AIG BONUSES: THE REAL STORY

Jacquerie of WAMToday discussed the need for us to go beyond rage and replace it with focus; she also talked about the Obama Campaign's ability to deflect us from the real issues and have us chase after bogus matters (Rush Limbaugh, the AIG bonuses, NCAA basketball, the White House dog, the White House bowling alley, and the like).

Finally, she stressed the need for us concentrate on issues where we can win. There are issues where our goals might be noble (e.g., the birth certificate controversy) but which we cannot win -- will not win. Remember, Obama wants us to joust with windmills. He wants us to spend tens of thousands of hours -- and hundreds of thousands of dollars -- on matters that lead nowhere.

Of course, it's not always possible to know in advance precisely what's winnable. For example, for various reasons it has become nearly impossible for Obama and Congress to pass additional "bail out" money for financial institutions, most of them big contributors to Obama, Dodd, and other political sleazebags.

One thing we need to avoid is becoming obsessed with single issues -- any single issues -- when backing candidates. Of course, Obama benefits from such obsessions, because it's part of their tried-and-true "divide and conquer" stategy. We want House and Senate members who believe in the Constitution and in traditional American values. If they disagree with us on one or two issues, that's almost irrelevant.

Yesterday, 87 Republican House members and a handful of Democrats voted against the punitive taxation of AIG bonuses. They did so not because they were pandering to angry constituents or because they favored the bonuses. They did so because they knew "ex post facto" laws are prohibited by the Constitution. In other words, we can't be punished by legislation enacted to make a previous act illegal.

If you read Amity Shlaes wonderful book The Forgotten Man, you'll see that Roosevelt's bad side was to enact ex post facto laws. He then prosecuted men, including Andrew Mellon, for legal tax "loopholes" they have used in prior years. If we don't have equal treatment under the laws, we have nothing.

On AIG, I talked at length yesterday with my friend TC, an AIG employee. She is not involved in any way with the credit default swaps that caused all of the company's problems. She was eligible for a performance bonus in her unit, but because of the company's bottom line financial situation she is not receiving any bonus money. She had planned on getting it, but now she isn't. Her situation is much more the norm at AIG than anyone imagines.

Did she earn her bonus? Yes. Is she getting it? No. And there are many, many people like her at AIG. It's basically a sales business, and bonuses are really a form of commissions. Of course, when the overall company is bleeding red ink, good people suffer because of the actions of a few (perhaps a dozen) bad people.

To reiterate: Almost all of AIG's operations in the more traditional insurance business were profitable in 2008, although one operation was horrendously unprofitable, which of course drove down the entire organization's profit performance.

Gee, why isn't the media explaining this the way I (and TC) have? Because the media, aside from FOX Business News and a few others, is clueless when it come to financial matters. They're much better at demonizing than they are at explaining.