopefully something that actually matters and will make a difference to most of us.
What's the cliche?
Submitted on March 18th, 2009 by Bluesteel (not verified)If you're not outraged, you're not paying attention?
Throughout the various disasters of the previous administration, most people weren't paying attention. Now that Obama's in office, even more people have tuned out.
Finally, some sense
Submitted on March 18th, 2009 by David Flower (not verified)Al, thank you for once again hitting the nail on the head and providing some sorely lacking perspective.Even normally sane people like Josh Marshall have gone off the deep end on this, and now I can't look at Open Left even for the train wreck entertainment value it sometimes brings.
Are the AIG bonuses wrong? Yes. Are they, in the context of everything else that is happening and that the administration is working on worth one tenth the level of hysteria that's been spent? Not even close. The worst thing about this matter is that it is distracting from the real work that should be (and, I trust, is) going on, and leading folks down a rabbit hole that isn't worth that distraction right now. I can't imagine what folks think the administration can even do. Barney Frank, and others, saying "we own the company, we tell them what to do?" Even if this is true (which I don't think is the case) -- how?? When and how do owners of public companies tell management what to do, other than vote out the board of directors at the next chance? Others say retroactively tax the bonuses. Nice idea, but it's probably unconstitutional (a little problem in the constitution called the prohibition against bills of attainder - that is, retroactive, targeted legislation to deprive particular people of a right - and yes, if their contracts called for "bonus" comp such as they received, then they have a right to it, no matter how distasteful that is to the public at large).
Yes, let's be disgusted by this, and scorn the folks who wrecked AIG and are now making out (truly) like bandits. They are the worst example of the ridiculous and distortive effects of outlandish executive compensation in the United States, and so let's do something about that problem -- as Obama has talked about for a long time. But let's not spend stupid amounts of energy and outrage on this example and cast about for "solutions" that either don't exist or that aren't, in the scheme of things, worth having us take our eyes off the more important and dangerous problems we're dealing with.
channel the outrage
Submitted on March 18th, 2009 by Jay (not verified)I can't help but think that those who are indeed outraged over these bonuses are used to thinking that all's fine with our economy and government, and that only now are they experiencing a disconnect between current events and their internal sense of what's right.
Perhaps a few of the outraged will think and read more, and learn that this is indeed all smoke and mirrors -- that the truly outrageous things are bigger, and more fundamental, and will have to be picked apart over years or even decades.
Demand for Meaningful Change Threatens Meaningful Change
Submitted on March 18th, 2009 by Roy MartinI don't think that's true. Congress had authorized Treasury to make rules regarding compensation that would have trumped contracts that predated the bailout. Geithner, for whatever reason, didn't think it important to do so. Obama, for whatever reason, had his focus elsewhere as well.
This is the kind of story that could have real consequences for Obama's popularity and agenda. What's interesting is that it was pushed, initially, not by conservatives but by liberals -- revealing the depth of feeling across the political spectrum. Here's Nate Silver's take on same: http://www.fivethirtyeight.com/2009/03/aig-how-meme-spreads.html
For what it's worth, Silver is one of the few who thinks this whole thing is overblown, so he's not pushing the hype.
For me, this is the bottom line: People are tired of corruption. They voted for change and, on this issue, they're mad. I agree with those who have said the biggest risk for Obama is not in attempting to accomplish too much but rather his instinct for caution, which could cause him to look like more of the same to those who don't pay close attention. Clearly, the Administration has a very ambitious agenda. A real reform agenda, the kind we've waited a lont time to see.
I do not want to see it undermined by the Administration's blind spots around these bailout dynamics.
The last straw
Submitted on March 18th, 2009 by Jim (not verified)As far as I'm concerned, the "outrage" and calls to fire Geithner are the last straw for me, meaning I can no longer even read OpenLeft. These guys want to be taken seriously, but their approach is almost always so infantile and simplistic that their credibility is (or should be zero).
Only thing I'll add is that I doubt the proposals to tax the bonuses out of existence are even legal. And I suspect that the proponents of such legislation know this, and could care less. Wasting time on ineffectuall legislation is the real "outrage."
@ Roy Martin
Submitted on March 18th, 2009 by Al GiordanoRoy - Where is this supposed "intensity of the feelings this would unleash" that you state as if it were a fact?
What is the evidence of it?
