Paul Greenberg / March 23, 2009

The Politics of Outrage

You don’t have to be a Gypsy fortuneteller to have foreseen the outraged reaction from politicians of both parties and all ideologies to the outrageous bonuses being handed out at AIG. After all, the giant financial insurer is only one of the many beneficiaries of recent bailouts, which means it’s now largely owned by the taxpayers, so its business is ours. Unfortunately. For that’s our money it’s doling out in those multimillion-dollar bonuses.

Instead of being put out of its misery like Lehman Brothers, AIG was one of those outfits deemed Too Big to Fail, and naturally it’s proving Too Big to Succeed. Instead of an orderly dissolution, reorganization and decent burial, AIG is being kept on life support at public expense. Its financial position remains precarious or worse, but there’s nothing wrong with its sense of arrogance, which remains as insufferably healthy as ever.

Result: The natives are restless and have every right to be. The approximately $165 million handed out in bonuses at AIG is said to be justified because the company has to retain the savvy executives who made all those failed investments in derivatives – a relatively new field as mysterious and complex as it can be financially fatal. You have to wonder: If these people are the best and brightest, what would the worst and dimmest look like? And why have a number of these “retention” bonuses gone to people who have since left the company, that is, not been retained?

Never mind. Nothing succeeds in today’s America like failure. For when Uncle Sam is picking up the tab, why scrimp? It’s like gambling with other people’s money; why not be a high roller? What have you got to lose save honor? The taxpayers will take the fall. Slowly the well-based suspicion mounts that it’s the government, aka We the People, who may have made the dumbest decision of all by buying into this outfit.

“How do they justify this outrage to the taxpayers who are keeping the company afloat?” our now outraged president asks. Answer: They don’t have to, not so long as Uncle Sucker keeps the money flowing.

Not the least ironic twist in this story is how quickly the enablers in government have turned on those outfits they enabled. Politics now demands a show of outrage, so they are shocked – shocked! – at what can happen when private companies become public wards and their execs, rather than have to face the consequences of their actions, are rewarded with bonuses.

When it comes to expressing outrage at some moral debacle in the financial world without acknowledging his own role in the continuing catastrophe that is the Panic of 2008, no one can top Barney Frank, the representative from Massachusetts and Chutzpah.

Congressman Frank was at the top of his low form this week when he appeared aghast at the very thought that “these bonuses are going to people who screwed this thing up enormously. … Maybe it’s time to fire some people. We can’t keep them from getting bonuses, but we can keep them from having their jobs. … In high school, they wouldn’t have gotten retention, they would have gotten detention.”

Hell hath no fury like a pol who, having screwed up largely public corporations like Fannie Mae and Freddie Mac, goes after a once private company like AIG. Time and again, when watchdogs like John McCain and his fellow reformers were barking at Fannie and Freddie’s reckless loans, Congressman Frank’s reaction was a sustained ho-hum.

Almost a decade ago – in 2000 – when a bill was introduced to tighten the supervision of the terrible twins, Mr. Frank called the danger of their collapsing “overblown” (actually, it was being understated at the time), and declared that “there was no federal liability there whatsoever.” And he stayed depressingly consistent year after year. “I do not regard Fannie Mae and Freddie Mac as problems” (Barney Frank, 2002). “I do not think we are facing any kind of crisis” (Barney Frank, 2003). When unmistakable cracks began to appear in their financial condition, Mr. Frank remained sanguine, if not deaf-and-dumb. “I think Wall Street will get over it” (Barney Frank, 2004). And so disastrously on.

Mr. Frank and his equally blithe accomplices in Congress encouraged Fannie and Freddie to make bad loans in because they were supposed to be creating “affordable housing,” and now that so many of those loans have turned out to be unaffordable, just as he was warned, the congressman responds by railing against … AIG.

You bet the executives responsible for this mess should be fired. They screwed up enormously, to use Mr. Frank’s phrase. But what happens to a Member of Congress who screws up enormously? Why, he’s regularly re-elected by the suckers. Instead of retention he, too, should get detention.

No such luck. Instead, Barney Frank struts and frets his hour upon the stage, a regular before the insatiable television talk shows as chairman of the Powerful House Committee on Subsidizing Scams, always playing the street-smart sage channeling our outrage. And no one dares call it chutzpah. Well, not enough do.


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