Broken Not Crushed life as a statement, not an apology

I wouldn’t want to be an AIG executive right now. With all the fuss over the $165 million in bonuses, they rank right alongside Josef Fritzl as the worst criminals society has to offer.

Between the “genuine outrage” of the Obama administration, Senator Frank’s call to fire the execs, the issuing subpoenas for the names of the employees who received bonuses, the calls by AIG CEO Liddy for execs to return the funds, and Senator Grassley suggesting that they should resign or commit suicide, it’s beyond debate that the company, since it took taxpayer dollars, should not have issued these obscene bonuses. Right?

Wrong.

This situation highlights why true democracy leads to mob rule, and why we are wise to avoid it. Armed with a few facts, the media (and the public) have already rendered their wise and well-reasoned verdict. One problem-in all this “righteous indignation” they’ve omitted a few relevant points:

First, there was no language in the bailout legislation to prevent this. Nothing. So what AIG did, whether smart or not, whether good PR or not, was NOT prohibited or even discouraged by the “bailout” package.

If this issue was so important, don’t you think Congress should have addressed it as it was being debated. (Do you remember now? It wasn’t really debated. Nor was it read, nor was it put on the internet – as promised – several days ahead of the vote to give people time to read and make known their opinion on it.)

Second, and FAR more important: there are only a few things that government SHOULD be doing, to ensure a truly free market, with healthy competition, in which voluntary exchange provides a system of checks and balances necessary to ward off abuse. Rule of law is the most important. Why don’t investors flock to Africa? Because they know that without rule of law, their investments may go up in smoke.

A key piece to that is enforcement of contracts. If you can’t have enforceable contracts, you can’t have property rights, you can’t have rule of law, and you can’t have a free and fair marketplace. Contracts have to be worth something more than the paper they’re written on. Look at Venezuela and the nationalization of the oil industry. So much for American investment there…the contracts turned out to be meaningless.

Contrast that reality with what our President, his administration, and his party are saying: “Despite the fact that these bonuses were part of the existing contracts, they should not have been paid. We should have ripped up the contract, and not given what these execs earned.”

The contract could have been renegotiated. It was not. Our President believes it should have simply been ignored. No matter how distasteful we may find these bonuses, do we really want to advocate for the non-enforcement of contracts? Is that REALLY where we want to go as a society? Do we really want a government that rips up contracts it deems inappropriate?

(In an interesting exchange, Senator Frank demanded that AIG hand over the names of the employees involved, despite threats to their personal safety, or risk a subpoena. Mr. Liddy indicated his desire to comply with the law. Wait a minute…if Senator Frank believes contracts don’t matter, and, by extension, the law is irrelevant, then on what authority is he making these demands?)

Third, in response to the calls for “heads to roll” at AIG: Do we really want the Federal Government to be involved in the hiring, firing and compensation decisions of a private enterprise?

Consider: if these officials could not oversee the distribution of a large sum of money, if they could not anticipate some contract and bonus issues, if they could not realize beforehand the necessity or renegotiating some of these contracts, what makes us think they are competent to run a company as large and challenging as AIG, while simultaneously attempting to run the country?

How can an administration, and a President, that vowed to go “line-by-line” through the budget, and yet let these bonuses go unchecked, be trusted to run any company? How have they earned that trust?

Has this administration considered just who WOULD run the company if the existing execs “bailed”? Without the bonuses, would they have remained at such a tough job? If they resigned (or are fired) en masse, what would happen to this company that is now 80% taxpayer owned? Who would run it? Shouldn’t the government, in the name of fiscal responsibility, be doing all it can to ensure that this company takes the steps needed to retain its best and brightest, to get it back on its feet as soon as possible?

Finally, in the blatant hypocrisy department:

In the last election cycle, though, 68 percent of contributions associated with the company went to Democrats. Two senators who chair committees charged with overseeing AIG and the insurance industry, Sen. Chris Dodd (D-Conn.) and Sen. Max Baucus (D-Mont.), are among the top recipients of AIG contributions. Baucus chairs the Senate Finance Committee and has collected more money from AIG in his congressional career than from any other company–$91,000. And with more than $280,000, AIG has been the fourth largest contributor to Dodd, who chairs the Senate’s banking committee. President Obama and his rival in last year’s election, Sen. John McCain (R-Ariz.), are also high on the list of top recipients.

Who’s demanding the return of that money?