>>>This was the lead story in yesterday's New York Times, which I got around to reading at lunch time today. I see in today's headlines online that President Obama is trying to get payment of these bonuses blocked. The article makes it sound like that may not be possible legally, but boy, is this aggravating. We are bailing these bozos out to the tune of $180 billion and they are paying themselves huge bonuses? And to the exact business unit that caused all the problems? Truly unbelievable.
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>>>http://www.nytimes.com/2009/03/15/business/15AIG.html
>>>
>>>Here is my favorite part ---
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>>>A.I.G., nearly 80 percent of which is now owned by the government, defended its bonuses, arguing that they were promised last year before the crisis and cannot be legally canceled. In a letter to Mr. Geithner, Edward M. Liddy, the government-appointed chairman of A.I.G., said at least some bonuses were needed to keep the most skilled executives.
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>>>“We cannot attract and retain the best and the brightest talent to lead and staff the A.I.G. businesses — which are now being operated principally on behalf of American taxpayers — if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury,” he wrote Mr. Geithner on Saturday.
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>>>Thank goodness they are retaining that best and brightest talent. Just think how much of a mess they could have created if they were not in such able hands!
>>>
>>>Grrrr.....
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>>Do you want to know a quick way to fix this? Don't bail them out. :-)
>
>After the NCAA selection show yesterday I kept the TV on a few more minutes to see Ben Bernanke on "60 Minutes". (Quite a coup for the old show -- normally Fed chairmen don't grant interviews, ever). He was asked specifically about A.I.G. and had a very interesting response. Actually two of them. The first was he said they really were too big to let fail. He said in his opinion it would have precipitated a global financial crisis. (Along the same lines, he said he wishes he had a do-over on Lehman Brothers, which did give markets a megajolt when it was allowed to fail).

Minor nitpick here Mike as I also watched the interview. I don't remember Bernanke mentioning a do-over for Lehman, but I do remember he said the Fed didn't have the tools to bail them out. This was a bald-faced lie and a way for him to deflect attention from the Fed's inconsistent handling of the crisis. A loan (bailout) could've been based on the same types of loans they gave to Citi, BofA et all. After all they all were "insured" by CDSs so their assets were no better or worse looking at the time. The issue with Lehman was wanting to make an example and say a public "no mas" to bailouts in addition to satisfying a personal grudge left over from Uncle Ben's days with Goldman.

>The second was he said he was angry with A.I.G. It was such an uncharacteristic response for a Fed chairman the interviewer did a double take and asked Bernanke to confirm it. "Yes, I was and am angry with them," he said -- for making such colossal business mistakes and leaving us holding the bag.

Here again Uncle Ben is missing the point. Within the context of the interview he mentioned that one of the problems during the Depression was that the Fed permitted banks to fail and this led to runs on other banks which led to further failures. The flaw in this logic is that he equates good and bad banks and disregards the safeguards which were put in place as a direct result of the events of the GD. If the Fed would've let the bad banks fail or break up and would've backed the good banks we'd be in a much better position going forward. Instead we've once again compounded a problem by applying a platinum encrusted, bonus-laden, laughing all the way to the bank type band-aid to a symptom rather than fixing the cause.