Wednesday, March 18, 2009

Trivial Pursuit

Greg Mankiw points out in a post titled "Trivial Pursuit":

The AIG bonuses now being debated in Congress and everywhere else represent about .001% of annual GDP. If a typical Congressman spent that fraction of a 2000 hour work year on the topic, it would consume only about 1 minute of his or her time.

Regardless of how outraged you are about the AIG bonuses, it is probably not an optimal allocation of resources for our elected leaders to spend large amounts of time and energy on the topic. The economy has bigger problems right now, and it would be better to focus attention on those.

MP: Here's another take. According to
the NY Times, nearly $200 billion in taxpayer funds were pumped into AIG, which now plans to pay out $165 million in bonuses. The bonuses represent .0825% (about 1/12 of 1%) of the bailout amount, or $1 in bonus money is being paid out for every $1,272 of bailout money received by AIG.

Also in the NY Times article, "[Some] employees took salaries of $1 in exchange for receiving the bonuses, which were supposed to keep them from leaving A.I.G."


At 3/18/2009 9:15 AM, Anonymous Anonymous said...

One thing that has gotten lost in all of this is employees that actually deserved bonuses. I really haven't examined much about the topic but isn't AIG a very diversified global financial institution? It was the mortgage/derivative mismanagement that took the company down. The casualty insurance side of the business could have been gangbusters. Just a thought that maybe some people within this organization actually deserved a bonus for doing a good job. Just a thought...

At 3/18/2009 10:50 AM, Anonymous Anonymous said...

Having taken an 80% interest in the company, the idiots in Congress are determined to drive away anyone who brings value to the enterprise.

As I said before, the government couldn't run a whorehouse profitably, (Mustang Ranch) what makes anyone believe they can manage a corporation? Or for that matter, your health care.

At 3/18/2009 11:19 AM, Blogger Marko said...

The reason this is important is that it is yet another illustration of why the government should not be running businesses, in case you needed such an illustration. Political concerns trump business concerns when that happens. Businesses may be stupid sometimes, but the government is always stupid.

At 3/18/2009 11:19 AM, Blogger misterjosh said...

I've been waiting for you to cover this story. I don't really have much to add beyond Tony and anon, but I will add a metaphor.

AIG is like a sick cow the village bought off a neighbor so he wouldn't go broke. He owed a lot of the other neighbors money, and they didn't want to lose that cash. Maybe not a good decision, but we're stuck with it.

We're making progress in healing the cow, but now the jackasses in the village council want to starve the cow because it costs too much to feed. The more we starve the cow, the less it's worth in the long run.

I'm not saying we need to give it oats and honey all the time (enormous bonuses for all executives) but we need to feed the cow properly if we ever want to fatten it up for slaughter.

At 3/18/2009 11:27 AM, Blogger Sparsh said...

If the owner of the cow, a supposed expert on dairy issues, couldnt keep this particular cow healthy, what makes anybody think that the village, composed of cobblers and bakers, will do a better job.
It will NEVER happen. I think the protests are an agitation towards that one fundamental fact, and hence very important. If you even stop drawing attention to it, the American economy might as well just give up right now.

At 3/18/2009 12:35 PM, Anonymous Anonymous said...

This explains everything. Scroll down through the pics at this LINK.

The idiot in the Che Guevara t-shirt is the head of AIG Financial Products and former vice chairman of Morgan Stanley, Gerry Pasciucco. Pathetic.

At 3/18/2009 12:52 PM, Anonymous Anonymous said...

President Obama was informed about the $165 million in bonuses due to employees of the American Insurance Group the day before they were paid out last week, the White House disclosed late Tuesday. Obama has expressed outrage that the company, which has received about $170 billion in government bailout money ...

Washington Post

Washington (AP) - Cue the outrage. For months, the Obama administration and members of Congress have known that insurance giant AIG was getting ready to pay huge bonuses while living off government bailouts. It wasn't until the money was flowing and news was trickling out to the public that official Washington rose up in anger and vowed to yank the money back. Why the sudden furor, just weeks after Barack Obama's team ...

Associated Press

At 3/18/2009 3:13 PM, Blogger Marko said...

Obummer is attempting to join in the anger to channel it away from his own administration.


Change - all that is left in your pockets after the Democrats take over.

At 3/18/2009 4:35 PM, Blogger QT said...

Anon. 12:52,

Thanks for the link. Interesting to watch Obama in action.

At 3/19/2009 2:07 AM, Blogger KO said...

Only politicians can pass a bill with $8 billion in earmarks one week and be outraged over $150 million the next.

If they want to stop AIG from becoming a black whole, how about going to the counterparties and settling on those billions?


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