Spontaneous demonstrations? Wildcat strikes? Yellow ribbons?
All I've seen is the corporate media and some of the bloggers that supported Senators Clinton and Edwards during the presidential primaries claim that it's there, without offering any evidence.
Show me the evidence. Otherwise, we'd just be swallowing another version of "manufactured outrage" being fed to us by companies that, too, overpay their executives and abuse their workers.
@ Nell
Submitted on March 18th, 2009 by Al GiordanoNell - You write about a "kind of unnecessary, underhanded, and deceitful attack on an ally (that) tends to make even sympathetic observers wonder what the attackers have to hide." That describes Hamsher to a tee: her behavior during the presidential primaries, during the Caroline Kennedy senate story and at other points including now has been to do exactly that: wage "unnecessary, underhanded and deceitful attacks" on people who are out there fighting and winning the battles that she claims to be fighting as well.
Your eagerness to buy the spin that somehow the White House is throwing Chris Dodd under the bus doesn't cause me to think you're analyzing this clearly. You write that "a lot of us" felt deeply skeptical about the bailout itself and basically admit that your egos and narratives are now caught up in proving yourselves to have been correct. The same goes for the "don't hire Geithner" crowd (yes, there's considerable overlap in those two grouposcules); unless and until the president dumps the Treasury Secretary, you folks will carry a grudge that began before he was even confirmed by the Senate. You seem to have not thought through at all the important question of "If AIG falls, who does it fall on?" The answer is the workers and the poor, and those in the middle class who will become jobless and poor as a result of a tidal ripple effect.
Moodys, S&P=Outrage
Submitted on March 18th, 2009 by Suzy ShureSeems to me there wasn't/isn't enough 'outrage' about Moodys and S&P 'rating' worthless 'securities' AAA and being paid for doing that by the very institutions planning to 'sell' them. AIG creates something that still isn't called (or regulated) as 'insurance' - and makes a fortune on more worthless paper. What's happening to all those folks??? Every time I see a guy from Moodys on television as a spokesperson, I wonder what his salary is?
Thanks to Bill Conroy for reminding us of Swift and A Modest Proposal. Be hard to use satire to describe this, the 'reality' feels like satire to begin with!!!!
Thanks again & again Al, for more good sense.
what outrages me
Submitted on March 18th, 2009 by siddhartha (not verified)is watching my students working forty hours a week with a full course load getting shafted on student loans
is listening to my students talking about going hungry or buying books, or going home to "steal" food from mom's refrigerator to get through the month
is watching many who are the first in their family to go to college drown in debt before they turn 21
is knowing that for some college is not an entitlement but something that is possible only if one first puts oneself in a situation where one can be killed (as in joining the armed services to perpetuate imperialism, a policy not of one's choosing) for an ordinary dream like becoming a middle-school teacher
is listening to some of my African-American male students wondering if this will be the day they die if they happen to be standing at a bus stop at night in the "wrong" part of town and a police car goes by (one such student served his country honorably in the marines and goes hungry often)
a pity our national political and media stage functions like a tawdry talk show that spectacularizes only one aspect of what is ordinary and normative not exceptional wretchedness and exploitation
Proof
Submitted on March 18th, 2009 by Roy MartinAl --
I don't have proof. The polling hasn't been done yet. But the issue itself is clearly incendiary. Million dollar bonuses for Wall Street professionals? The very same ones who manipulated the markets? I don't think it wrong to express concerns in this regard. You can call it chicken littling, but I think it prudent concern for the White House's failure to read the public mood on this issue, to see their potential vulnerability, the way this could outrage the public and be exploited by its enemies.
I think it's clear that the public is not enamoured of the bailout itself, though Obama has remained popular. Polls have so far been pretty consistent along those lines. My hope is this does not damage the President. But as much outrage as there is over the bailout itself, and given that this touches on the least justifiable aspects of the bailout (its patent unfairness), I think it stands to reason that this could seriously undermine public support for, and confidence in, Obama.
Not all manufactured outrage: Issues raised by AIG bonuses
Submitted on March 18th, 2009 by Nell (not verified)@Al:
As the comments here demonstrate, I'm far from alone in being uneasy about the bailout. My ego isn't caught up in proving anything one way or the other about it; you yourself seem concerned, as I am, about the 100% face-value payments to AIG counterparties vs. paying discounted or current market value -- which involves many times the amount of money involved in the bonuses.
