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Too big to fail? Well, maybe so

March 24, 2009
The Daily Mining Gazette

Sometimes we wonder whether the suggestion that some businesses are "too big to fail" ought to be amended. During the past several months it sometimes has appeared that "too arrogant, greedy and incompetent to fail" was the criteria used by federal officials in charge of taxpayer-funded "bailouts."

American International Group is providing a new example of arrogance, greed and incompetence paying off. To date, AIG has received about $170 billion from taxpayers, to keep the giant financial services company from failing.

It was revealed a few days ago that AIG has paid "retention bonuses" totaling $165 million to some of its executives. More similar payments may be made in the future; reportedly the $165 million is just part of a $450 million package of bonuses.

Members of Congress, both liberal and conservative, are livid about the bonuses. President Barack Obama has asked Treasury Secretary Timothy Geithner to find out whether there is any way the government somehow can rescind payment of the bonuses.

We doubt that Washington can do anything about the $165 million. That is in part because the bonuses were written into executives' contracts long before federal "bailout" money was provided to AIG. Officials at the company say that because the bonuses were included in contracts, they are required by law to pay them.

Perhaps so.

Instead of attempting to find some way to block the bonuses, federal policy makers would do well to view them as an expensive lesson. It is that AIG was managed incompetently. How can there be any other conclusion about a company that approved nearly half a billion dollars in bonuses intended to "retain" the very people who nearly drove the firm out of business?

The question Obama and members of Congress should be asking is whether similarly mismanaged companies should be helped in the future - regardless of how big they are.



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