The Innumeracy of the Masses

I’m still fascinated with the outrage that the AIG bonuses have generated. I can understand that it looks like a lot of money. But lets write two numbers down for a minute,

$165,000,000
$170,000,000,000.

Now the second number is 1000x larger than the first as a reasonable approximation. But people seem to be completely unaware of the second number even though the first number is totally dependent on the second number. That may sound a bit cryptic, so let me put it another way. Because the Federal Government has given AIG $170,000,000,000 AIG can now hand out 0.1% of that money, $165,000,000, in retention bonuses.

My question is, if the number that is 1000x times smaller than the actual bailout of AIG is causing all this fuss why aren’t people in the streets in huge numbers demonstrating against the $170,000,000,000 bailout? It is, after all, a bailout. A way of propping up a company that was a key player in bringing about the financial crisis that also is a significant if not the main reason for the recession that is putting people out of work.

And it doesn’t stop there. President Obama has his $750,000,000,000 stimulus package. If there is only 1% waste, fraud and abuse (a laughably small number given how fast the government is going to try and spend it—think of the money for Katrina aid that went to strip club trips) that is still $7,500,000,000 that is wasted. That number is 45.5x the size of the AIG bonuses. Where is the outrage?

My only conclusion is that most people are innumerate. When a number gets too big they just can’t grasp the magnitude of that number. Here is one way of trying to get a grasp on the magnitude of these numbers. If you took 170,000,000,000 one dollar bills and stacked them one on top of each other (not end-to-end) it would be 11,537 miles high. If you took 750,000,000,000 one dollar bills and did the same thing it would be 50,899 miles long, or it could go around the earth twice at the equator. Why people are worried about a stack of one dollar bills that is only 11 miles high beats me.

FILED UNDER: Economics and Business, Government, , ,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. Innumeracy is probably part of the problem, but a larger part is socio-psychological/political. Our media and political “leadership” classes are portraying the AIG bonuses as an outrage. The vast majority of American citizens pay minimal attention to politics as they go about their daily business. What they hear from these groups is mostly what they “know” about politics. What they’re hearing right now, especially from the political class, is “stimulus: good, AIG bonuses: outrage.”

    Hear something long enough and you start to believe it, whether it’s true or not. Taken completely out of context on their own, the AIG bonuses certainly *sound* outrage worthy, so it’s easy to follow on with what the talking heads are saying.

    The failure is on the part of our so-called leaders, who are in the process of demonstrating that they are immensely bad at actually leading. But, really, is that anything new?

  2. Because it is all about manipulating people’s emotions, not educating them and asking them to make rational decisions.

  3. Michael says:

    Amusingly, this was the first page I hit after reading today’s XKCD: http://xkcd.com/558/

  4. Oy… it isn’t about innumeracy… it is about a visceral reaction that people have to notion that people are getting rich while the rest of us are going deeper and deeper into debt.

    The American people are saying, “we are willing to make sacrifices to help the economy recover, but those sacrifices have to be shared.” People are losing their job. They are seeing mountings of debt being issued in their names. They are scared and they are frightened and the reality that the same people who ruined us are now getting seven figure bonuses is just infuriating.

    Frankly, it isn’t innumeracy of the masses that I find most perplexing, but the complete lack of empathy of people like you. You really don’t see why people are irate? I find that mind-boggling.

    And for all the nonsense about how this is about politicians riling up the masses for political profit… it just isn’t. Our leaders are being swept along because they understand the alternative is to be swept out.

    You cannot bail out companies and expect the public to tolerate bonuses that are, in some cases, literally 50-100 times what the average household income is. You may call them innumerate, but people understand the difference between their $50,000 salaries and $2,000,000 bonuses.

    Sheesh.

  5. Boyd says:

    My anal retentive blog reader got stuck on this passage:

    If there is only 1% waste, fraud and abuse…that is still $7,500,000,000 that is wasted. That number is 45.5x the size of the AIG bailouts.

    That should be, “45.5x the size of the AIG bonuses.”

    Sorry, but I just had to point that out.

  6. Patrick T. McGuire says:

    why aren’t people in the streets in huge numbers demonstrating against the $170,000,000,000 bailout.

    Google “tea party”

  7. Drew says:

    Get a grip, Bernard. These people were guaranteed bonuses to complete the task of unwinding the AIG book as best as possible. That is a worthy endeavor. Further, these are not the same guys who wrote the CDS’s. Those guys cut and ran awhile ago.

    This is pure envy, an emotion uniquely fostered in the pop culture against business. When $100MM wife beating rap stars and $10MM a year second rate shortstops who bat .220 get the same ire from the press, politicians and then the public you can preach about sacrifice.

    Right now, you are just bloviating.