I haven't called for Geithner's resignation or firing. I was responding to your over-the-top characterization of Krugman, Hamsher, Sirota, and other netroots bloggers. While I've had my disagreements with every blogger named, I think it's possible to have the disagreements without becoming unpleasant about it.
You and I differ in our interpretations of the recent NY Times article quoting an anonymous administration official defending the bonuses being paid by saying "The official noted that even a provision recently pushed through Congress by Senator Christopher J. Dodd, a Connecticut Democrat, had an exemption for such bonus agreements already in place," without noting that the exemption was included at the insistence of Geithner and the Obama administration, over Dodd's opposition. To me, that's an effort to displace the blame onto Dodd. To you, I'm eager to buy into hostile "spin".
I note that the Times has corrected their most recent story to reflect that it was not Dodd's idea to exempt existing bonuses. I doubt that would have happened without Hamsher's, Glenn Greenwald's, and Media Matters' posts.
My opposition to the bailout in the fall was on the merits, and had nothing to do with electoral considerations. The sound principles candidate Obama articulated at the time have not been sufficiently embodied in corresponding legislation and regulatory requirements, in part due to opposition by Obama's own appointees, in part due to insufficient political will in Congress. Individual contributions to Obama's campaign were at historic levels, but they haven't erased the influence of his top bundlers, who were from Goldman and other Wall Street shops. The FIRE sector also has more influence on Congress than working people, by a long shot.
I want this administration to succeed, and am supporting its efforts enthusiastically when I can. When I can't, I usually just sit quietly. When I believe they're going in the wrong direction, as on much of the policy and legal work on detention and accountability-for-torture issues, I say so.
The completely-with-us-or-completely-against-us approach you're taking here is unwise. Working and voting for Obama didn't sign me up to agree with you on who would be the best Senator from New York. It shouldn't make me or any bloggers who take issue with something Obama's doing an enemy. I'm not new to politics. I've worked long stints as a Latin American solidarity activist, paid and unpaid Democratic electoral staff, and have knocked on literally tens of thousands of doors. We've got more in common than we have differences. Relax, and don't be so quick to pour vitriol on critical allies.
Not *my* allies
Submitted on March 18th, 2009 by Al GiordanoNell - My point - and this isn't the first time I've made it - is that I don't consider myself to be allied in any way, shape or form with Hamsher or Sirota or Krugman. I would never collaborate with people like that on any project. If we happen to agree on specific points from time to time, that's an accident, not because our philosophies are compatible, which they are not.
Got it? You may consider them to be your "critical allies," but they are not mine, and I doubt that they ever will be. I have the right, just like anybody else, to free association, and that includes the right to disassociate myself from those who claim to be on my side of the barricades while they, time and time again, use the very vitriol to a much higher and more shrill degree that you seem to complain about me using here.
Finally, my point regarding Hamsher on Caroline Kennedy was not that she didn't have the same opinion as I did (I get along splendidly with Kos, for example, who had an opposite opinion to mine) but in the way that she invented falsehoods and called them fact (specifically, the selective guilt-by-association between Kennedy and Lieberman because her consulting firm had once represented him even as Kennedy donated to his opponent - that was dishonest on Hamsher's part) and the willful attempt to tear her down because she is a Kennedy (i.e. expressions like "princess" and "doing her nails" and "oh, she didn't get her christmas pony") and thus attempt to tear down the single most important progressive force in Democratic Party politics of recent decades. And you're telling me that I'm somehow "allied" with that piece of vomit? No thank you.
A few thoughts
Submitted on March 18th, 2009 by ikl (not verified)A terrific and much needed post. Unfortunately many progressive folks seem to be taking their eyes off of the ball on this one.
I think that your gratuitous swipe at Prof. Macey and the Washington Post was pretty ill informed though. Did you actually read the chat? Macey is an expert on Corporate Law, not just some guy with fancy degrees blathering on about things that he has no understanding of. Instead, I think that the Post (of which I have not been a big fan of recently) should be commended for giving a platform to someone with relevant knowledge base and interesting ideas rather than an outrage mongering ignoramus. Macey is pretty critical of the policies that lead to the AIG fiasco and suggests that (a) the government should never have allowed AIG to be too big to fail, (b) given that it did fail, it should have been allowed to go into bankruptcy where shareholder value would have been wiped out and bankruptcy judges could modify the contracts.
