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March 18, 2009

Notes from Ferdy - Bailouts and Bonuses

by Ferdinand T Cat

Everybody's upset about the AIG bonuses.

The logic here is simple. AIG needed money to survive, and the American public doesn't want the money spent on frivolous things. The problem is that the bonuses are a consequence of contractual agreements set up long before the current crisis started. There is only one situation under which AIG's hapless CEO Edward Libby could have legally refused to make the payments: AIG going bankrupt. Therefore, when Senator Obama voted to authorize the AIG bailout, he was also authorizing the payment of the bonuses.

This is the problem with bailouts, and it's why conservatives oppose them. A bailout does not change anything about the situation that put the recipient in trouble in the first place. It is, in effect, an investment in the hope that business as usual will turn things around.

Expecting anything else is not just stupid, it's Illinois stupid.

Respectfully submitted,

Ferdinand T. Cat

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Ferd,

You sure are a smart cat!


Posted by: dean0 at March 19, 2009 12:59 PM

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