  8. No Drew, I have a grip. I am just explaining that it isn’t that people don’t understand the difference between 170,000,000,000 and 165,000,000, it is that they understand the difference between 50,000 and 2,000,000.

    I don’t like the claim that people are idiots in this matter. You may disagree with their priorities or their assessments. But the anger is not driven by stupidity or innumeracy. It is driven because they are focusing on one set of facts and numbers and you on another.

    The argument about ballplayers and rap stars is irrelevant, and you know it. We’re not paying them with taxpayer money!

  9. Alex Knapp says:

    Drew,

    You’ve got your timeline wrong. The retention bonuses were written into the employment contracts in December 2007. And their pure intent was to offset losses to employees due to the anticipation that the CDS’s were about to take a nose dive.

    In other words, the goal of the bonuses was to offset the loss in salary to the very people who f**ed up in the first place.

    The outrage here is due to the fact that most Americans are decent human beings who think that people should suffer negative, not positive consequences for wrongdoing.

  10. Steve Verdon says:

    Bernard,

    You see, I look at this issue a bit differently than you. I see the bailouts as being badly done and rushed with a lack of due diligence and with what looks like lying by our elected leaders and that this AIG mess is really nothing more than an a modern day tribal ritual like sacrificing an animal or person to some make believe god.

    In fact, not only were the bailouts rushed and lacking in due diligence so has the stimulus package. It was a rush vote and I bet we are going to see tens of billions that are wasted.

    And for all the nonsense about how this is about politicians riling up the masses for political profit… it just isn’t. Our leaders are being swept along because they understand the alternative is to be swept out.

    In other words they are protecting their own skins at the expense of AIG executives even though it is now starting to look like Geithner knew those bonuses were in there well before he is now claiming.

    Link

    From the link:
    In early February, Mr. Geithner opposed a provision in the economic stimulus bill that would have slapped a steep tax on the kind of bonuses that A.I.G. was about to pay.

    If A.I.G.’s plan to pay out an additional $165 million in bonuses came as a surprise to Mr. Geithner, it did not come as a surprise to staff at the Treasury, the Federal Reserve in Washington or the New York Fed.

    Personally, I wouldn’t be surprised if Geithner knew that bonuses were in the bailout deal back in 2008. After all, he was the head of the New York Fed, the primary government representative in making that deal.

    But yes, lets keep focusing on the pennies while hundred dollar bills are shredded. I see this whole issue as a distraction, and for somebody who claims to be so smart Bernard you have certainly been distracted and rather easily I might add.

  11. Dave Schuler says:

    I don’t know whether it’s innumeracy, misdirection, Bernard’s explanation or some other but I don’t want Steve’s second point to get lost in the argument about the first.

    As I understand Steve’s second point is that the waste, fraud, and abuse in the stimulus package is all but certain to exceed the amount of the AIG bonuses by a signficant amount. It’s not that there shouldn’t be outrage about the bonuses. It’s that proportion demands that we be outraged about the inevitable waste, fraud, and abuse, too.

  12. Fredw says:

    The focus on the 165,000,000 is not really about the bonus amount; it is about repressed resentment over the whole AIG bailout, the bonuses are just a trigger that surfaced the resentment.

    What we should really be mad about is that by bailing out AIG the US taxpayer became the counter party to the risk exposure of the entire world banking business. By that measure the $170,000,000,000 may be many orders of magnitude smaller than our true cost.

  13. Steve Verdon says:

    In other words, the goal of the bonuses was to offset the loss in salary to the very people who f**ed up in the first place.

    Really, one of the bonuses was to a guy who ran their energy and infrastructure investments. In fact, that was the largest bonus and his job was to wind down the investment book in his unit which he has done with more money than was initially anticipated…money that will actually go to the government.

    Link

    The outrage here is due to the fact that most Americans are decent human beings who think that people should suffer negative, not positive consequences for wrongdoing.

    Which is why we are bailing out people who took out mortgages they couldn’t afford. Spare me Alex.

  14. Steve Verdon says:

    In other words, the goal of the bonuses was to offset the loss in salary to the very people who f**ed up in the first place.

    Really, one of the bonuses was to a guy who ran their energy and infrastructure investments. In fact, that was the largest bonus and his job was to wind down the investment book in his unit which he has done with more money than was initially anticipated…money that will actually go to the government.

    Link

    The outrage here is due to the fact that most Americans are decent human beings who think that people should suffer negative, not positive consequences for wrongdoing.

    Which is why we are bailing out people who took out mortgages they couldn’t afford. Spare me Alex.

