AIG Theater of the Absurd Moves to Connecticut

The scarlet letter-like hysteria over AIG continues, this time with the Connecticut state legislature seeking the political limelight by reportedly being ready to ask AIG workers to testify.

From the Greenwich Time:

The legislature's Banks Committee and Attorney General Richard Blumenthal are issuing subpoenas this afternoon to force state residents who received AIG bonuses to the capitol next Thursday for a hearing on the details of those awards.

"There's just really a lot of questions to ask," Sen. Bob Duff, D-Norwalk, Banks Committee co-chairman said in an interview.

Duff said the committee is also going to subpoena AIG CEO Edward Liddy for questioning over why the bonuses were paid with federal bailout money. But Duff acknowledged unless Liddy owns property in Connecticut, the move is more a symbolic because the Banks Committee's authority ends at the borders.

This has officially become theater of the absurd. The U.S. Congress and now Connecticut state legislature are outraged - outraged - and want answers.   They are going to do more of what they do best - talk.

Lets clear up a few things:

Most AIG workers had nothing to do with the problems.   AIG has 116,000 employees.  The entire financial products division employs about 6,000 of them.    Only a few of those 6,000 actually had the decision making authority and power to create the derivatives in question.   Most AIG employees are normal, good people who thought they worked for an insurance company.

How many of those employees actually discussed their bonuses with Treasury or Congress while the negotiations were being done to bail out their company?   Likely none.  The employees were simply given what was agreed to (after the U.S. Treasury signed off on much of this, by the way).   It doesn't mean they won't have to give the money back, but don't blame them for the bonuses being paid.

99.99% of Americans would have accepted the money.   Ask yourself - honestly - if you would voluntarily turn down a bonus (of any size) paid to you under your employment contract even if your company was losing money.   Do athletes on losing teams give their paychecks back when they get hurt and cant play?  Hell no.   And many of those same athletes are living in part on the taxpayer dole by playing in publicly funded stadiums filled with generous tax breaks.

Most AIG workers are just regular people.   They are not the executives who created many of these complex instruments.   They were not bent on world destruction.   We must separate the rank and file from the executives, who take the top job and higher pay on the idea that if 'it' hits the fan, they will be the ones that go down or get raked over the coals.    Parading the rank-and-file in front of a McCarthy-like hearing does nothing to solve the bonus problem.   It also does nothing to solve the bigger problem of the credit crunch and billions in bad debts still on balance sheets.   It just destroys families and creates dangerous class warfare.

Americans are angry and looking for somebody to blame.   Right now, AIG is a very convenient target.   As Michael Lewis wrote in an excellent column today:

But now that taxpayer money is on the line the story has changed: innocent taxpayers are now being exploited by horrible Wall Street financiers. The guy who defaulted on mortgages on his six spec houses in the Nevada desert has turned himself into the citizen enraged by the bonuses paid to the AIG employees trying to sort out the mess caused by his defaults.

America has a right to be angry about the AIG bonuses.  The money shouldn't have been paid, and much of it should be given back.   But just because the money was paid, does not mean grandstanding politicians need to destroy the lives of the workers receiving money to prove a political point.

I'm beggining to wonder if all the taxpayer money wasted on the AIG bonus issue through hearings, wasted time and general blather isn't going to cost us more than the $165 million anyway.