I doubt that you would agree with everything that Macey writes, but there is certainly food for thought there. The fact that he thinks that the Obama administration is making a big mistake concerns me (unlike the opinions of the outrage of the day crowd).
A taste: "To me the most obvious question that the media is missing is this: "what services precisely were these executives performing that made AIG want to pay them so much to retain them?" Everybody assumes that the payments reflect some sort of cronyism.. this is not true. The payments are made to people who are talented at doing certain very sophisticated, complicated tasks that are highly undesirable from a societal point of view."
Magical Thinking
Submitted on March 18th, 2009 by Paul (not verified)Al -
I can't say that I've followed your writings especially closely, although I did read and agree with many of your thoughts during the campaign. But I can't help but be completely put off by some of the "magical thinking" going on in this post and the comments. What, exactly, makes Tim Geithner so indispensable? I *do* think he should be fired, mostly because he should never have been hired in the first place. Geithner has done nothing to indicate that he understands the actual structural flaws in the economy (we don't make anything) - everything he's done has been designed to maintain the status quo (to "get credit flowing"). The status quo *is* the problem. He, Summers, Rubin, etc. have done everything in their power to create the situation we find ourselves in, because they think it's the way things should be.
Take AIG (please!): how, exactly, would AIG's failure hurt the poor and working class? People without insurance aren't going to get any less insurance. Wal-mart isn't going to rescind their employee bonuses. People who didn't gorge themselves on magical pieces of paper that "insure" against losses won't bear the brunt of AIG's collapse. None of which is to say AIG's failure doesn't have any effect; it would, of course. But wouldn't we be better off (morally and economically) helping the innocent people hurt by AIG than continuing to pour hundreds of billions of dollars into AIG so that they won't hurt anyone?
I wholeheartedly agree with your comments about the media manufacturing outrage, but just because every tree is a plant doesn't mean every plant is a tree. Would you continue to hire an accountant who was skimming "only" 10% off the top? Would you forgive your boss because he only short-changed your hours a little bit?
There is outrage about the entire meltdown, and AIG (like Jim Cramer) has given people something to focus on.
News cycles suck
Submitted on March 18th, 2009 by nepat (not verified)This is a news cycle packaged as "outrage." We'll be onto something new next week. Maybe we'll discover that Octomom actually works at AIG. Or that Meghan McCain hooked up with Ron Paul. Something new will come along and the "outraged" will move right along with it.
Proof
Submitted on March 18th, 2009 by Roy MartinThis from Dailykos on the latest Gallup tracking poll:
http://www.dailykos.com/story/2009/3/18/710212/-Gallup:-Government-Has-M...
Here's the heart of it:
@Roy Martin
Submitted on March 18th, 2009 by Elliot KaufmanSo people say that they are "outraged" right now, the question to ask is not whether or not people are upset right now over this, the question to ask is whether or not it will last and whether or not Geithner and, by association, Obama will be held responsible for it. I think you forget that this is a 24/7 news culture we having going right now, and the chances are pretty damn good that by nex week this "outrage" will be forgotten and a brand new "outrage" will pop up and then they'll be demands for Rahm Emanuel to resign because he flipped someone off with what remains of his middle finger or something.
"The great enemy of the truth is very often not the lie, deliberate, contrived and dishonest, but the myth, persistent, persuasive and unrealistic.” JFK
@ Paul - The "Magical Thinking" Is Yours
Submitted on March 18th, 2009 by Al GiordanoPaul - Yes, there is "magical thinking" going on... but from those who like to use that term when they propose dumping the Treasury Secretary without having considered the unintended consequences:
1. Chaos in the senate confirmation process for the replacement nominee: Holds, delays, vicious and hostile hearings... the GOP will smell blood and circle the waters. They will have every motive to do so and will be emboldened to do it much more so than they have been on any other nominee. It will make Hilda Solis' confirmation look like a waltz through the park. In the end, what you'll get is a new Treasury secretary more acceptable to them, and less acceptable to you.
2. Undersecretary nominations will stall with it: The Senate won't even consider confirming the assistant secretaries of Treasury until there is a secretary. Thus, the vital and urgent work of that department will stall, further delaying economic recovery.
3. The economic recovery will crash and have to be started from scratch again, losing months in the process: That will push it back past the November 2010 elections, meaning...