  15. legion says:

    Steve, Bernard,
    Can we perhaps agree that _both_ the bonuses _and_ the bailout were poorly thought-out and incompetently handled, and just crucify Bernanke and Geithner? And then ostracize the idiots and criminals at AIG and various other places that brought their own companies to insolvency in the first place, so that they have more trouble ever getting another job again that Alberto Gonzalez? That’d be my preference…

  16. Bill H says:

    I have been blogging about this all week. See Outrage and Acceptance and Outrage and Distraction at On My Mind.

  17. Bithead says:

    No Drew, I have a grip. I am just explaining that it isn’t that people don’t understand the difference between 170,000,000,000 and 165,000,000, it is that they understand the difference between 50,000 and 2,000,000.

    Heh. So,

    A=mypay
    B=hispay
    IF b>a THEN bitch

    Go ahead, Bernard, tell us this isn’t all about wealth envy. But let’s do pretend nobody noticed the half billion dollar book deal the Chosen one just signed. Let’s ignore the money in William jefferson’s freezer, and Charlie Rangels checkbbok. Let’s ignore the sweeheart deals for Chris Dodd. Wealth envy, after all, doesn’t apply to anyone with a (D) after their name.

  18. Bithead says:

    and lest we forget to mention it, let’s pretend we don’t see similar bonus structures at Fannie and freddie, which actually are larger than the bonuses at AIG.

  19. I see this whole issue as a distraction, and for somebody who claims to be so smart Bernard you have certainly been distracted and rather easily I might add.

    LOL… sigh… anyways…

    I am not distracted. I am angry about the bonuses, but not enough to do anything about it. I mean, in the end, it is chump change. But it is just radioactive politically, and unless we can get some control over executive compensation in bailed out firms, we are going to have to acknowledge that the bailout model is dead. And it is not dead because of demagoguery. It is dead because the optics of these guys getting rich off taxpayer money is simply never, never going to sell. Obama even at his rhetorically most compelling was never going to be able to sell, even if he’d wanted to.

    My only point in all of this is that the outrage is real and understandable, and no amount of justifying the AIG quants as geniuses, and no amount of rhetoric about the sanctity of contracts, and no amount of comparisons between the bonuses and the total bailout will change the basic fact that the American public will not accept that people are getting millions of dollars in salary or bonuses at bailed out firms. It is just not gonna happen.

    At this point, I am sort of pleased about it because I had begun to see the bailouts as essentially a bottomless pit likely to consumed multiple trillions of dollars that could probably be better used in direct lending to individuals and business.

    And yeah, I agree, the Fed and Treasury under both Bush and Obama have been incompetent in how they have handled all of this. So we don’t disagree about much really.

    All we disagree about is that you think the American public is stupid for being outraged, and I think their outrage is both understandable and predictable.

    Also, while I share the anger of the vast majority of my fellow citizens, if I really thought the bailout model was credible, I’d probably consider the bonuses and compensations a relatively small price worth paying… but since I don’t think it is a workable model, I’m just as happy seeing it blown up in a burst of righteous anger at the looters who have taken up residence as executives in most major American corporations. If if happens to prompt shareholders to do a better job on corporate governance issues in the future, that will at least have been a change for the good.

  20. Heh. So,

    A=mypay
    B=hispay
    IF b>a THEN bitch

    Go ahead, Bernard, tell us this isn’t all about wealth envy.

    I know talking to you is like talking to a brick wall… but you really don’t see how this is different when we are talking about taxpayer dollars? If Congress said, “look, in effect, we’re running a $3 trillion a year enterprise, and we should be compensated accordingly at say $25,000,000 per year with an additional bonus package equivalent to 20% of GDP growth above 2%” so that Congressmen often ended up with salaries in the 9 figures… how would you react? Could I just accuse you of wealth envy if you opposed that kind of pay scale for Congress?

  21. Steve Verdon says:

    More here Alex indicating you are wrong, at least in part.

    Link

    AIG said Wednesday that Messrs. Haas and Liebergall plan to accede to Mr. Liddy’s request and return their bonuses too. Mr. Haas, 47, and Mr. Liebergall, 43, are co-heads of North American marketing for the financial-products unit. In a statement, AIG said they are both “willing to do what Mr. Liddy has determined is appropriate.” Like Mr. Poling, they didn’t work in the credit-derivatives unit.–emphasis added

    Can we perhaps agree that _both_ the bonuses _and_ the bailout were poorly thought-out and incompetently handled, and just crucify Bernanke and Geithner?

    Hmmm, I don’t know, I suppose if somebody has to be the recipient of the publics anger those two are better choices…after all they elected to take high profile jobs where public scorn is a possibility. I’d be sympathetic to an argument that goes like this:

    “We were trying to prevent a failure cascade of the global financial sector and we just couldn’t take the time to worry about $165 million. Yes it sounds like alot of money, but consider:

    $2,700,000 Million vs,
    $165 million.

    Which would you rather have us focus on?”

