Like many people I am concerned that employees and managers in the Financial Products Division of AIG, the arm of the company that wrote the under-priced CDSs, are receiving large bonuses. It is more all the more irksome because they are now being paid by US tax payers, many of whom are struggling with the fall out of AIG's bad decisions.
However, I am opposed to some of the suggestions being floated in Washington to recover that money, for example that of Charles Schumer, who is advocating new completely ad-hoc tax laws. This is the kind of response that makes people wary, indeed suspicious, of government. Such ad-hocary increases uncertainty and makes the Government look weak and capricious.
The time to argue about bonuses was before the money was handed over, not after the fact. Of course, as was I'm sure clear to many at AIG, they had the government over a barrel and the government would have found it enormously difficult to make the surrendering of bonuses a pre-condition of the bailout.
While AIG took excessive risks that have contributed the crisis, it did so because we (regulators, government and the electorate) allowed them to do so. Blaming a few fat cats is easy - they make wonderful scapegoats, but not all of the blame is theirs.
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