Now the AIG scandal is getting out of hand. Yesterday Iowa Sen. Charles Grassley suggested AIG executives should take a Japanese approach toward accepting responsibility for AIG’s collapse by resigning or killing themselves. 

First off, you only need to go back and read my past AIG articles to know I was against giving them bailout money to begin with. I also stated at each disbursement that it wouldn’t be the last. However, as critical as I am of AIG I find Sen. Grassley’s comments appalling. For starters, let’s keep a couple things in mind.

1. Poor management is not a crime – Don’t get me wrong, I think AIG was poorly run but that does not make it criminal activity. Should key people in AIG be fired? Absolutely. Is poorly running a company a criminal offense? Not unless just about every manager you have ever worked with is ready to serve time for stupidity. 

2. Whose fault is it AIG has money to burn? –  Surely AIG would not have had the ability to pay bonuses if they went out of business. Now that the American Tax payers own almost 80% of AIG, money appears to be no object.  

3. Look, shiny beads! – Makes for a nice change of focus doesn’t it? Instead of being upset with Bush (or now Obama) for giving all this money to companies without any real restrictions or monitoring plans, we can now focus all our anger at a specific company (AIG) and their employees. 

4. Throw the baby out with the bath water – The AIG bonus structure will get messy. Many of those receiving the bonuses are apparently front line people who have performance related contracts. Some of the bonuses are as low as $1,000. In the realm of already giving AIG $170 Billion maybe some of them should be paid. 

The biggest thing we need to focus on right now is we have invested money in AIG (whether you wanted to or not). What is the best way, going forward, to protect that investment? Don’t pay any money to any workers? Fire everyone? Or, if you are like Sen. Grassley call for suicide? Come on people, we have to move forward and rebuild the company (so we can get paid back). 

Should executives get bonuses? No. Should front line performance/commission people get paid? Probably, so long as it was based on delivering positive numbers to the company. 

As for Sen. Grassley…I would save the theatrics for your own campaign and I certainly hope your constituents are 100% happy with you; or they just may take your advice on how to solve the problem of you in office. 

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AIG has turned into the worst brother-in-law you could have in the family. A money-losing blob that just won’t go away. The government has turned into the perfect enabler relative that just won’t admit when all is lost and to simply cut bait. 

On October 10, 2008 AIG received $ 85 Billion. It was my first mention of AIG and I wrote “The downside is that I highly suspect this will be nowhere near the amount of money that AIG ends up needing.”  

On September 17, 2008 I wrote about AIG receiving yet another chuck of cash. This time it was $40 Billion. I wrote “Matter of fact, I am going to say it again; I highly suspect this STILL will not be the end of it. Companies like this seem to always keep coming back to the government trough (I hope I am wrong).” 

Now, AIG is back again (surprise!) and the government is handing them another $30 billion. More taxpayer money going to a company that can’t seem to get their sh*t together. 

When will government understand bailing out companies, in a capital market, is not the right answer? Most of the bailout companies, I am sad to say, will still end up failing. The only catch is that they will blow through billions of taxpayer dollars before they do fail! 

Let them fail and the next company, that is trying to do everything right, will step up to the plate! 

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If you remember, the government agreed in September to give $85 billion to faltering AIG to avoid a collapse in the economy (mmmm, how did that work out for you?).

AIG was so happy with the bailout that saved their company and their jobs they continued on with a $440,000 posh California retreat just days after the bailout. 

But wait, there is more. Buried in the news… 

AIG is saying they need more money. And the government, in such a giving mood right now, gave it to them. How much you ask? 

$37.8 billion. 

Yes, that is on top of the $85 billion in September. 

“The bottom line is, they need more liquidity than they thought,” said Mark Lane, an analyst for William Balir & Co. 

You just can’t make this S#%@ up! When will the government learn their lesson? When will someone make some solid decisions? Just say “no!” – even a four-year-old knows that! 

Don’t get me wrong; I don’t blame the government – exclusively – for the economic downturn. Frankly, we are all to blame. We, as a country, have been living in excess and mixed up priorities for some time. 

What we do going forward is key to our future and I have yet to see a fundamentally sound decision being made in the last month. I mentioned in my first AIG post that they would most likely need more money and here we are. Matter of fact, I am going to say it again; I highly suspect this STILL will not be the end of it. Companies like this seem to always keep coming back to the government trough (I hope I am wrong). 

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When Mexico was in serious financial straights the US said the (Mexican) government needed to stay out of the way – the market knows best. 

When Russia was on financial brink, again, the US said government intervention should never happen – you should be like us.

When Thailand was….nevermind…you get the idea. 

We are real good at telling other governments they need to stay out of their country’s “free market” affairs even when the result includes joblessness and domestic turmoil. The economic system will correct itself…well, unless it happens to us – then the rules change. 

The Federal bailout is approaching (and will pass) the Trillion-Dollar mark. What is on the table so far? 

$300 billion for failing mortgages.

$200 billion loans to banks

$200 billion to buy Fannie Mae and Freddie Mac

$87 billion to JPMorgan for financing Lehman trades

$85 billion to buy (79%) of AIG

$29 billion to JPMorgan to buy (failed) Bear Stearns 

Is this a glimpse of a US move towards Socialism? Well, the government will now basically control the lions’ share of mortgage lending (Fannie Mae and Freddie Mac) and Insurance (AIG).

I think Sen. Jim Bunning (R-KY) summarized it pretty well. “The only difference between what the Fed did and what Hugo Chavez is doing in Venezuela is Chavez doesn’t put taxpayer dollars at risk when he takes over companies. He just takes them.” 

Think about it. The US, with taxpayer dollars, has taken over failing companies for billions of dollars. If they are right, and companies rebound, the government has serious intervention into the once private sector. If they are wrong, and the companies fail, taxpayers deal with more loses and ongoing repercussions. Sounds like a no-win situation to me.

I don’t think we should have bailed the companies out. Yes, I know jobs would have been lost. I know the economy would have suffered as it worked its way back to manageable levels. But I also know that “just print more money” is not the path to recovery. 

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