    I’d hope most people would say the former. In fact, I’d be more impressed with Geithner if he went before Congres and showed them numbers like that and said, “Now, which number should I have focused on. I couldn’t do both, so you tell me, now with the benefit of hindsight which number. If it is the bigger number than can we please end this farce of a witch hunt?”

  22. odograph says:

    Oy… it isn’t about innumeracy… it is about a visceral reaction that people have to notion that people are getting rich while the rest of us are going deeper and deeper into debt.

    I think that it is primarily that reaction, though I think innumeracy is real, and Innumeracy by John Allen Paulos is a great little book.

  23. A good ways back up, Dave noted:

    “As I understand Steve’s second point is that the waste, fraud, and abuse in the stimulus package is all but certain to exceed the amount of the AIG bonuses by a signficant amount. It’s not that there shouldn’t be outrage about the bonuses. It’s that proportion demands that we be outraged about the inevitable waste, fraud, and abuse, too.”

    I noted this in my own blog a few days back. Should these AIG people have gotten bonuses? I’ve seen arguments on both sides, but the short version is that I myself don’t really know, and there are a lot of other issues at hand that I believe to be vastly more important.

    1) Whether they should or shouldn’t get these bonuses, Congress approved them in the first place with wording placed in the bailout bill that specifically protected them. We were in such a hurry to DO SOMETHING NOW! that nobody bothered to actually read the bills they were passing. This is probably the biggest outrage of the whole thing. When we actually stop to think about where $700 billion is going, I’ll start caring about a measly $165 million.

    2) As Steve pointed out in the original post and Dave reminded us later, this is chump change compared to the wasteful spending we’re almost guaranteed to see in the stimulus package. I’m a bit more worried about fixing our economy and getting our spending under control (yes, I know these might be conflicting goals) than I am about punishing a relative handful of “bad people” on Wall Street.

    3) The whole point of punishing said people is that incentives matter. Which is exactly why our outrage is better served if we direct it at a Congress that blindly spent this money and enabled this to happen in the first place. Where are the incentives for them to reign in their own bad decisions? Bad decisions that have directly and indirectly enabled the other bad decisions that we are now outraged at. Take the outrage to the source.

    If I fall down and scrape my knee because I’ve broken my leg, it just might be a tad more useful to treat the broken leg before I worry about putting a band-aid on my scraped knee.

  24. Also, my original point about our “leadership classes” and their emotional manipulation:

    I don’t think the public shouldn’t be outraged over the bonuses. I do think that our political class is manipulating this outrage to cover their own incompetence and screw-ups, and a complacent/incompetent media class is playing right into their hands by sensationalizing it (like they do with everything). That part I find disgusting.

  25. Steve Verdon says:

    All we disagree about is that you think the American public is stupid for being outraged, and I think their outrage is both understandable and predictable.

    But I can’t help but think that the outrage would also be both understandable and predictable if the public were inummerate as well. Please Bernard, tell all of us dopes here how it wouldn’t be predictable and understandable.

    And I’m not saying they/we shouldn’t be upset about the bonuses so much as saying, “Why all the anger over that, but noting for waste, fraud and abuse that is likely going to make the AIG bonuses pale in comparison?”

    …I’m just as happy seeing it blown up in a burst of righteous anger at the looters who have taken up residence as executives in most major American corporations.

    The looting is only possible due to the bailouts, IMO.

  26. I wonder if there’s a linguistic explanation here?

    In the English language (and in some other languages), the words “million,” “billion,” and “trillion” all have a similar sound to them.

    Therefore, to the ear of a person, multi-million dollar retention payments, multi-billion dollar bailouts, and multi-trillion dollar national debt all sound about the same.

    I seriously suspect that if we had different sounding words for “million” and “billion,” some (not all) of the retention payment outrage would be muted.

  27. Please Bernard, tell all of us dopes here

    Look man… If I thought the readers and writers here were dopes, I wouldn’t be spending as much as I do in these threads…. absorbing the amount of personal abuse I do in the process.

    noting for waste, fraud and abuse that is likely going to make the AIG bonuses pale in comparison?

    But, you see, I would like to see much stronger control and oversight. Why is it less politically motivating? Because it is less visible. I can identify specific multi-millionaire AIG executives receiving specific multi-million dollar bonuses. It has the misfortune of looking bad and being highly visible. Which does not mean I wouldn’t rather see more focus on serious oversight and accountability elsewhere, but it is what it is.

    The looting is only possible due to the bailouts, IMO.

    Well, we probably disagree here as well. I think the problem is the insanely high level of cronyism among boards of directors, compensations committees, and executives of major firms. They are close club who make decisions about each other’s compensation and have no incentive to bargain hard. And it is empowered by apathetic shareholders, most of whom are large institutions who don’t really give a damn about any of the day-to-day matters of any of their holdings.

