President Obama's apparent inability to block executive bonuses at insurance giant AIG has dealt a sharp blow to his young administration and is threatening to derail both public and congressional support for his ambitious political agenda.
Politicians in both parties flocked to express outrage over $165 million in bonuses paid out to executives at the company, demanding answers from the president and swamping yesterday's rollout of his efforts to spark lending to small businesses.
"I warned them this would be met with an unprecedented level of outrage," Sen. Christopher J. Dodd (D-Conn.), the chairman of the banking committee and part of a group of senators who pressed Treasury Secretary Timothy F. Geithner to stop the bonuses, said yesterday.
All this mock outrage, especially from Chris Dodd, is ridiculous. The company is paying its bills and fulfilling the terms of its contracts. The problem is not that taxpayer money is being used to pay bonuses. The problem is that the government decided to bail out AIG in the first place. It makes no sense to prop up poorly run companies and then complain that they're still poorly run even after the bailout. That's like complaining that welfare recipients aren't looking for a job after you increase their benefits. If you reward incompetence, you're likely to get more it. Face it: everything the government gave to AIG is gone. The guys who run it are making sure that they have a soft landing. Take the money and run. The government is pretending to care, but really they're in bed with these guys behind the scenes. They've been getting campaign contributions from the bigshots at AIG for years and now those executives are collecting on their political insurance policies. By the time, the government takes over and cleans house, there won't be much left to fight over. You can bet that Dodd and Frank will blame it all on Republican greed, but I bet there are a lot of Democrats in high places at the companies receiving bailout money.
The rhetoric grew so heated yesterday that Sen. Charles E. Grassley (R-Iowa) suggested in a radio interview that AIG executives ought to "follow the Japanese model . . . resign, or go commit suicide." An aide later explained he does not actually want executives to kill themselves.