This one comes courtesy of Andrew Sorkin of the New York Times:
Do we really have to foot the bill for those bonuses at the American International Group?
Fittingly, he provides a stupid answer as well:
So here is a sobering thought: Maybe we have to swallow hard and pay up, partly for our own good.
Sorkin invokes “the sanctity of contracts”:
…the “fundamental value” in question here is the sanctity of contracts
Welcome to the real world, Mr. Sorkin, where millions of Americans across a broad spectrum of socio-economic classes are employed with transient “contracts”. An NFL player can be cut at any time. A grocery clerk’s job can be eliminated without a second thought. A consultant can be fired in an act of downsizing. Long time employees can be terminated without severance.
Mr. Sorkin justifies his belief with another point that he pulled out of his ass:
Here is the second, perhaps more sobering thought: A.I.G. built this bomb, and it may be the only outfit that really knows how to defuse it.
More like they were trying to build a toy rocket and instead, built a bomb. In this case, I would say they have no fucking idea how to defuse it because they never realized the dangers of what the created; they never really understood the risks to begin with and thus themselves lacked a fundamental understanding of how their own investment vehicles worked. I’d say these people are the least qualified to handle this because clearly, they’re the same idiots who thought that credit default swaps were a good idea in the first place.
I’m sure many IT consulting companies would love to have contracts with Mr. Sorkin. Even if their consultants write terrible, buggy, and unstable code, Mr. Sorkin would be convinced that because these guys wrote it, they would also be the most qualified to fix it. Mr. Sorkin would be the the ideal IT consulting customer. Send in your cheapest, least qualified labor and have a guaranteed income stream. Not only that, Mr. Sorkin would be so ensconced with the sanctity of contracts, that he would feel compelled the keep employing the same guys who wrote the buggy code to the very end.
Sorkin then cites Pearl Meyer:
“The word on the street is that A.I.G. employees are being heavily recruited,” Ms. Meyer says.
Well good. Isn’t this how the free market and capitalism works? If these guys, who were a part of the one of the greatest failures in free enterprise (dollar wise), can find people willing to pay them to ruin their businesses, then let them go. I call B.S.; massive steaming piles of it. The financial sector is shedding jobs at an astounding rate…let them swim and see how many want to jump off the boat.
In actuality, I think Meyer is full of shit. AIG acquired 21st Century (an auto insurance company) in 2007 and promptly changed the name to aigdirect. Interestingly, aigdirect.com now redirects you to 21st.com. I guess that AIG moniker wasn’t working out, huh? You really have to dig around to find any association with AIG on the site.
At the end of the day, I’d like to see if Sorkin and his compadres would be defending the UAW’s contracts or how about pension funds which are routinely raided or wiped out in restructuring?
In reality, there are lots of corporations that have figured out that there are loopholes in this bill. … What those loopholes permit companies to do is make promises to a few sophisticated creditors to lock up all the assets of the business so that if the company ultimately fails, there won’t be any sharing of the pain. The sophisticated guys will walk out with everything, and the employees and pensioners will be left with nothing.
The text of the law clearly gives a priority to the banks and the other creditors who protect themselves by contract. They come ahead of all of the employees and all the pensioners. It’s been there since 1978; it is in the law today. If Congress wanted to change it, they could change it with the stroke of a pen, but that is what the statute says. … What has changed over time is how much the banks are seizing in terms of the assets, … so that by the end of the day, there is less and less and less left over for the employees and for the retirees.
How about you defend “the sanctity” of these contracts first and then we can talk about bonuses?
The comments are the only thing which redeem this otherwise steaming pile of excrement.
This argument would make more sense if the government wasn’t forcing automakers to abrogate their contracts with their workers and pensioners. Would the columnist have us believe that those contracts that will be modified or cast away were any less legally binding than those at AIG? Balderdash…it’s rewarding poor performance at the expense of the taxpayer.
— agincourt76, Seattle, WA
I don’t remember seeing this argument when discussing the breaking of union contracts for the auto bailout. In fact breaking the union contracts was seen as a feature and not a bug.
— JStuddle, Los Ageles, CA
You have disgraced yourself. What have you said that hasn’t been said? If anyone wants to hire these guys who ruined the world economy and collapsed their own firms, they are welcome to them. Yeah, they’re real rainmakers. And do you think new people can’t be hired to unwind the transactions with $165 million dollars?
— Sylvia Ellerson, New York, NY
Nothing in this piece says what it is that makes the bonus beneficiaries so indispensable. Their training? Their brains? They and only they know where the bodies are buried?
In every big company — but especially in finance — there are junior personnel just aching for a chance to take over from their superiors. Eventually they do. Why not now?
— donnolo, Monterey, CA
Its really very simple. Without government intervention, AIG would be bankrupt and none of those bonuses would have been paid.
The government breaks contracts in bankruptcy all the time. Of course it does set a precedent for people who loot their companies and the taxpayers. Even if the goovernment bails out the company, they may not get all the loot they expected. I don’t know that is such a bad thing.
The truth is, the government ought to be going after many of these employees with criminal fraud charges. Its pretty obvious they sold more credit default swaps than their company could afford to pay off. Those were contracts too.
— Ross Williams, Minnesota
The thesis of this article is we must acquiesce in the millions of dollars of bonuses paid to AIG executives because (1) we must keep the “best and the brightest”and (2) the sanctity of contract must be protected.
The “best and the brightest” bankrupted the largest insurance company in the world. Keep them? They ought be carefully scrutinizer for criminal law violations: their conduct simply does not pass the smell test. Besides, in the financial crisis which AIG is a prime contributor, where are these so called “best and the brightest” going to go? The taxpayers inherited them, but we don’t have to keep them. Remember, AIG has been nationalized. We own it!
The plaintiff cry about honoring contracts rights hollow. Contracts ought to be enforced. That fundamental proposition is undebatable. Why isn’t the same application of the law urged in the case of the United Auto Workers?
These “bonus” given to the recipient of the taxpayers largess ought to be a “pink slip”
— David, Sherman, TX
Congratulations, Andrew Sorkin, you’ve just asked the Stupid Question of the Day!