  28. Phil Smith says:

    I personally find this statement utterly hilarious:

    And for all the nonsense about how this is about politicians riling up the masses for political profit… it just isn’t. Our leaders are being swept along because they understand the alternative is to be swept out.

    So, it isn’t about political profit, it’s just about getting re-elected! The only distinction being made here is about who started it. I said it before – this is about “saving our phoney-baloney jobs.” Harumph!

    The anger may be justified, but it’s entirely misdirected. We should be angry at the jackasses who wrote, signed, and are perpetuating this idiocy.

  29. Steve Verdon says:

    I don’t think the public shouldn’t be outraged over the bonuses. I do think that our political class is manipulating this outrage to cover their own incompetence and screw-ups, and a complacent/incompetent media class is playing right into their hands by sensationalizing it (like they do with everything). That part I find disgusting.

    Russell,

    I was reading your post and thinking, yes, yes, yes,…. Good comment.

  30. Bithead says:

    I know talking to you is like talking to a brick wall… but you really don’t see how this is different when we are talking about taxpayer dollars?

    Of course! Then again, who lept into that area, unconstitutionally? At what point does the constitution provide for governmental takeover of private enterprise?

    absorbing the amount of personal abuse I do in the process.

    Look above, Bernard. You’re dishing it out as well, so spare us the ‘poor abused leftist’ routine.

    Well, we probably disagree here as well. I think the problem is the insanely high level of cronyism among boards of directors, compensations committees, and executives of major firms.

    And we know that never happens when government is in control, right, Bernard?

  31. Bithead says:

    I was reading your post and thinking, yes, yes, yes,…. Good comment.

    Agreement.

  32. Steve Verdon says:

    Look man… If I thought the readers and writers here were dopes, I wouldn’t be spending as much as I do in these threads…. absorbing the amount of personal abuse I do in the process.

    It was sarcasm Bernard.

    And you haven’t answered the question. If it really is innumeracy why wouldn’t it be predictable or understandable?

    But, you see, I would like to see much stronger control and oversight. Why is it less politically motivating? Because it is less visible. I can identify specific multi-millionaire AIG executives receiving specific multi-million dollar bonuses. It has the misfortune of looking bad and being highly visible. Which does not mean I wouldn’t rather see more focus on serious oversight and accountability elsewhere, but it is what it is.

    That’s part of it. The other part is that our politicians see a great opportunity to cover their own butts for their own ineptitude and stupidity. Russell said it much better,

    I do think that our political class is manipulating this outrage to cover their own incompetence and screw-ups, and a complacent/incompetent media class is playing right into their hands by sensationalizing it (like they do with everything). That part I find disgusting.

    Well, we probably disagree here as well. I think the problem is the insanely high level of cronyism among boards of directors, compensations committees, and executives of major firms.

    You are half-way there. You’ve left out the cronyism between government and business. People move almost effortlessly between well paying and important corporate jobs and government. Go into government and get into a high ranking position, then go to corporate America. Then a few years later back to politics for an even higher position.

    And it is empowered by apathetic shareholders, most of whom are large institutions who don’t really give a damn about any of the day-to-day matters of any of their holdings.

    I’d say they are large institutional investors who are run by the same people we are talking about.

  33. Phil Smith says:

    absorbing the amount of personal abuse I do in the process.

    You haven’t been abused that I’ve seen. Your ideas, your command of the facts, and your reasoning have been impugned. Not your intelligence, honesty, character, or any other personal attribute.

  34. your command of the facts

    Show me one factual mistake that I have made and I have not promptly acknowledged… in any of my contributions in any thread on this board.

  35. Alex Knapp says:

    Steve,

    You’re missing the point. The employment contract was drafted in 2007, and it was drafted in contemplation of the CDS collapse. Meaning that AIGs executives knowingly gave themselves more money even though they were well aware that their company was about to head over a cliff.

    That’s just plain looting.

    Sorry, I don’t feel bad for the bastards at all. They deserve the public opproborium.

    Yes, of course the tide of money flowing into the bailouts, etc. is likely to exceed the costs of the bonuses. But people don’t get mad about general bad things happening–they get mad about specifics. When specific instances of corruption, etc. appear, I assure you there will be outrage directed at that. But it’s hard to get worked up about hypothetical “waste” for which there is currently no evidence and, by your own admission, hasn’t even happened yet.

  36. Phil Smith says:

    If you insist. You committed a fairly egregious category error in conflating institutional misdeeds with (alleged) personal misdeeds; you in this very thread said that the outrage of politicians both was and wasn’t political – in back-to-back sentences, no less; you accused the people receiving the bonuses of “running the business into the ground” (March 19, 2009 13:41) – and although subsequently shown plenty of evidence that the people getting the bonuses aren’t the ones who developed and sold the CDSs, you certainly never retracted or even admitted fault; this is getting boring.

