Monday, March 23, 2009

Pop The Economic Pimple While The Cancer Runs Wild

Note: I find the bonuses paid to the AIG executives and financial "geniuses" that created and sold the products that has helped to bring the economy of the United States and the world to its knees to be abhorrent and bordering on the immoral. If there is a way to abrogate them within the boundaries of contract law, then it must be done! But that is not the point of this post. That said, let's move on.

What Is The "Political Risk Premium" For Doing Business?

Populism is a discourse which claims to support "the people" versus "the elites". Populism may comprise an ideology urging social and political system changes and/or a rhetorical style deployed by members of political or social movements. Generally, populism invokes an idea of democracy as being solely the expression of the people's will.

Political Expediency: Many politicians make decisions based not necessarily upon what is the best thing to do, nor upon their own ethics and morals, but upon what is best for their own political gain. A politician is dependent upon his or her good standing with voters, as well as an ability to "fit in" with the party political structure. Since a person's time in politics sometimes is short, it is only natural that they do everything possible to continue their career.

I use these words and political commentators use these words, but how many have actually seen a definition. When you read them it really shines a light on how it is that our government runs, and why it is that it is so dysfunctional. When we look at the goings on in Washington over the last week or so as it concerns the political uproar over the bonuses being paid to executives at AIG, there are really no other words to describe it.

The Law of Contracts Inside Cover

The AIG bonus situation is an issue to be hashed out by lawyers that specialize in contract law. Can bonuses contractually agreed to be rescinded out of hand in a situation where a company is still a going concern, albeit one that took TARP money. Maybe, and I certainly hope so. But the fact remains that these are not items to be taken lightly. In order to negate the validity of a contract, there needs to be some basis in law, and not done simply because it makes good theater for the people back home.

If and when we get to the point as a country where contracts can be overturned at the whim of a populist position taken by a politician with the power to do it, then who in their right minds would have the faith and confidence to enter into a contract? Where does capitalism go from there?

To recap: Are these bonuses being paid to many of the same people that helped get the country into the situation that it finds itself in repugnant, disgusting, immoral? Yes they are, but the fact remains that we are a country of contracts and laws, and if these contracts are able to be rendered invalid simply because the masses find them to be incredibly wrong and the politicians find a cause that is both populist AND politically expedient, then we as a capitalist society are going down a slippery slope.

What other contracts don't we like? Mortgages? Car Leases? Student Loans? Contracts signed with another business? If the moral outrage was strong enough and the politicians saw the opportunity to glom onto the cause, could we just have them rendered null and void?

These same politicians exhibiting their moral outrage also have a lot of explaining to do. Barney Frank, Chris Dodd, Tim Geithner and their bands of merry men and woman are not blameless in all of this, not by a longshot. They do however, have the unmitigated audacity to get up on the bully pulpit, waste the taxpayers time and money running hearings to do publicly what could be done privately, and engage in the populist rhetoric when they should be in another hearing room sitting at the table answering their own set of questions about how and why we are now where we are.

All of that said, let our employees in Washington get back to curing the cancer that is running through the body of the country, and stop trying to clear up the acne that is on its face. All in the name of populism and political expediency!

4 comments :

  1. if you blame dodd, geithner etc..blame bush.

    ReplyDelete
  2. I never said the Bush adminstration didn't have a big hand in all of this did I?

    But they are not in charge now.

    ReplyDelete
  3. Thanks for writing a thorough article about personal finance management. I learnt something new and hope to test drive your ideas soon. Awesome article!!

    ReplyDelete

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