by Russ Roberts on March 18, 2009

in Politics

From the New Mexico Independent:

Tom Udall and a group of fellow U.S. senators has sent a letter to embattled AIG CEO Edward Liddy.

Udall, in a statement, said the letter sent a message to Liddy: “Give the bonuses back, or we’ll find a way to take them back.”

That's called a threat. Lovely. But it's obvious that Udall doesn't like to see our money going to a bad cause. Unless it's friends of his. From KFDA in Amarillo:

As part of the $410 billion Omnibus Spending
Bill, US Senator Tom Udall says he included over one million dollars
for Eastern New Mexico industries.

Over $200 thousand is going to a dairy consortium so they can boost research on improved dairy production.

more than $950 thousand is going to the Sapphire Energy Algae so that
company can create and grow technology that turns the algae into fuel.

Udall says the algae company could create 100 jobs.

Love that word, "could." Can't wait to count them.

The Senator does not seem to understand that these two stories conflict with each other. AIG has failed to generate private capital to keep it afloat. It can only stay afloat with my money. AIG can't raise private capital because it has lost the trust of potential investors. They're bankrupt and exist only because of the government's largesse funded by taxpayers. Why would you want to repeat the same mistake with that dairy consortium and Sapphie Energy Algae? If they're good investments, let private investors take the risk and either reap the reward or lost their money. If they're bad investments, why am I being forced to pay for them?

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Crusader March 18, 2009 at 12:36 pm

I'd like to see some polling if the American people approve of these threats.

drtaxsacto March 18, 2009 at 12:54 pm

I don't presume to defend Udall but it is odd for Liddy to claim after we have poured a ton of dough in an effective bankruptcy that the bonuses are obligations.

Had AIG gone into a formal bankruptcy – which I would have preferred, the government is not a good manager – the bonuses would have been unsecured creditors – behind the bond holders, behind commercial agreements behind even the stock holders. That is the way we need to think about these things.

It is unfortunate that the current and former administrations rushed headlong into "saving" AIG without thinking of little details like this.

Crusader March 18, 2009 at 1:02 pm

Ideally, social pressure would cause the AIG execs to decline the bonuses. However, if you care about the rule of law, then the contracts have to be kept to. I can't imagine any court of law upholding a breaking of the contract, other then the 9th Jerkit Court of Schlemiels.

Euler March 18, 2009 at 1:05 pm

I would love to see one of the executives from AIG write a letter to say the NY Times and call all these hyprocritical blowhards in Congress on their bullshit. "We will give back the bonuses as soon as you give back all the pork you have secured for your constituents."

Crusader March 18, 2009 at 1:09 pm

Euler – one of them did something even better:

AIG exec demands Congressmen resign or commit suicide

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