    It’s also yet another red herring. Even if those facts had been correct, or you had retracted them, my statement was that nobody attacked you – just your arguments. That’s still the case.

  37. Steve Verdon says:

    You’re missing the point. The employment contract was drafted in 2007, and it was drafted in contemplation of the CDS collapse. Meaning that AIGs executives knowingly gave themselves more money even though they were well aware that their company was about to head over a cliff.

    That’s just plain looting.

    And it has been known to the Federal Government since about October of 2008. It is looting aided and abetted by the Federal Government, the same prigs who are now so outraged and are looking at setting up special punitive taxes after the fact.

    Sorry, I don’t feel bad for the bastards at all. They deserve the public opproborium.

    Maybe they do, but so do the a$$holes sitting in Congress.

    Yes, of course the tide of money flowing into the bailouts, etc. is likely to exceed the costs of the bonuses. But people don’t get mad about general bad things happening–they get mad about specifics.

    Semantic bravo sierra noted. It is all general until it becomes specific.

    When specific instances of corruption, etc. appear, I assure you there will be outrage directed at that. But it’s hard to get worked up about hypothetical “waste” for which there is currently no evidence and, by your own admission, hasn’t even happened yet.

    You really think there is a pony still in the federal government? That if we work really hard it will work flawlessly? Or do you think that waste fraud and abuse is inevitable and will dwarf this current outrage…but nobody will be outraged because nobody in Washington has any incentive to make it into a public spectacle?

    Ufortunately for our elected leaders this issue became public and they had to take the heat off themselves. Fortunately the legislation surrounding this was rushed through and there is enough confusion that we can’t point to anyone person and say, “You, you did this.” So instead our elected leaders, like good cult leaders, will sacrifice the AIG executives, whether deserved or not is beside the point I’m making, so that they don’t have to explain their f*ck up. And to add some gravy to this sh*t sandwhich because such a sacrifice will likely work, our elected leaders will not have to be punished, as you so rightfully noted, and will be free to do it again, and again, and again.

  38. legion says:

    At what point does the constitution provide for governmental takeover of private enterprise?

    I dunno, Bit. Is there someplace in the Constitution that explicitly forbids it? I suppose you could call ‘…without due process…’ on it, but the open debate in Congress could easily qualify for that, unless you’re positing that assets can’t be nationalized without going through a full court hearing first, which is a whole ‘nother kettle of fish.

    And we know that never happens when government is in control, right, Bernard?

    Congratulations, Bithead, you have just summarized the total failure of the modern GOP in one sorry sentence: “There’s some possibility this solution might not work, so let’s just not do anything at all!” Welcome to The Party Of No (Ideas).

  39. Phil Smith says:

    “nor shall private property be taken for public use, without just compensation.”

    Paging Ms. Kelo . . .

  40. tom p says:

    “nor shall private property be taken for public use, without just compensation.”

    Phil, just compenstion would have been about $1 for all of AIG (as near as anyone can figure).

    As Matt Taibbi pointed out, there is plenty of blame to go around eveywhere.
    As Bernard and Alex have stated, these people have brought us to the edge of the stone age (yes, a little hyperbole) and are still making a mint off of it (and that rightly pisses people off) As Steve V pointed out, the politicians let it happen (it behooved them too, just as it now behooves them to blame it on the CEO’s).

    So what? Unfortunately, we have this thing called the “Constitution” which guarantees the right to “petition the Congress” (lobbying) and “freedom of speech” (I don’t like the idea that someone, by virtue of having more money than I, can buy more speech than I, but the SCOTUS is right to rule that way) as well as numerous other rights, which have brought us to where we are now… with all the corruption and gaming of the system etc.

    So what do we do about it? Argue with each other, trying to poke pinprick holes in each others arguments so we can crow “I whupped you!”??? All I see is a lot of defending of sacred cows, but nobody seems to notice that all the sacred cows have been gored.

  41. Phil Smith says:

    You miss the point, Tom. Legion asked re: nationalization of industry “Is there someplace in the Constitution that explicitly forbids it?”, so I showed him the text doing exactly that.

    We’re living in an amalgamation of Mel Brooks movies. “A riot iss an ugly zing. Und I tink, that it is chust about time ve had vun!!”

  42. You committed a fairly egregious category error in conflating institutional misdeeds with (alleged) personal misdeeds;

    Now wait… I didn’t assert it as a fact… all I did was caution against the assumption that the bonus contracts would prove lawful in the likely (in my estimation) case of securities or other criminal charges. I never assert that as I fact. I made a prediction.

