CLEARLY, another chapter in the continuing series, "Clueless Executives," is unfolding with the revelation that AIG, the recipient of serious USG bailout money, went ahead and paid many of its top-level executives their millions in bonuses. And these were exactly the same guys, it is said, who were responsible for most of the bad decisions that led AIG to need a bailout.
A lot of ink has already been slung on this subject, and with notables from New York's Attorney General all the way to the President weighing in with their outrage, there's little need for me to say more (but of course I will). Whether the taxpayers will get back any money remains to be seen (though I suspect they will). But there are lessons here.
First is that AIG's current Chief Edward Liddy, who was brought in to clear up the mess, hasn't thought through his role well. As an outsider he may not be able to judge correctly if the derivatives gang is really essential. But it's hard to believe anyone in his position could be so stupid as to not see any problem in paying these bonuses, and just pay them without any consultation or warning to government officials. A failure of leadership such as we have come to expect from our highest level tycoons.
Second is that government officials, from Obama to Barney Frank and others, must learn what any average citizen's common sense tells them: Businesses require regulation to ensure that laws and policies affecting them will be heeded; the regulation must be specific, clear, and built into legislation. Then, of course, the regulators have to be funded, which is where we fell down badly in the past decade.
Third, our experience in the past few months with the oversized corporations that have needed bailouts demonstrates beyond a doubt that we really can't afford to allow businesses to get so big that they "can't be allowed to fail." Those that exist now need to be broken up judiciously as their industries are (we may hope) restored to health, and in future, the government needs to take more seriously laws already on the books regarding such old fashioned concepts as monopoly and competition.
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