Bipartisanship is here, at long last. Everybody, in every party, and their mothers, are mad about AIG handing out more millions’ worth of taxpayer-financed bonuses to its employees. And backed into a corner by the rage, President Obama is leading the fight to block them.
To refresh the memory, let’s do some math. The AIG bailout, including a recent infusion two weeks ago of another $30 billion — which Obama didn’t feel the need to announce or explain publicly — now totals $170 billion. This is roughly 22 percent of the entire national recovery package the U.S. Congress passed to address soaring unemployment and aid many states buried under budget shortfalls.
Edward M. Liddy, who leads the insurance giant, had to explain how “difficult” the decision was to honor the bonuses, citing what he considers several mitigating factors. These include promises for bonuses made before any federal government intervention; the legal ramifications of failing to honor such promises; the need to retain the talent required for the company’s recovery and the consequences of losing employees to the competition; the fact that most employees of AIG and its subsidiaries have already seen drastic reductions in their compensation; and the fact that the top 25 executives are set to receive only $1 each in salary in 2009.
Following the fallout, AIG released, at long last, a list of recipients of the federal funding — companies and states and municipalities that were owed billions, including Goldman Sachs, Merrill Lynch, Bank of American, Wachovia and Citigroup. Foreign banks include Barclays, UBS of Switzerland, the Societe Generale of France and Deutsche Bank of Germany.
AIG disclosed the list to illustrate its tentacles throughout the global economy — a derivates-rich portfolio that ensures widespread collapse should the company go down. That list didn’t seem to calm anybody down, but that is their argument and in choosing to bail out AIG our government bought it. The Bush administration did, and now the Obama administration has.
The bonus explosion clearly has the Obama administration panicked, scrambling to strike a populist posture. This time they chose to be proactive, worried as they are — according to The New York Times — “that anger at financial institutions could also end up being directed at Congress and the White House and could complicate President Obama’s agenda.”
Welcome to March of 2009, Team Obama. This surely will complicate the president’s very complicated agenda. There is no guarantee that taking bonuses away at AIG will stem the tide of outrage. But it could be a helpful first step. And unfortunately, no matter how mad everybody gets, it doesn’t mean that AIG isn’t too big to fail — it probably is.
No matter what comes next, it is time for the president to make his case to the American public. He is a great communicator, and he has the ability to tell us why he decided recently to bail out AIG again and why bolstering numerous banks may be the only way our economy can hope to come back. The longer he waits, the harder it will be, and the less believable he will sound.
WILL THE AIG BACKLASH SPELL THE END FOR MORE BANK BAILOUTS? Please join Ask A.B., my weekly video Q&A, by sending your questions and comments to askab@digital-stage.thehill.com. Thank you.