  43. Phil Smith says:

    there is a ton of suggestive evidence… moreso than at a similar point in the Worldcom or Enron unraveling.

    is what you said when I chided you for making assertions without evidence. My mistake for not realizing that was a prediction.

  44. legion says:

    Phil,
    And Tom pointed out the flaw in your argument – the key phrase being “without just compensation.” The stock market itself determines such things on a daily basis and, as Tom also pointed out, AIG’s market value is somewhere between “crap” and “we’ll pay you to take this stock off our hands”.

    Now, as for ‘true’ nationalization, where the gov’t just walks in and says “this is ours now, boyo” – well, that’s a different thing altogether. It is also clearly not what is currently happening right now…

  45. Phil Smith says:

    The house just did it to the AIG guys. Do try to keep up.

  46. suggestive evidence.

    “Suggestive evidence” was not meant to suggest any definiteness at all, and I certainly apologize if I gave a different impression. I thought I had been quite clear that I was just speculating on this issue. If I had meant to be definitive, I would have said, “there is unambiguous evidence.”

  47. legion says:

    Wha? Phil, the House voted to tax specific bonuses paid to people who meet certain specific requirements:

    The bill would impose a 90 percent tax on bonuses given to employees with family incomes above $250,000 at American International Group and other companies that have received at least $5 billion in government bailout money. It would apply to any such bonuses issued since Dec. 31.

    Now frankly, I’m not 100% convinced this method _is_ legit – I don’t know nearly enought about tax law to have any idea if it’ll stick during the inevitable court challenges. But I don’t see how it’s unconstitutional nationalization.

    But to bring things back to Steve’s original point – which is that this smacks of a witch-hunt that takes the focus off the utterly insane cost of the bailouts in general – I can’t agree entirely with Steve. These aren’t random execs across AIG that have everyone up in arms, it’s specifically the office that _bankrupted the company_. And these bonuses were tucked into their contracts knowing that the jerks getting them had already done their damage. I don’t know if it rises to the level of criminal fraud, but if AIG was still publicly held, you can damn sure bet the shareholders would be howling with outrage over these payouts. They just wouldn’t have the ability to do anything about it. Congress (apparently) does.

  48. Phil Smith says:

    Legion, you have a lot of catching up to do. It’s already been established that the guys who got the bonuses in questions aren’t connected with the CDS meltdown. These are the troubleshooters brought in after the fact to clean up the mess.

    Look, what you are advocating is to allow the government to separate individuals from their property without any due process whatsoever. You guys are tossing around allegations or “speculations” about criminal fraud without any command of the facts. You are screaming blue murder to punish somebody, not because they’re guilty – not even because you’re mad at them – but because you’re mad at the company they work for. It’s infantile rage transference, and nothing more.

  49. Bithead says:

    Congratulations, Bithead, you have just summarized the total failure of the modern GOP in one sorry sentence: “There’s some possibility this solution might not work, so let’s just not do anything at all!” Welcome to The Party Of No (Ideas).

    Do you understand that freedom itself, involves risk? You may be willing to sacrifice your freedom for a government ‘guaranteed’ outcome. Too many are, I fear.

    I am not.

  50. anjin-san says:

    At what point does the constitution provide for governmental takeover of private enterprise?

    At what point did the constitution provide governmental spaceflight to the moon?

    You really don’t have a clue how the constitution works, do you?

  51. anjin-san says:

    Go ahead, Bernard, tell us this isn’t all about wealth envy.

    Still flogging this very, very tired horse, eh bit?

    You’ve flung this lame canard at me more than once. It’s kind of funny really. My boss is one of those rich people I supposedly hate so much. Every day I go to work and bust my ass to make him richer. Happy to do it too. He pays me well, treats me well, and is a nice guy who earned every penny he has.

    Yep, I am one of the angry left, swollen with envy for all that possess more than I 🙂

    And yea, I am pissed about the bonus/compensation issue too. I have no problem with someone making a lot of money for doing a good job. I do have a problem with someone cleaning out the cash drawer after they have run the joint into the ground…

  52. anjin-san says:

    “nor shall private property be taken for public use, without just compensation.”

    I am thinking that the checks the government wrote to AIG with all the zeroes at the end cover the “just compensation” thing pretty well…

  53. steve s says:

    My only conclusion is that most people are innumerate. When a number gets too big they just can’t grasp the magnitude of that number. Here is one way of trying to get a grasp on the magnitude of these numbers. If you took 170,000,000,000 one dollar bills and stacked them one on top of each other (not end-to-end) it would be 11,537 miles high. If you took 750,000,000,000 one dollar bills and did the same thing it would be 50,899 miles long, or it could go around the earth twice at the equator. Why people are worried about a stack of one dollar bills that is only 11 miles high beats me.

