Tuesday, March 17, 2009

Werewolves and zombies

The AIG fiasco leads to a few unavoidable conclusions:

1) Tim Geithner and Larry Summers need to join the growing ranks of the unemployed, who already number 10.8% of the workforce here in Oregon. Joblessness would only be temporary for them, no doubt. They're old-school crony capitalists who fundamentally don't get it because they're too embedded in the culture of Wall Street. They should be replaced by advisors who aren't totally clueless — people like Robert Reich and Paul Krugman, for example.

2) The behavior of the werewolves who occupy the AIG corporate leadership may be politically tone-deaf, but it was absolutely predictable. The rage is more suitably directed at politicians: the very people who either saw this coming and accepted it, or should've seen it coming and acted to prevent it. The feigned naïveté of politicians who are "shocked" by the AIG bonuses is a nauseating sight to behold.

3) If U.S. taxpayers own AIG (nearly 80%) and the zombie banks, they should exercise a proportionate amount of control over their management.

4) Legal platitudes about the sanctity of contracts were notably absent when the Big Three abrogated agreements with the United Auto Workers and other unions. Worst case: unilaterally rescind the contracts and let the executives make their arguments to a jury.

5) Scary as it sounds, bankruptcy is a better alternative for AIG and the zombie banks than endless bailouts with no transparency. For one thing, Chapter 11 filings would allow these corporations to avoid pre-existing contractual obligations to provide bonuses and golden parachutes. It would also allow them to dump their most toxic assets.

6) Barack Obama's adaptive skills are impressive enough that he can quickly clean house, learn the necessary lessons and move on to a more populist model for economic recovery (with a little help from Reich and Krugman, among many others).

And not least:

7) The whole cultural obsession with short-term gain needs to be examined at the deepest levels, from politics (with its focus on "short-term outcomes dictated by the electoral cycle") to the economy. Short-term gain often produces long-term pain, as the AIG fiasco again demonstrates. [To start, here's a minor suggestion: amend the Constitution to allow for 4-year terms in the House of Representatives to promote long-term thinking and reduce nonstop campaigning and fundraising.]

GRAPHIC: The werewolves at AIG (Wikimedia).

[Note: versions of this entry were cross-posted at Obsidian Wings and Lawyers, Guns and Money.]

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