Last week's brouhaha over the super-juicy bonuses received by the executives of bailed-out American International Group (AIG) was a stunning example of the ultimate lose-lose situation. Mistrust of the financial services sector by the general public has never been higher, and these new shenanigans will not encourage private investors to put their faith and funds into pumping up a deflated economy. Â
Yes, it is easy to tar and feather the AIG elite as being a bunch of greedy slobs for pocketing federal bailout dollars in the guise of bonuses. Yet at the same time, the controversy is bringing out more slobs who are exploiting the crisis for their own gain. In many ways, their behavior is just as inexcusable as the actions of the AIG bunch, owing to their hypocrisy in pocketing money from the financial services sector during the period when it was beginning to crumble into ruin. Â
The leaders in the House of Representatives and the Senate are raising a hue and cry over this situation without bothering to set an example of responsible actions. Alabama's Sen. Richard C. Shelby, the ranking Republican on the Senate Banking Committee, faulted Treasury Secretary Timothy Geithner for being ‘out of the loop’ on what the AIG C-suite was pulling.Â Shelby, however, was very much in the loop with the financial services industry: BusinessWeek and the Center for Responsive Politics recently reported that he pocketed $565,399 in campign donations from financial service companies and executives during 2007 and 2008 – the period when the economy began to rot out of control and the financial services industry started to implode. I guess it is okay for Shelby to put his hand out, but not the AIG crowd.
But Shelby was a penny-ante character compared to Sen. Chris Dodd, D-Conn., the chairman of the Banking Committee. Dodd gets byline credit for writing the loophole in the amendment of the bailout legislation that enabled AIG-style bonus payouts. He has reason to be sympathetic to the plight of financial service executives: in the 2007 and 2008 period, $6 million in campaign donations from financial service companies and executives was inserted into Dodd's coffers, according to the same report by BusinessWeek and the Center for Responsive Politics. (And it is no coincidence that many of the bonus-gathering AIG executives are Connecticut residents.) Â
And how can we forget Rep. Barney Frank, D-Mass., the head of the House Financial Services Committee? When the AIG scandal boiled to the scalding point, Frank came forward to declare, ‘I think the time has come to act as the owner [of AIG].’ Ah, but who owns Barney Frank? The BusinessWeek/Center for Responsive Politics report found that Frank was the Congressional depository for more than $984,000 in campaign donations from the financial services companies and executives during 2007 and 2008.
Is there a need to tighten the loose language of the bailout legislation to prevent a reprise of the AIG debacle? Of course. But more importantly, there is a need to tighten the laws relating to campaign donations – especially when there appears to be a blatant conflict of interest. It is too easy to blame Geithner or even President Obama for the AIG mess – and, yes, they deserve a lot of heat for being seriously off their game with this situation. Â
But let's not forget the Congressional leaders who sat by and did absolutely nothing during the two-year pre-Obama/Geithner period when the financial services industry began to fall apart – particularly Dodd, who literally walked away from his Senate responsibilities in a vain attempt to become the Democratic nominee for president.
Periods of crisis bring out the best and the worst in people. Let's hope we can start to see examples of the best in people in the very near future.
– Phil Hall, editor, Secondary Marketing Executive.
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