AIG Bonus "Outrage"
A lot can be, has been, and will be said about AIG's payment of executive bonuses and the expressions of "outrage" from President Obama and other politicians. Tyler Cowen, for example -- one of the most reasonable people anywhere -- sparked criticism with an uncharacteristically sarcastic post on the topic.
One thing that I think this episode shows is that AIG (not surprisingly) is better than the government at market participation. The bailouts were, in part, arm's-length negotiations between AIG's people and the government's people, over how much AIG would have to give up in exchange for how much government money. This is what businesspeople do for a living; it's not what most government people do for a living. (As just one example, what employer would ever begin a salary negotiation by telling the employee, "My company can't afford to lose you"? And yet that's what the government did in saying that AIG was too big to fail.)
And so, surprise surprise, AIG came out of the negotiations with what appears to be a very nice deal.
Now the government, realizing it got snookered, is trying to divert attention from its own clumsy performance by voicing moral outrage at AIG. "I agree that you can have a dog in your apartment. . . . How dare you have a Saint Bernard in your apartment!"
Update: Minutes after posting this, I saw (courtesy of Russell Roberts at Cafe Hayek) that one of the bonus lamenters (Sen. Dodd) is the person who inserted into the stimulus bill an exception for contractually obligated bonuses agreed on before Feb. 11. In other words, "How dare AIG do what we agreed it could do!"
4 hours ago