Sunday, March 15, 2009
Allow me to translate this for you: everything is going according to plan, right down to the faux outrage expressed by Geithner and Summers. Summers' reliance upon pre-existing contracts to justify inaction is particularly mendacious. Out here in California, public sector workers are under unrelenting pressure to renegotiate collective bargaining agreements so as to legally authorize reduced salaries. The police in Sacramento have already agreed to lower salaries, school teachers in almost all districts face similar pressures, and the judiciary has permitted the Governor to unilaterally furlough state workers, and thereby reduce salaries, because of an ongoing fiscal emergency.
The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to executives in the same business unit that brought the company to the brink of collapse last year.
Word of the bonuses last week stirred such deep consternation inside the Obama administration that Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them.
The payments to A.I.G.’s financial products unit are in addition to $121 million in previously scheduled bonuses for the company’s senior executives and 6,400 employees across the sprawling corporation. Mr. Geithner last week pressured A.I.G. to cut the $9.6 million going to the top 50 executives in half and tie the rest to performance.
The payment of so much money at a company at the heart of the financial collapse that sent the broader economy into a tailspin almost certainly will fuel a popular backlash against the government’s efforts to prop up Wall Street. Past bonuses already have prompted President Obama and Congress to impose tough rules on corporate executive compensation at firms bailed out with taxpayer money.
“There are a lot of terrible things that have happened in the last 18 months, but what’s happened at A.I.G. is the most outrageous,” said Lawrence H. Summers, President Obama’s chief economic adviser, during an appearance Sunday on “This Week With George Stephanopoulos.” “What that company did, the way it was not regulated, the way no one was watching, what’s proved necessary — is outrageous.”
Mr. Summers, who also appeared on CBS’s “Face the Nation,” suggested, however, that the government’s ability to require the bonuses be scaled back was restricted by preexisting contracts, even though he did not specify what those restrictions may be.
But AIG? AIG is the line in the sand where the sanctity of contract must be preserved at all costs. And there is an inexorable logic to it. As I wrote here just after Obama's election:
We are entering the early stages of this process, with capital retaining as many privileges as possible, despite the catastrophic failure of those who managed it, while the workers who have already been victimized, are called upon to sacrifice, even those with the contractual protections commonly utilized by bankers and investors. Will we eventually rebel? There is no sign of it. But if we do, how will Obama respond? Well, the Pentagon is already anticipating the deployment of troops to deal with domestic unrest.
In the 1970s, capital interests responded to a global crisis of similar severity by embracing neoliberal policies that rendered the lives of workers more transient and insecure, policies ultimately adopted by both Republicans and Democrats. If capital determines that a merciless regime of subproletarianization of the workforce is required, including recourse to extreme methods of suppression, why should we feel confident that Obama will resist? Obama has skillfully fused his political skills with new technologies to excite millions, but it remains to be seen whether his efforts will ultimately be empowering, alienating, or even a more refined method of social control.