Kozlowski: AIG bonuses aren’t great, but have to be left alone

Outrage! Outrageous! Boy, I’m mad! The discussions in the news, where they ask the question:… Outrage! Outrageous! Boy, I’m mad! The discussions in the news, where they ask the question: ‘AIG: scumbags or the biggest scumbags ever?’ seem perfectly reasonable to me. Why, those AIG executives are worse than Bernie Madoff by taking their bonuses, worse than Benedict Arnold, and almost worse than Judas Iscariot. The public demands, and must receive, their heads on a plate. By golly, crucifixion is too good for them. The very public outrage over the AIG bonus scandal has been remarkable. You don’t usually see the public this worked up unless abortion is somehow involved or Brad Pitt is showing up to give autographs. Unfortunately, mobs are not known for exhibiting a great deal of rational thought. There are many things that are being overlooked about these bonuses, lost in a sea of condemnation and irritation. So, at the risk of being thought in league with perfidious Wall Street and the World Banking Conspiracy ‘mdash; offices convenient to those of the Masonic and Papist conspiracies ‘mdash; some perspective, if I may. First, there is the niggling and overlooked fact that Congress cannot do anything whatsoever to force those bonuses to be returned. Attempting to do so would be either ineffectual or unconstitutional. This tax that the House rammed through, to tax bonuses at 90 percent, could not apply to the AIG bonuses for one simple reason: The law was passed after the bonuses were given out. If the bill becomes law, and that law is applied to the AIG bonuses, then Congress has just done one of two things. It has either passed an ex post facto law, a law that is retroactive; or it has passed a bill of attainder, which is a legislative act that confiscates property without the target of the attainder being convicted of a crime in a court of law. Both of these actions are explicitly no-doubt-about-it, no-penumbras-needed unconstitutional. Article I, Section 9 is unequivocal on this point: ‘No bill of attainder or ex post facto Law shall be passed.’ Congress can stand on its head, but the bonuses will stand. Next, the amount of money in question is trivial. According to ABC online, the size of bonuses was a mere $165 million. OK, OK, $165 million does sound like an awful lot of money, particularly when viewed from the perspective of a bunch of college students who don’t have any money at all. However, overall, AIG received $170 billion in federal money. In short, that means a whopping one-thousandth of the federal money went into these bonuses. That’s 0.1 percent, folks. That would be like being outraged after you gave somebody $100 because he spent 10 cents in a way you thought was irresponsible. We also have to wonder where our heroes in Congress were when all this bailing-out business started. Well, surprise, surprise, there were loopholes in bailout legislation that allowed these bonuses. These loopholes were inserted in the legislation at the request of Treasury Secretary Tim Geithner. The Hartford Courant from March 19 has Sen. Christopher Dodd, D-Conn., admitting that he was hanging around somewhere when this loophole was inserted at the request of the Treasury Department. Now, he claims he was unaware of the bonuses involved, which is funny because according to his own Web site, dodd.senate.gov, he is chairman of the Senate Committee on Banking, Housing and Urban Affairs. If Dodd, head honcho of the committee, didn’t know that this very important loophole had been inserted, then he is incredibly incompetent. However, Dodd aside, what this means is that AIG was only acting in a way that Congress had specifically authorized. They broke no laws. Finally, Secretary Geithner, quoted in the Courant, provides the final needed perspective, namely why Treasury requested that loophole. AIG had already made promises of bonuses to these executives. Had AIG not delivered on those promises, they would have been sued for fraud by the very people receiving the bonuses. The government would have been legally liable as well, and more money probably would have been lost in the legal wrangles and the court-ordered paying of the bonuses anyway. In short, lost in the outrage are some very important facts that seem to paint a very different picture from the one the media is feeding us. AIG, contractually obliged to provide these bonuses, took advantage of legislation pushed through a Democrat-controlled Congress to fill those obligations, which were trivially small compared to total bailout money received. Because those bonuses have already been paid, Congress risks acting unconstitutionally if it attempts to recoup them. AIG did nothing illegal by granting the bonuses, and those who received bonuses are not criminals. How unfortunate that anger is a substitute for analysis. Write Mark at kozthought@gmail.com.