4. Republicans will make huge gains in the 2010 midterm Congressional elections: See Gingrich, Newt, and the Contract For America, 1994, if you are at all confused about what will happen if the economy doesn't begin to rebound measurably by then.
5. The chaos will further wreck the economy: Consumer confidence, credit circulation, investment... all of it will go backwards, not forwards, during the many months of greater uncertainty created by dumping a Treasury Secretary that did nothing wrong and so many things right.
If you haven't already thought those consequences through, who is doing the "magical thinking?"
@ Roy
Submitted on March 18th, 2009 by Laura M. PoyneerIn opinion polls, people often give the answer they think they should, or that is considered the most socially acceptable.
What would be actual evidence of the kind of "outrage" that is being claimed is how ordinary people around you talk. Do they bring up the issue a lot and express anger at Obama and Geithner? Or are they, like Al and many of us, not surprised even though it is upsetting.
No one I know is actually outraged in that sense. My Republican mom, who voted for McCain, does not blame Obama, but thinks it is a situation not of his making and that there is not a lot that can be done because of the contracts.
My non-political friends do not talk about it at all, as they have more important things to worry about.
Or look at the town hall Obama did in California. Did people keep asking him questions about AIG after he spoke on it? Did they ask him to fire Geithner? Or were they more concerned about things like foreclosures, layoffs, and how they are going to pay their bills this month?
Surprising
Submitted on March 18th, 2009 by Elie (not verified)--how unable our country is to be led -- to understand how complex things are done and undertaken. What building a complex policy looks like -- patience -- do we have any of that? Discipline? Understanding cost benefit? Inability to tolerate ambiguity or uncertainty for any time longer than ten minutes...
I am mightily disappointed in the left/progressives...
While I am not a Geithner/Summers cheerleader -- it seems unbelievable to me that after a couple of months on a crisis of huge proportions with many risks and international impacts, we are picking apart the only two guys probably who should be in the hot seat/s - two people with very specific technical and policy knowledge of the world as it is -- not what we would dream it to be.
Did people actually think that some pristine, ethically pure, virgin economist with no hint of knowing any of these cast of characters and with solid left economic credentials could actually haul this wagon? Where is common sense these days?
I have no idea how this will all turn out, but I know that Obama is no fool and I have to trust that he has the brains, courage and intestinal fortitude to do the right thing as best as anyone can determine.
I have no idea what to think about these folks out here calling themselves liberals and progressives but who betray the same short sighted, rigid and unbelievably shallow, hyperemotional reactions that we accused the right wing of having...I guess it rubbed off...
The Sorcerer's Apprentice
Submitted on March 18th, 2009 by Paul (not verified)Al -
Certainly, I don't think any of the issues you raise are inconsequential ... but neither would be the reaction to dumping Geithner. Do you honestly believe the Republicans would, or could, hold up a new Treasury nominee? Even Snowe, Collins and Specter? With Obama forcefully making the case for a new Secretary?
I don't agree with the idea that the economy won't continue to crash with Geithner, or that it can't be turned around without him. He has thus far proposed one big idea: give public dollars away to prop up the financial system. This amounts to trading real money (Treasury bills) for fake (falsely created/rated securities, CDS, etc.). This cannot and will not fix any problems.
I believe the chaos you predict is 1) already here and 2) not mitigated by Geithner's actions. Nothing he has done has worked. Letting Lehman fail *created* chaos. Bailing out AIG hasn't solved anything, and has only postponed a confrontation with the reality of our Big Banks' insolvency. And yet the same proposals keep being made.
I think Obama could turn this around, but not if he's listening to Summers and Geithner. Their mojo hasn't worked, and they certainly don't understand the realities of the poor and working class - as you put it, "never used either [torches and pitchforks] as work tools with their own hands". We've struck the iceberg and Geithner, our head engineer, thinks if we can just contain the leak we can get back on course. The faster we toss an engineer who isn't facing reality and fixing things, the faster we can find one who will.
My magical thinking would go something like this: Obama announces he realizes that the approaches we've been trying aren't working. The scope of the problem has expanded, and thus changed, and the solutions provided by a valiant Mr. Geithner have been insufficient. The DOJ enters the mix in order to uncover and prosecute possibly extensive fraud. Obama then proposes bringing in Robert Reich, or another reasonably liberal nominee. Contentious confirmation hearings would be welcomed as an arena for not only presenting a new path towards a more worker-friendly and sustainable economy (hey kids, ask your grandparents what a raise is), but to smack around Republicans when they inevitably spout nonsense. Then we fix the economy and we enter a new Golden Age.
