The Washington Post Crashed-and-Burned Watch

Dean Baker has not yet posted on either of these *Washington Post* articles:* * But somehow I am sure that he will. The Washington Post:>Politicians Of Both Parties Pile On AIG.: [W]e were more skeptical than most about the “populist” backlash against the $165 million in bonuses that went to some employees of government-owned AIG…. The firm is hemorrhaging knowledgeable employees at precisely the time when it — and therefore we — need them most…. [T]he attorney general of New York, Andrew M. Cuomo, among other Democrats, floated the argument that the AIG employees should get stiffed because “it is only by the grace of American taxpayers that members of Financial Products even have jobs, let alone a pool of retention bonus money.” True. But the bonuses were set in motion well before the U.S. takeover of AIG…. [T]his has not been a stellar moment for [Obama] who came into office arguing that “the time has come to set aside childish things.” With hundreds of billions of dollars in necessary repairs to the financial system still to come, Mr. Obama must find a way to explain those costs…>Ruth Marcus – Grin and Bear the Bonuses: Could we put down the pitchforks for just a moment and have a reasonable discussion about the bonuses at American International Group?… The sums are staggering…. The public is worked up, increasingly convinced that its money is being flung around recklessly, to a gang of extortionists at AIG and at European banks, without any hint that the fundamental problem is being fixed…. [H]ammering the AIG employees to give back their bonuses risks costing the government more than honoring the contracts would. The worst malefactors at AIG are gone. The new top management isn’t taking bonuses. Those in the bonus pool are making sums that… are significantly less than what they used to make. Driving away the very people who understand how to fix this complicated mess… isn’t particularly cost-effective….>But, you ask, what about autoworkers who are being squeezed to renegotiate their contracts? Those renegotiations mostly involve the future terms of employment, though, it is true, they also could affect retiree health benefits. If an autoworker doesn’t want to show up on the assembly line under the terms of a new deal, he or she doesn’t have to. That’s different from telling AIG employees they’re not getting the amount on which they agreed for work they’ve already performed…The principle that “if your firm goes spectacularly bankrupt and costs taxpayers tens if not hundreds of billions of dollars, you don’t get any bonuses” seems an eminently reasonable one. But not to Ruth Marcus or Fred Hiatt.


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