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AIG: Why The Facts Don't Matter

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...when faced with a symbolic, emotional challenge, the knee-jerk response of most red-blooded managers is to counter the issue with substance, with the facts. So in the case of AIG, we are told that the bonuses were contractual obligations, that they were essential to keep the talent necessary to wind down complex positions. And, even that without them the government bailout funds would be permanently lost because the company would not be able to function....

 

If you consider the truly great leaders throughout history, they have ways of re-framing the issues that acknowledge emotions but put them in a greater context. Consider a literary example, the "friends, Romans, Countrymen" speech written by Shakespeare, who describes the eulogy given by Mark Antony at Caesar's funeral. ...Antony's call for judgment and reason, and the introduction of perspective ("you all did love him once, not without cause"). Now, I'm hardly one to try to hold our business and political leaders up to Shakespearean standards of oratory. But the basic message

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...when faced with a symbolic, emotional challenge, the knee-jerk response of most red-blooded managers is to counter the issue with substance, with the facts. So in the case of AIG, we are told that the bonuses were contractual obligations, that they were essential to keep the talent necessary to wind down complex positions. And, even that without them the government bailout funds would be permanently lost because the company would not be able to function....

 

If you consider the truly great leaders throughout history, they have ways of re-framing the issues that acknowledge emotions but put them in a greater context. Consider a literary example, the "friends, Romans, Countrymen" speech written by Shakespeare, who describes the eulogy given by Mark Antony at Caesar's funeral. ...Antony's call for judgment and reason, and the introduction of perspective ("you all did love him once, not without cause"). Now, I'm hardly one to try to hold our business and political leaders up to Shakespearean standards of oratory. But the basic message

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It's really fairly simple:

 

IF YOU DON"T WANT PRIVATE COMPANIES TO DO THINGS YOU DON'T LIKE, DON'T GIVE THEM ANY MONEY.

 

It appears that our politicians place more importance on being able to wriggle out of a bad situation created by their own incompetance, than they do in defending ideals in the constitution like:

1. the concept of equal justice under the law,

2. the sanctity of contractual agreements,

3. property rights,

4. creation of ex-post-facto legislation, and

5. the application of a

Edited by Faustus

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I'd better stick to passing on choice opinions of others rather than my own, or someone may catch me contradicting my motto:

My opinions may have changed, but not the fact that I am right.

A CNBC reporter suggested the AIG bonus issue was intentionally pumped up and then defused in order to divert attention from a potentially worse populist outrage against the gov't. Many zillions of tax money is going to foreign financial companies who took out AIG insurance on obviously risky and lucrative investments, and will end up the winners due to being made "whole" by the US. On the other hand, they were burned badly by the gov't takedown of Lehman, and opinions are split whether the kill-Lehman or save-AIG approach by gov't was the best or worst one.

 

...read the full article at Harvard Business

In http://www.timesonline.co.uk/tol/news/uk/e...icle5821706.ece the Harvard Business School is portrayed as a typhoid Mary... at the center of most recent financial disasters. From Enron to Lehman to RBS, they pushed and participated in the very innovations that later lead to downfall, even recently praising them as the epitome of the way forward. Which brings to mind:

 

White, Blue-Eyed Bankers Have Brought World Economy To Its Knees

An editorial from The Economist magazine claims we should appreciate this "bleeding edge" financial innovation from mostly the Anglo world, and tolerate a fair amount of stumbles. It's one thing for other countries to follow along and emulate the capitalist experiments that seem to work best. But the way forward to better well-being has to be blazed by people free to break the paradigms and smash entrenched interests holding things back. Some small tweaks to the notorious types of securitization may bring a lot of new opportunities. So the reins of regulation best be light and not presume too much. And our suffering may be like that of Roman warriors, hopefully civilizing the world albeit thru a certain amount of mayhem!

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It's really fairly simple:

 

IF YOU DON"T WANT PRIVATE COMPANIES TO DO THINGS YOU DON'T LIKE, DON'T GIVE THEM ANY MONEY.

 

I think AIG it's now largely owned by the government.

 

The problem is that this bailout programs are very unfair. The perceived culprits get away with a large amount of money because the government wants to help and not to punish the banks while perceived innocents suffer.

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I largely agree with this article

http://www.theatlantic.com/doc/200905/imf-advice

Bailouts and stimulus plans are immoral and only prolong the crisis. Many features of the economy of the last years are gone: securities, the real estate boom, highly priced commodities, the chinese financing US consumption, hedge fond expansion etc.

 

The economic system is crazy. International banks were not interested by Romania until a real estate boom draw them here where they invested billions of euros creating deflation and ending with loads of dubious mortgages on grossly overpriced communist made apartments. Now they are freezing credit paralyzing the economy and send home their money creating inflation.

Everybody knew that the bubble will burst as there were many new investments while the demand was failing but competition made the banks take greater risks.

In the 5 years between 2003 and 2008 real estate prices increased at least 10 times fueled by lending made by international banks.

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