Obviously none of the problems we face are easy to fix. But we shouldn't waste valuable time and effort continuing losing strategies, as the only result will be to have wasted that time and effort. We need a Treasury Secretary (and President) who are honest and forthright about the problems we face, and willing to do whatever it takes to fix them.
Paul, you illustrate my post precisely...
Submitted on March 19th, 2009 by Elie (not verified)Really, what else can be said...
"The DOJ enters the mix in order to uncover and prosecute possibly extensive fraud. Obama then proposes bringing in Robert Reich, or another reasonably liberal nominee. Contentious confirmation hearings would be welcomed as an arena for not only presenting a new path towards a more worker-friendly and sustainable economy (hey kids, ask your grandparents what a raise is), but to smack around Republicans when they inevitably spout nonsense. Then we fix the economy and we enter a new Golden Age."
The fix is:
1. Prosecute fraud
2. Contentious confirmation hearings are a path to a worker friendly sustainable economy
3. Smack around Republicans
4. Magically end up with economy fixed and enter new "Golden Age"
And this is better than what we have now.
Oh my.
There is always a method to
Submitted on March 19th, 2009 by Lily (not verified)There is always a method to the media's madness. This "outrage" is all a cycle. This week its shouting at Obama to be rid of Geitner after working less than two months. Next week they'll be a lull, then they'll be some new nonsense the week after that. This is the sky is falling, everything including that asteroid that almost hit us is Obama fault week. Nobody will remember this a year from now. I remember the tempest in a teacup over Blago. This tomfoolery will be over soon.
@ Paul - Your "Magical Thinking" Again!
Submitted on March 19th, 2009 by Al GiordanoPaul - What is this? Comedy?
If you think that the wonderful Robert Reich is going to be nominated (or if nominated, confirmed by the Senate) if Geithner suddenly isn't there, that's more "magical thinking" and deluded fantasy than anything said in any comment on this thread.
I'll stick with the reality on this planet, thank you very much!
Outraged at what? The wholething, not just the executive bonuses
Submitted on March 19th, 2009 by Krishna Kumar (not verified)Teaching managerial economics at ASU-West I said in January 2000 that the IT hype would result in a bursting of the IT stock bubble, which did happen in April 2000. This was based on economic fundamentals. Ponzi schemes are well known over several decades since the twenties when Ponzi had his scheme. This is a scheme where some one promises a much higher return than what the market fundamentals can support, attarcts a lot of deposits, fulfills the commitment of high returns from high subscriptions to the scheme, then after some time the subscriptions taper-off and the fundamentals operate and the guy defaults on his payments.
There is little difference between a Ponzi scheme and several recently-introduced financial instruments such as insurance swaps, home mortgage bonds, derivatives, etc. While the financial institutions, and hedge fund operators were engaging in tarding with more and more risky instruments, in self-interest and in a greed to make short term profits, what are the intellectuals doing? Did any one attempt to compare the fundamentals with the financial returns? What were the regulators doing? Every one should read an old economic classic-Keynes General Theory, Chapter 12, dealing with long term expectations which talks about the greed, competition, and deviation of short term return from the long term fundamentals, inflationary expectations etc.
In my opinion this is a failure of capitalism as it is practiced where the capitalists, in their self-interest and in pursuit of their greed, even prevent the regulators from regulating the institutions created under capitalism. The people who rejoiced breakdown of communism in Russia in 1989 must now should worry if it can resurface with such breakdowns of capitalism as it is practiced, unrestrained and unregulated.
In my mind, the way you test
Submitted on March 19th, 2009 by Derek (not verified)In my mind, the way you test "outrage" is if the AIG thing would be the first or 2nd thing a normal person would ask the president about if they got the chance to talk to him about his agenda. I don't even think it's the 10th.
Gail Collins nails it
Submitted on March 19th, 2009 by Jim (not verified)Collins has a pretty hysterical column up today, nailing the whole world for their anger.
http://www.nytimes.com/2009/03/19/opinion/19collins.html?_r=1&ref=opinion
She is my favorite NYT columnist (right after Frank Rich).