Both Oars In Greed is Only One of Seven

Mar 20, 2009

This week CNN ran the headline “Is Greed Good” as the controversy over AIG bonuses waged in Washington and on Wall Street.  For the record, greed is not good, nor is gluttony, wrath, sloth, envy, lust or pride. Arguably, all these but gluttony, unless we count gluttony for punishment on our part, have been displayed this week in the discussion of the AIG bonuses.

Before I begin to layout the players who have taken us on this latest ride through Dante’s Inferno, let’s take a moment to dispel any notion that greed is good or even a necessary evil. Greed is a vice. It is the disordered desire for money or material things. It has no place in a market economy.  Adam Smith’s invisible hand does not steal from the cookie jar—it lowers the cost of cookies for everyone. Proper economic systems reward individuals for their industriousness in a manner that benefits everyone, not just the individual. Bonuses can be good, but greed is never good.     

Nevertheless, it is understandable why AIG’s CEO, Edward Liddy, has had a hard time explaining why giving bonuses to 418 employees in a faltering company benefits us. Not buying his plea that AIG needed those who did the winding to the do the unwinding or the public would have lost more, an angered House committee demanded he name who got the dough. He declined, claiming that anonymous threats had been made against the recipients, including strangulation by piano wire. His claims seem well-founded since Senator Grassley suggested on national television that AIG bonus takers commit hari-keri.  Unfortunately, for the now embarrassed Mr. Grassley, even network makeup cannot cover up the ugly face of wrath.  

Channeling Joe McCarthy, Barney Frank continued the wrathful clamor for “NAMES” on to more network shows.  Yet, Mr. Frank is unwilling to list the names of the Senate and House members, who likely out of sloth or lust for power, allowed the financial industry to become deregulated to the point of its own destruction. He also did not offer to list the names of those Senate and House members who crafted the loophole that allowed the AIG bonuses to slip through in the first place. He has less reason to hold back than Mr. Liddy—these names would be of public figures who actually work for the taxpayer, not private citizens.

I do applaud Mr. Liddy’s request that AIG employees who received bonuses of $100,000 or more “do the right thing” and give back part of their bonuses. I am for voluntary remittance of the bonuses. To be honest, I am always for people giving back—even the poor widow who offered her last penny. I suggest AIG employees donate their bonuses to charity to avoid the personalized tax code the ever prideful Ms. Pelosi has in mind for them. Maybe split the bonus between a favorite charity and Uncle Sam—who is pretty cash strapped himself.  

This leaves envy. In some twisted way, I think envy explains why we did not rage with wrath over bonuses in the good old days when the market was twice as high. If there were no high paid athletes and heavily bonus-ed Wall Street moguls, who would we have to envy? They provide wish fulfillment. Mr. Madoff contended that it was his clients demand for unobtainable returns that made him do it. That’s no real defense, but it may be an authentic indictment of us.

I am not necessarily for these particular bonuses; I am just concerned that our congressional leaders are responding to vice with vice. Screaming for names of every day private citizens to make them targets of public criticism or worse and concocting specialized tax codes smacks of vigilantism. It also looks a lot like the usual political smoke used to cover up the lack of preventive vigilance that lawmakers, like Mr. Frank and Mr. Dodd, should have been practicing before the whole herd of cows left the barn. I prefer Mr. Liddy’s request to his colleagues, which respects contract law and personal freedom, to Mr. Frank’s scary rant that AIG is “de facto nationalized.” AIG is most certainly in our debt, but it is not our nation’s company.  The principles of this free country are worth more than $165 million.

On a final point, Mr. Frank questions AIG for giving retention bonuses to those who “messed it up in the first place.” His point is well taken: why retain the “incompetents” who caused the problem? Will he feel the same way when he stands for reelection?