So what is AIG, and why is everyone so mad at it?

If you’ve heard any news at all in the past week, you know that lots of people are steamed about bonuses paid to executives at AIG. But what exactly is AIG, and how did this happen? Since you and I own controlling interest in the company, we really ought to know that.

What, you didn’t know you owned it? Well, you do. When the company was on the verge of collapse and came crawling to the government for help, they got it – big time. So far, AIG has received over $182.5 BILLION in bailouts from the federal government. We, the taxpayers will foot the bill for this. In exchange for our generous donations, AIG had to hand over about 80% of the stock in their company to the government – that’s us, remember. We now have controlling interest in AIG. We, therefore, feel we should have some say in how it is run. So does Obama. In effect, the company was nationalized, though no one calls it that.

AIG originally stood for American International Group, but these days people believe it stands for Arrogant, Incompetent, and Greedy. In my opinion, that pretty well sums it up. This humongous corporation is actually an insurance company with fingers in lots of other enterprises as well, such as financial services. It’s the financial services division that screwed up the entire company. Some of the executives in that division received part of the $218 million in bonuses the company paid out recently. These are the same people that were stupid and greedy enough to cause the company to nearly collapse. Now, in the world where most of us live, bonuses are paid to people as a reward for good work. Apparently, that is not how Wall Street operates. On Wall Street, salaries are kept relatively low with the expectation that bonuses will be paid each year. A typical executive might have a set salary between 200 and 300 thousand a year, but receive an end-of-the-year bonus of 2 to 10 million. The amount is based on the volume of business they brought into the firm over the year. (One of the problems has been that they have been rewarded for the quantity of their investments, not the quality.) These executives see themselves as entitled to this money, as though it was really part of their regular salary. It is even written into their contracts. So part of the outrage is caused by the fact that we define a bonus one way, and Wall Street execs define it another.

It seems to me that these rich financial guys live on another planet and really don’t have a clue how the ordinary American taxpayer sees this situation. In 2007, the median household income in the Unites States was $50,233. That means half the households in American somehow manage to get by on around $50,000 while Wall Street executives make six figure salaries and expect additional bonuses in the millions. Of course the average American is going to be outraged! Especially when these fat cats have nearly devastated our economy and expect us to bail them out. Not only that, but they retire with their “golden parachutes” while the rest of us are the ones who suffer from their mismanagement. These people have lived in a bubble for so long they don’t even know how an ordinary person lives anymore.

So we are mad, and for good reason. But Obama said one thing I actually agree with. He said that we shouldn’t govern out of anger. I’m sure most of us have said or done really stupid things when we were angry, so that makes sense to me. Right now, Congress is trying to do just that. The House has already passed a bill that would tax those Wall Street bonuses at a rate of 90%! That is the only way they can figure out to get the money back that they carelessly let get gone in the first place. After all, they passed the original TARP legislation and the stimulus bill. Now we learn that language in the bill allowed these bonuses to be paid. What a surprise! Congress passed a bill without knowing what was in it! Now they have the nerve to act all hot and bothered about it. If they are allowed to pass a punitive, compensatory, retroactive tax aimed at a specific group of people, (which is probably unconstitutional), it sets a dangerous precedent for the rest of us. Sure, we hate what AIG has done. But anytime government acts, we must beware of the Law of Unintended Consequences.

I agree with Mike Huckabee, who says that if Congress wants to punish AIG by taxing them at 90%, they should tax their own salaries at 90%, since they also had a lot to do with getting us in this mess.

I personally believe the President could use his influence to get the executives to voluntarily return most of the money. Instead of cracking jokes on Leno, he needs to be leading right now. He needs to personally call these executive to account and appeal to their sense of patriotism and love of country, if they have any, to do the right thing.