Tuesday, March 17, 2009

This Is Just Priceless

Straight from my own backyard, AIG is defending it's award of bonuses as necessary under Connecticut law. Failure to pay the bonuses would have resulted in a double penalty payment to the AIG employees at the companies financial products unit in Wilton. But the absolute best part- if this doesn't make you a libertarian than I don't know what will- part of the story is the reaction of angry Connecticut politicians who are now seeking to change the law.

"The state of Connecticut should not be used as the scapegoat or the excuse for AIG to pay these outrageous'' bonuses, said House Republican leader Lawrence Cafero of Norwalk.

"We are outraged to learn that AIG is using Connecticut wage laws as leverage to use taxpayer money to pay hundreds of millions of dollars in bonuses," [Senate Republican leader John] McKinney said.

"The fact that AIG would even consider paying bonuses of any kind out of taxpayer funds is appalling, especially when it was AIG's greed that led to the business failure that necessitated a federal bailout in the first place," [Governor Jodi] Rell said. "To cite Connecticut state law as a defense for this action is contemptible."

And yes, I understand the complaint that AIG is just using the law as an excuse to pay the bonuses out. But if it was so cut and dry that this double penalty law wouldn't apply, why are the politicians all agitating to change it. More importantly, it's a little lesson to the legislature and all law makers that all laws no matter how well intended have unintended consequences.


Anonymous Anonymous said...

I don't think they're complaining about the laws. If it's legal, it's legal. I just think the main complaint in all of this has been the ethics of it all. Not "is it legal?", but "is it right?"

10:56 PM  
Blogger lonely libertarian said...

Perhaps, but doesn't that just go back to the ridiculousness of legislating bailouts in the first place?

Politicians always like to complain about how people respond to the laws that they make without taking any responsibility for the fact that the laws shape our lives and our world in the first place.

8:41 AM  
Anonymous rose said...

To anonymous: We all agree that it isn't right. It isn't right that AIG's European counterparties were made whole either. It is absurd.

But since when do we require companies to do anything but follow the law? The law should be designed to protect peoples' rights and in this case it is possible that tax payers were not adequately protected (I'd argue that $800b stimulus bill that was shoved up our ass in two weeks is really the same thing as this). But that is the government's fault, not AIG's.

If citizens and companies are required to not just follow the existing law, but to act "ethically", or risk some sort of retroactive punitive legislation...that's pretty scary.

10:34 AM  
Blogger lonely libertarian said...

Right on Rose-

The assumption- without any facts to base it on- is that AIG is acting in bad faith in awarding these bonuses. No serious consideration has been given to the argument that these bonuses are being awarded simply to avoid the possibility of lawsuits, and all the costs and penalties associated with those lawsuits.

Now, I have no idea what the truth is, but I suspect most everyone else weighing in with their two cents doesn't know the truth either.

To go back to my post from a few days ago about the emotions behind all this, what people are mad about is all this perceived bad faith. As I said then, maybe we should worry a bit more about the rest of that 180 billion dollars and how the company is being run in general than our judgments on their character.

1:50 PM  

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