"We are a country of law. There are contracts. The government cannot just abrogate contracts."
Will the government adopt the same stance when demanding that auto workers accept cuts to remuneration? In that case, there seems to be a whole different attitude: accept reductions to pay and benefits or you can't expect to keep your job. There are even demands for cuts to payments to auto union pensioners.
If you're going to force auto workers to accept pay cuts for relatively minor bailouts you sure as hell better force financial institutions to accept pay cuts.
To put the bailout in perspective, US taxpayers are paying on average over $1,000 in 2008 - just to bail out AIG. And it's just one of dozens of financial institutions being bailed out. The bailout to the auto industry is going to be something like one 10th of just the AIG amount.
I see the justification in the auto industry negotiations: the auto industry is not profitable, and so costs have to be reduced to make it a sustainable industry. Has the financial industry somehow not been judged in the same way?
Most of the AIG bonuses go to the Financial Products Division, the group that ruined AIG. In the last three months of 2008, AIG lost $62B - the largest losss of any company ever. Some individual bonuses are as large as $6M. The company argues that the average bonus is only $19,000, but you can manipulate the average: the key thing is the top amounts. Plus, the company claims that if they aren't paid people will quit, but really: in today's economy, where will they go? You might argue that they'll sue: well pass a law.
The bonus issue is just part of the scandal at AIG. There are also troubling questions about counterparty payouts: while a company in distress might have forced counterparties to take a cut on payouts (especially since a lot of the transactions were highly speculative), AIG used federal bailout funds to voluntarily pay 100% - and is now resisting efforts to provide a list of who was paid. Again, it seems like the rich and powerful are using government bailouts to transfer money among themselves.
You might argue that it's all about power. AIG is too big to fail so the government's hands are tied. Baloney. The government now owns 80% of AIG. The government has all sorts of options up to and including taking control of the company, sending people to jail, and levying massive fines.
I'm not blaming Obama for this; he has a whole lot better take on this than his opposition. This is just the way the system works. It's a mindset: a paradigm that needs to be broken and replaced with something more equitable. It's doubtful it will ever change. Everyone's mad about this but nobody's mad enough.
Update: Counterparty payments released