Welcome. This here blog offers what I learn, in commentary for all its worth. Know that I try to know best, when I know anything at all.

Journey onward!!!

Tuesday, March 24, 2009

Part 1 - AIG Bonuses Are Immoral, But That Is a Good Thing

Anger can be therapeutic, so can drama. Therapy, however, does not always diagnose accurately. Especially when the therapist is a politician, we should all know better. The mad drama surrounding the AIG bonuses is such that one is hard pressed to separate reality from truth.

I juxtapose truth and reality because, in reality, there is every reason to demonize AIG and Wall Street. After all, the financial sector did bring down our economy. In truth, however, these are bankers and executives who were merely doing their jobs. To punish them is to punish guilt by association, while the real culprits of the financial crisis lie safely elsewhere.

Do not forget that there was nothing illegal about the practices that brought our economy to its knees. For the sake of keeping our eyes on the ball (forthcoming in Part 2), I will defend AIG insofar as reality permits and truth allows.

In Truth
Bonuses are standard practice on Wall Street, be they performance- or retention-based. Even when financial firms suffer big losses, big bonuses are still doled out to executives in the name of retaining their services and clientele. However reasonable they may be, retention bonuses alone seem unconscionably huge to the common man.

But the truth is, these exorbitant sums accurately reflect the importance of finance to the post-industrial American economy. Simply put, Wall Street salaries and bonuses are set in proportion to its real economic worth, not by losses in a single fiscal year. $165 million does not sound unreasonable in today's context.

I have argued in another post that, even today, our economy needs Wall Street more than Wall Street needs us. Certainly the massive and grudging bailouts of Wall Street and AIG affirms this point. Without Wall Street, the most desirable aspects of the American lifestyle that each one of us covets (admit it) would not be possible.

Until our reliance on Wall Street changes--and it will--AIG deserves its bonuses as much as they ever did, plain and simple.

The truth is, why should it make a difference whether their bonuses are comprised of tax money from their fellow citizens or deposits from far off Asian savers? Their bonuses are deserved because Wall Street gave us our lifestyle, albeit one that eventually drove us into the ground. But what's that got to do with them? Nothing. After all, they're just mere bankers and executives merely doing their jobs.

In Reality
Despite all truth, rewarding executives--no matter how deserving or innocent--whose company is on life support is seen by most people as outrageous at best and criminal at worst. The specific indictments are superfluous to name here. No matter how you look at it, AIG executives who helped themselves to the taxpayer's dime while the economy burns are morally indefensible.

But in reality, does Wall Street or AIG operate on an ethic of morality? If they did, then:
  • AIG would preemptively volunteer to forfeit their contracted bonuses;
  • AIG would graciously allow us to tax back their bonuses;
  • AIG would not have doled out bonuses at all;
  • AIG would not reward failure, not on the taxpayer's dime;
  • AIG would never have run a quasi-hedge fund that gambled our money away on bad bets;
  • Wall Street might not have destroyed itself and our economy along with it.
It is as if we expect our bankers and executives to do the moral thing, and getting really mad that they are not. The trouble is, there was never anything moral about this business in the first place. And we know it.

Wall Street plays the market, an institution that knows no moral bounds. Business ethics ring hollow because a free market economy is held to work on efficiency and not morality. More often than not, voluntary "moral" actions contradict market rules and drive the moralizing entrepreneur out of the game.

Can you recall any large shoe-making companies that refused to offshore its manufacturing to Chinese sweatshops? Probably not, since those companies would have disappeared long ago for their morals. Market competition is such that executives cannot submit to their moral discomfort, if such even exists.

As I have asserted elsewhere, this is an economic reality that Americans must own up to: moral detachment, and the productive exploitation of greed, is what drives a capitalist economy to its optimal output.

Immorality, as it were, is a good thing.

The Conclusion
In truth, bonuses are price tagged by the market, not individual intent. In reality, immorality is often rewarded by the market, not rebuked.

