Blame and Bonuses

First of all let me say I share the anger everyone rightly feels over the fact anyone might get even a $1 bonus, let alone a million or more, after screwing up on the scale the folks at AIG did. The fact our tax dollars are involved amounts to pouring salt in an open wound.

Having said that, the reaction to the AIG bonuses does make me a little bit nervous. Too much focus seems to be on who is to blame rather than what is to blame. Everyone can find someone - Republican or Democrat, member of the Bush administration or someone in the new administration - that could have caught the contract at the center of the current controversy sooner, put more pressure on AIG to renegotiate it, or found some legal way out of it altogether.

Accountability is important, and as President Obama said today so far as the administration's handling of this goes the buck stops with him. However, he also said something else of far more consequence I fear may get drowned out in all the outrage being expressed; the anger we all feel today needs to be turned into a force for constructive reform down the road.

People tend to behave one of two ways in circumstances like this: 1) They demand someone's head and then go back to their daily routines once they have it, or; 2) Calm down after the immediate focus of public anger has gone away, in this case after the money is returned - assuming it is. In either case the underlying problem that should be the focus of everybody's rage never really gets addressed.

Whatever failure specific public and private officials may need to take responsibility for in this case, the whole AIG bonus fiasco ultimately isn't the fault of any one person but of a failed ideology. Big corporations have been giving huge bonuses including golden parachutes to failed executives for years now. The contract at the center of this blow up was put in place before a single taxpayer dollar was given to AIG and was standard procedure for large corporations at the time. Where was the public outrage then?

The ideology behind such bonuses was a laissez faire, free market, deregulatory philosophy that preached government had no business sticking its nose into business, least of all how executives were compensated. If we think back just a year or two the notion the government should discourage, let alone prohibit outright, huge bonuses to the heads of companies that were under-performing would have been almost unthinkable.

Funny thing is, those preaching this laissez faire, deregulatory notion of free market capitalism were also telling us government should butt out because a truly free unregulated market rewarded success and punished failure all by itself. Government regulation or oversight only mucked things up. Well obviously if that had been true AIG and countless other companies never would have written contracts that mandated bonuses regardless of performance.

So be mad as hell at those receiving these bonuses, the company that signed the contract that led to these bonuses, and politicians that intentionally or unintentionally let this particular contract slip by them. But if at the end of the day your anger stops there it is wasted energy. We should also be angry at ourselves for believing for the better part of three decades a free market somehow regulated itself. We should turn our anger into a movement for well thought out reasonable reforms that ensure American capitalism truly rewards hard work and good ideas but never again rewards greed for its own sake.