The real scandal of AIG isn't just that American taxpayers have
so far committed $170 billion to the giant insurer because it is
thought to be too big to fail -- the most money ever funneled to a
single company by a government since the dawn of capitalism -- nor
even that AIG's notoriously failing executives, at the very unit
responsible for the catastrophic credit-default swaps at the very
center of the debacle -- are planning to give themselves $100
million in bonuses. It's that even at this late date, even in a new
administration dedicated to doing it all differently, Americans
still have so little say over what is happening with our money.
The administration is said to have been outraged when it heard
of the bonus plan last week. Apparently Secretary of the Treasury
Tim Geithner told AIG's chairman, Edward Liddy (who was installed
at the insistence of the Treasury, in the first place) that the
bonuses should not be paid. But most will be paid anyway, because,
according to AIG, the firm is legally obligated to do so. The
bonuses are part of employee contracts negotiated before the
bailouts. And, in any event, Liddy explained, AIG needed to be able
to retain talent.
AIG's arguments are absurd on their face. Had AIG gone into
chapter 11 bankruptcy or been liquidated, as it would have without
government aid, no bonuses would ever be paid; indeed, AIG's
executives would have long ago been on the street. And any mention
of the word "talent" in the same sentence as "AIG" or "credit
default swaps" would be laughable if it weren't already so
expensive.
Apart from AIG's sophistry is a much larger point. This sordid
story of government helplessness in the face of massive taxpayer
commitments illustrates better than anything to date why the
government should take over any institution that's "too big to
fail" and which has cost taxpayers dearly. Such institutions are no
longer within the capitalist system because they are no longer
accountable to the market. So to whom should they be accountable?
When taxpayers have put up, and essentially own, a large portion of
their assets, AIG and other behemoths should be accountable to
taxpayers. When our very own Secretary of the Treasury cannot make
stick his decision that AIG's bonuses should not be paid, only one
conclusion can be drawn: AIG is accountable to no one. Our
democracy is seriously broken.