Bailout baloney

I want to be a contrarian just once. I want to suggest that A.I.G. has done nothing wrong by paying bonuses to executives. Yes, it is true that the bonuses are going to the division that almost torpedoed (the results are still not in) the world economy: the banking division. It was they who put billions of dollars of obligations into Credit Default instruments.They are the ones who get involved in dicey derivatives. They are the ones taking all the chances. If they are right, if the economy had not stumbled, might they now be happily counting billions of dollars in profits.

The same might apply to Caisse de Depot that haemorrhaged money by investing in costly derivatives, specifically Commercial Backed paper.

Who knew?

Of course you say, they should have known. The rating companys like Moody's and S&P gave triple A ratings to securities that turned out to be no better than wallpaper. The S.E.C. was unable to demand that hedge funds be more transparent so that investors would understand what dangers there are in arcane derivatives.

But back to being a contrarian. I am as angry as anyone else that the reckless ones at A.I.G. are to be rewarded for their recklessness. The anger is real because the government in the U.S. has already put billions into A.I.G. to save it from ruin, BUT, was their purpose to save A.I.G. from ruin? Or was the larger motive that saving A.I.G. amounted to saving the entire economy. The favour being done was not to A.I.G. but to the American and the world economy. A.I.G. received money, but only because they were unwittingly, the agent of saving the economy from ruin.

So does A.I.G. "owe" anything to anyone? We are not ready to be rational. We want to punish them. We want them to crawl. We want them to accept their share of the blame for worldwide economic chaos. That they seem unwilling to be sufficiently repentant is what is making us furious.

If the financial world has rules, and even crooks have rules, then who are we to change those rules in the middle of the game? The old cliche about putting the toothpaste back into the tube comes to mind.

The economy fostered speculation; Speculation fostered greed. A.I.G. played according to those rules.

It is political posturing for the authorities, from Barney Frank to the President,to be angry. It looks right.

But does that make it right?