    Discussion (52)

    (puts on his math tutor hat)

    First of all, it’s pointless to count how many battleships you could build with $178,000,000 in melted-down quarters or whatever. Those things don’t help people understand big numbers, they put hard-to-imagine numbers in terms of other hard-to-imagine numbers. So let’s forget that exercise. (In case your wondering what does help people roughly compare big numbers, the answer is scientific notation.)

    As to why people are concerned with the million dollar bonuses more than the billion-dollar losses, it’s not innumeracy, it’s psychology. Having to cover somebody’s bad debts to prevent a calamity is one thing. But the idea of then rewarding the irresponsible gambler with million-dollar welfare checks is much more upsetting in a basic fairness kind of sense. Plus, the two events didn’t happen independently, and aren’t being judged as independent abstract events. After the financial sector has spent years pocketing fictitious returns, selling fraudulent mortgages, then in the last year being responsible for everyone’s 401k getting cut in half and your neighbors laid off and foreclosed, all these things add up, and when you hear that after all this, the people responsible think they should now be made even wealthier, on the taxpayer dime, it’s no surprise at all that the public’s outraged. What’s surprising to me is that the executives of these companies haven’t been murdered by angry mobs.

  54. steve s says:

    Frankly, it isn’t innumeracy of the masses that I find most perplexing, but the complete lack of empathy of people like you.

    Read your Rand. Empathy is communist weakness. Selfishness in the true morality. To loot everything you can get your hands on with no consideration for others is the only truly noble act.

  55. Herb says:

    Speaking of innumeracy…

    Can someone explain to me why there is such anger for “people who took out mortgages they couldn’t afford,” and yet so much sympathy for AIG executives and their million dollar bonuses?

    After all the “people who took out mortgages they couldn’t afford” just wanted to own their own home.

    And the AIG guys were making super-risky plays with other people’s money.

    Morality wise, one of these things is worse than the other.

    Perhaps the correct position would be that neither AIG execs or homeowners should be bailed out by the government, but I’m not willing to risk total financial collapse to field test that theory.

  56. Bithead says:

    At what point did the constitution provide governmental spaceflight to the moon?

    Had it occurred to you that constitutional issues were one reason it was handled as a defense matter? At all points, that whole deal was about the militarization of space, much as the left likes to deride the concept.

    And yea, I am pissed about the bonus/compensation issue too. I have no problem with someone making a lot of money for doing a good job. I do have a problem with someone cleaning out the cash drawer after they have run the joint into the ground…

    You must be ROYALLY pissed at Democrats, then. Did and I just felt themselves a raise? Apparently, their graft isn’t making them enough money.

    No? Then you have other motivations… you know… the ones you keep telling us don’t exist.

    Now that the wind is gone out of this sail, pretty much, let me point out once again that what we’re really dealing with here is the lack of ability to deal in simple logic.

    One example of course is these two figures in juxtaposition: $2,700,000 Million vs $165 million.
    In the leftist driven bizarre-o world that we now exist in the latter is the bigger problem. Then again, let’s remember that the people who have this particular problem of determining which is the more important figure also are the ones who put democrats in charge in all three branches of the government. There, too, we are dealing with the emotional, rather than the factual. I’ve been saying for quite some time that Mr. Obama as supporters dealt more with emotion than fact, and thereby that mere fact would never defeat Obama. One of the points that Mr. Obama was elected on was “he will take care of pay my rent” . Anyone remember that one?

    Given all of that, do we really anticipate that anyone so lacking in logical ability is going to be able to make a determination of which of the two dollar figures is of greater import?

    That lack of ability doesn’t bode well for our future, I think.

  57. anjin-san says:

    Had it occurred to you that constitutional issues were one reason it was handled as a defense matter?

    Ummm. No. Because that is utter nonsense. And, unless I am mistaken NASA is not military, though they do work with the military and support them on various projects.

    You must be ROYALLY pissed at Democrats, then. Did and I just felt themselves a raise? Apparently, their graft isn’t making them enough money.

    Yep, and there is no graft in the GOP. Its all those nasty Democrats. Well we can count on one thing bit, you will never go one thought beyond where your idiology allows you to go.

    Today’s question is how many former Bush admin officials have been convicted of various crimes… hint, its more than a few.

    And, as I have said before, I think Pelosi and Reid are lightweights at best.

  58. Bithead says:

    Ummm. No. Because that is utter nonsense.

    As you demonstrate here with some reliability, you wouldn’t know nonsnese if you tripped over it. Which if you open your mouth again, you may just do.

    Yep, and there is no graft in the GOP. Its all those nasty Democrats

    Well, I’ll tell you what, Anjin; Next you come upw ith it showing on the GOP side, you just let us know, OK? Meanwhile, ‘they do it too’ isn’t a defense except in Bill Clinton’s mindless.