Well, here we are again. I guess it must be foolishness, because shrewdness it is not. The Administration’s saga on economic recovery earnestness continues to show a lack of traction under the current regulatory parameters of the financial system. Last night’s 60 Minutes interview with Ben Bernake, the Fed Chairman, raises the stakes even higher and confirms our worst fears: Without a carefully constructed banking bailout, the success of the recovery and stimulus bill Congress just passed is zero to none.
This comes amidst the latest financial scandal from the corridors of Wall Street. Insurance giant AIG, which has received the largest government bailout in US history, has announced it will pay $165 million in bonuses from taxpayer bailout money as part of a total payout reportedly valued at $400 million. Needless to say, AIG’s last quarter earnings showed the biggest loss in US corporate history, which of course set the stock market on a downward spin for the first week of March. Adding to the fire, is that public trust in bailouts is beginning to erode, because there is nothing more damaging and harder to restore in an economic crisis, than public perception and trust, and this is turning to be Mr. Obama’s biggest and most lucrative headache.
Taxpayers are beginning to feel that the government is helpless in finding a way out of this capitalist jungle. But holding companies accountable is not flying with Wall Street, even as many of them keep accepting bailout money. Treasury Secretary Geithner seems to have underestimated the Amazonian arrogance of corporate America, as he could not find a way for AIG to reconsider the bonus payouts. The outrage has been coming from all fronts. New York Attorney General Andrew Cuomo has requested AIG to release the names and positions of the recipients of bonuses or face being subpoenaed.
Mr. Obama has to find a way to stop the foolishness and put his government into the driver’s seat. The bonuses represent a tiny symptomatic gesture of the total conceptual failure of his government to hand out money with no structurally sound accountability system in place. By this I mean, attaching legislation to bailout funds that would modify employees’ contracts to reflect the reality on the ground: That bonuses are to be paid if and only a company earns profit. Why is this Administration so scared of bending its muscles with Wall Street when they got us into this mess in the first place? AIG’s decision to pay bonuses will be the measuring stick of this Administration’s failure to act swiftly and boldly in correcting the capitalist renegades that refuse to play by the rules.
In the end, Mr. Obama should feel like he did everything he could to avert a second depression. He should start firing people in Wall Street; he should pass legislation that would put caps on financial instruments like CDS’s (credit default swaps), which are becoming the lethal protagonists of the current credit crisis in this saga of sagas; and finally he should start announcing plans for a banking rescue that would tie all the loose ends Wall Street giants are undoing with massive payouts and corporate gimmicks.
