So AIG paid some bonuses while they were taking billions of dollars in government money to avoid bankruptcy. Wow.
Like about a gazillion other people, I am pissed off about this, but not too pissed off; in the grand scheme of things, this doesn't surprise me that much or bother me much more. $165 million is not that much money compared to what we're spending to keep AIG afloat, and I think I am just not that surprised any more at the sheer stupidity and greed of people on Wall Street. I'm saving my anger.
What I am surprised at is the stupidity of whoever wrote these contracts. I can understand incentives in a contract: make X amount of money, and we will pay you Y bonus. I have no problem with that. But apparently these people wrote contracts that promised payment of bonuses even when they clearly DID NOT make X amount of money. They must have written contracts that did not take into account the fundamental ability of the company to actually pay the money promised by the contract.
AIG does not have $165 million to kick around. We have lent them tens of billions of dollars. They will make the argument that if they don't pay people, they'll leave. Fine. Let them leave. Then hire someone else and give them incentives to clean up the mess. Right now there are lots of unemployed investment bankers out there. I have no problem incentivizing people to clean up a mess. I have real problems with paying people for failure.
One ancillary question running through this debate has been: can we get the money back? How about taxing the bastards? Megan McArdle asked Laurence Tribe about the technicalities involved in that. I don't think it would be a good idea to target these people particularly. I think Obama is going to wait until the argument swings to whether or not we should raise the capital gains tax, or the top tax rate on the wealthy. He's going to have a fair amount of ammunition. The Republicans argue that the private sector is a better steward of money than the government. Right now, that is just laughable.