Populist Backlash

From Levine News (why they send me news updates, I don't know)

OBAMA TELLS GEITHNER TO BLOCK A.I.G. BONUSES: President Obama has instructed the Treasury secretary to try to stop the faltering insurance giant American International Group from paying out hundreds of millions of dollars in bonuses to executives, as the administration scrambled to avert a populist backlash against banks and Wall Street that could complicate Mr. Obama's economic recovery agenda.

I am incredibly wary of this attitude. First off, it's not important from an economic perspective. Whether companies pay bonuses is an independent issue from their viability and whether they are deserving or in need of government bailout. I don't know enough about how the pay structures at these places work to be a judge and I'm sure most Americans expressing outrage don't either. Some pay packages are based around bonuses to give companies flexibility. The term "bonus" makes it seems as though it's "extra," but I think people in fields where a bonus is a significant part of the pay don't see it that way. Secondly, this AIG news doesn't seem like a big deal. A hundred mil in bonuses seems insignificant compared to the $85 billion dollar bailout. It's as if you loaned someone $850 and then griped about them buying a $2 coffee with your "loan."

This is a news story because it has a dramatic and ironic "hook." Look at these companies "we're" paying for giving away hundreds of millions of "our" money. We hear about this stuff because of the drama, not because it matters or is of importance. It's a stupid distraction.

This is a political issue - an issue of populist outrage and anger. And if we think the solution to the financial crisis will be the populist demanding that the government come in and run these companies the "right" and "morally correct" way it'll resemble Prop 8 supporters and opponents running insurance companies. The sure result of succumbing to this impulse will be massive and ugly failure.

One thing I learned these past 8 years - things can always get worse. Populist backlash will not help solve these questions.