Tuesday, October 07, 2008

The Reason People Hate the Bailout

This story about AIG is why people hate the bailout.

It seems that:

just last week, about 70 of the company's top performers were rewarded with a week-long stay at the luxury St. Regis Resort in Monarch Beach, Calif., where they ran up a tab of $440,000.

Essentially they went on this thing the American taxpayers dime.

And then there was this from a hearing in Congress:

Over and over, the committee members vented outrage at having the federal government bailout the company, referring frequently to their angry constituents. But neither of the men acknowledged making any mistakes.

"Looking back on my time as CEO, I don't believe AIG could have done anything differently," Willumstad said.

Sullivan blamed "a global financial tsunami" and the "mark-to-market" accounting rules, which require businesses to value assets at market value, even if no sale is imminent.
In other word it was everyone else fault but mine.

This is what is going to make people really pissed off about the bailout. And they should be pissed off. The problem is will this sour their views towards what the rest of the government is attempting to do to solve the crisis.

Right now it seems one of the greatest problems with this financial crisis is the psychology of the whole thing. It can become a self-fulfilling proficiency. People stop spending money because they fell like they can't afford things. They don't buy the car. They don't by the computer. They cut back on what they spend in general. This causes those companies where the products are made to cut back. It becomes a vicious cycle.

The big question right now is how to break that cycle.

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