Let me ask you a question: If you were a passenger on the Titanic, and somehow managed to wangle your way ahead of the women and children onto a life boat, would you demand to take your luggage?
I don't think that's a far-fetched comparison. Here we have a massive company that hit a huge iceberg - this one of its own devising - and just as it's about to sink under the water it receives a timely and enormous rescue... and the guys who ran it into trouble in the first place are now leaving the boat with their silverware, furs and jewelry intact.
Of course, these are insurance guys. I don't know what we all expect of them. In my experience, insurance guys are trained to justify just about anything. Last month my health insurance company told me that a 5 a.m., six-hour visit I made last summer to the Emergency Room of my local hospital was not covered because it was not an emergency. It's not that hard for people trained in that kind of reasoning to tell themselves that they're entitled to their legally-promised bonuses.
The thing that's interesting in this case is how many AIG executives seem to have mandatory boni in their contracts. In my experience, perhaps the top five guys in any corporation usually have that kind of protection. Here we seem to have an entire executive class that has the clause in their deals. I guess wish I had their attorney or worked in an industry that while it is so rigorous with others is so generous with itself.
There are, I suppose, only two solutions to this problem going forward. The first is for Congress to immediately pass a law that any firm that receives bailout money will be under certain constraints:
-- No bonuses not approved by the taxpayers;
-- No boondoggles to which the taxpayers are not invited;
-- All executive expense accounts to be reviewed by Warren Buffett.
The other solution is more difficult: Trust in the people who run our financial system must be restored... one step at a time.
Wall Street thinks its problems are related to objective measures such as debt, equity, long and short selling, broken models, secular issues afflicting certain key industries. That's nonsense. The reason why everybody is off of the investment train is a lot more simple. People hate Wall Street and the business people who work in or around it.
It's not hard to see why. It's pretty clear that as things stand the interests of Wall Street are not those of working corporations and the people who are employed there. Americans are enraged and disgusted because they were sold a bill of goods and now they see the light. At the end of the great, decades-long confidence game the Street has run, we are all out of that commodity. No confidence, no investment.
How to restore that trust? I can think of one thing that could be done immediately. It's not easy. It's totally counter-intuitive. It will never happen. But it would be an excellent gesture.
The AIG guys should renounce their bonuses. Their management and the government have no legal standing to do so. They're going to have to do it for themselves. For all of us.
I say this in full knowledge of how improbable and difficult this would be. I know a whole lot of people, myself included, who depend on their bonus to live. It's not a frill. It's part of our compensation that we wait for, plan for, put our kids to school with. We don't have yachts. We don't have polo ponies. We have mortgages and child support and elderly cocker spaniels who have kidney trouble. That's what our bonuses pay for.
But most of us don't work for companies that have screwed up the entire economic system of the world. Most of us don't work for corporations that require the People to step in and save their butts.
The effect of such a renunciation would be immediate and dramatic. "Gee," people around the world would say. "Maybe American business people aren't total ethical morons after all."
It's a first step. Somebody has to take it. Why not the proud, courageous insurance men and women of AIG, standard-bearers on our collective march toward a new tomorrow?