What is going on today with Ed Liddy, CEO of AIG, is a show trial of the sort that used to grace the Soviet Union. Ed Liddy was not put in place by AIG, but the government. The current Treasury Secy, Tim Geithner, while he was head of the NY Fed, put in place the AIG bailout and allowed the bonus deals. Chris Dodd, Demo Senator, put an amendment in the 'Porkulus' bill to protect executive bonses - including these AIG bonuses. Now that the political heat is falling on Obama and not Bush (you don't hear Bush's name anymore, do you? All Obama, all the time), the Demo leadership from Obama to Dodd are 'shocked, shocked' to find bonuses are being paid. They hope the show trial will deflect public anger; if it doesn't, expect Tim Geithner to take the fall. No one will shed a tear for an incompetent tax cheat.
This show trial is all political noise, but beware of what Obama said today at a press conference, which shows how clueless he is of the real world. He never really held a job, after all. He first said he wanted to end the 'culture of bonuses' - meaning he has no understanding of how to motivate sales people, in or out of Wall Street. (BTW, if he removes these bonuses, expect the remaining sales people at the AIG trading desk to vacate, leaving virtually no one to manage $2.4T of credit default swaps - what a huge potential fiasco that will cause, all to save $165M of bonuses). Next he said he wanted to end the boom & bust cycle of the economy - a pattern built into human nature. Even God wouldn't try that! Finally he said he would have Barney Frank come up with the answer - Barney Frank! the fox in the henhouse who thwarted 12 attempts by Republicans to end the excesses of Fannie/Freddie that was the proximate cause of the housing bubble.
No wonder Obama's political support has dropped hard - his incompetence is showing. The spread of strongly approve vs strongly disapprove has dropped from 30% to 7%, and got as low as 4%, according to Rasmussen. He gets poor grades from economists, according to a WSJ poll. And at one time, 60% of MSNBC viewers in an unscientific poll rated him an F - this from his must supportive TV network!
This show trial is distractig the public from a much worse AIG issue - $120B of the $170B of bailout went right out to the counter-parties of these swaps. Goldman Sachs got $13B, etc. And none of them has any responsibility to pay it back. Who is responsible for that? It should make us very cautious to let the governent get its hooks into any other companies. It has destroyed AIG through inattention and now massive political meddling. Maybe the real trial should put the real culprits up, nt the fall guy.
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