Lions and Tigers and Bear Stearns, OH MY!

Ever since the historic collapse of Bear Stearns, we have been peeling back the layers of an industry which, until a year ago, had eluded most of us, and have discovered that the age old saying is indeed true: there really is no such thing as a free lunch. Years of bad management and suboptimal decisions has led us into one of the worst economic crises anyone could have imagined. And just when we think things are maybe beginning to turn around, something else crops up. Its like the ultimate death spiral.

Our latest failed attempt at resuscitation: The AIG bonus scandal. After accepting $170 billion in government funds, AIG has turned around and paid $300 million in bonuses to their employees. What do I think the government should do?

Umm... Let them keep their money!!

Here's how I looked at this whole situation. Let's say you give a child money. He or she comes back with a big bag of candy. Do you get mad at the kid for not buying fruit and confiscate their bag of candy? No. Doesn't work that way. There were no stipulations on the bailout money and so AIG reserves the right to allocate those funds as they see fit. Sure it isn't fair that hard earned tax money is being given to people so they can keep their charter jets and second homes in the Hampton's, but who's fault is that?

Last March Toto pulled back the curtain to reveal a frail old deceitful man. "PAY NO ATTENTION TO THAT MAN BEHIND THE CURTAIN!" He says into his microphone.

Okay, the government said, we won't pay attention to the man behind the curtain. Instead, we will give him $170 billion to continue doing "business as usual". And surprise surprise, that's just what he did. As far as I can tell the AIGs and Bear Stearns of the world have done absolutely nothing to elicit the public's trust, so why should anyone have expected a bailout to change their behavior? Allowing a person to fail changes his or her behavior. Bailing them out doesn't. Isn't that a concept straight out of Life Lessons 101?

So, as much as I don't approve of execs getting millions in bonuses during a time when the unemployment rate is over 8%, the highest its been in over a quarter of a century, AIG has an obligation to their employees to honor their contracts. It would be ethically wrong not to. It would also be wrong to impose a 90% tax on those bonuses.

The government was captivated by the smoke and mirrors. Their need to believe in the great wizard of Wall Street blinded them from the harsh reality of it all. I for one have had enough. I think its about time we took that old man out of the control booth and started taking care of business.