As such, moral truths and expectations have no basis in the capitalist reality which Americans subscribe to. To scream about the immorality of AIG bonuses, let alone expecting executives to forfeit them, basically amounts to a moral repudiation of free market principles.

Are Americans really prepared to take this stance? I'm not; not yet, anyway, until all is ruinous. We are not quite there yet, though our economy "stands on the edge of a knife. Stray but a little and it will fail, to the ruin of all. Yet hope remains while all in the Company is true." (from Tolkien)

When things are good, we love Wall Street. When things sour, we do not stay true to the very institutions that brought us riches with the world's envy. Instead we turn against them as if they were filth to begin with.

There is something profoundly misguided about populist anger at the immorality of AIG bonuses, to which an even stronger objection might be raised, namely that the populist anger is itself immoral.

If the AIG bonuses debacle, and the financial crisis at large, can help Americans reflect on our moral contradictions, the cost might well be worth it.
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Wednesday, March 18, 2009

Sitting President Sits with Jay Leno: A Post-Partisan Act

Thursday night, Obama sits in with Jay Leno. Some see this as good, some bad, and most say risky at the least. These are all legit opinions except that they are all irrelevant. I argue that Obama's choice was a matter of necessity, if he is intent on proving his commitment to the promise of "changing" Washington.

Obama's appearance, unprecedented for a sitting president, gives him an unprecedented chance to vet his unprecedented promise: achieve a post-partisan Washington, somehow, by relegating partisan ideology to the back-burner in politics. Some promise, isn't it!

In reality, he faces a poisonously partisan Congress wherein neither parties are willing to yield their party lines. While not surprising, this impasse effectively voids Obama's promise of change. As Washington looks today, post-partisan politics will not appear any time soon, much less bipartisan agreement on anything of import.

But Obama still has his trump card: popularity. He must use it or fail his promise.

At this point, the only way Obama can move Washington toward a post-partisan future is by appealing directly to the people. If he cannot do this effectively, Congress will forever remain as we know it today: divided by ideology, and speaking of things as they ought to be rather than as they really are.

All this while reality burns.

In fact, Obama really does not have a choice but to go straight to the people. Democracy requires that Congress speaks the language of its electorate and none other. Even as president, Obama can talk post-partisan all he wants but it does not mean Congress will speak his language. The only way to "change" Congress, therefore, is to "change" the people.

After all, how can we expect our leaders to transcend partisanship when their own electorate cannot? Lots of Americans are fed up with our government, but they want to look for the cause of their malcontent in all but the most obvious place, which is the mirror.

Obama understands this, but he cannot say it. This is why he decided to take the unorthodox step of appearing with a talk show host. If appearing on Jay Leno lessens the stature of the presidency, it is because Obama thought it necessary to attain his goal. Necessity and pragmatism are, of course, the definition of a post-partisan act.

Tomorrow night on Jay Leno, Obama must defend himself by making a post-partisan case for why his agenda leans so heavily on classically liberal ends. He must convince Americans that there is a practical need for doing so, not because he is a liberal nut trying to remake the country in his own partisan image. And he must do this without a teleprompter, which is why I suspect he chose this venue.

Because spending is a liberal thing, Obama must face the people and convince us that spending is also a thing of necessity in today's anemic economy. Making this kind of argument directly to the people is what it takes to bring post-partisan politics to Congress.

The political situation in Congress today is more than mere partisan gamesmanship, but getting perilously close to political brinkmanship. Obama cannot be the man who "changes" Congress because he does not elect its members. Rather, it is the American people who sets the tone in Congress, an institution designed to speak the language of its electorate (too often does it work the other way around). Tomorrow night, if Obama can convince enough Americans that he is pursuing an imminently post-partisan agenda, not just a liberal one, it would be a small step toward a post-partisan Washington.

Jay Leno is a risky but necessary step, given the political climate today. This move is very courageous on Obama's part and has earned my respect. For my part, I will be watching very closely not at what he proposes, but in how he proposes it.

Therein lies the key to post-partisan success.
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