Carol Baum, at Bloomberg, reads today’s news and finds herself living in a Rand novel.
Somewhere John Galt is smiling.
The hero of Ayn Randâ€™s â€œAtlas Shruggedâ€ is smiling because heâ€™s seen it all before: the governmentâ€™s intervention in the private sector; the constraints placed on business in the name of the people; the desperation on the part of government bureaucrats when they realize their leverage is limited; and — this part is still fiction — the decision on the part of business leaders to walk away from the enterprises they built.
Thatâ€™s all I could think about when I read that American International Group Inc., recipient of $173 billion in taxpayer funds, was paying out $165 million in bonuses to employees of its financial-products group, the poster boy for risk and greed.
The Obama administration, Congress and the public are outraged taxpayer dollars are going to enrich the folks who got us into this mess. So am I.
Members of Congress want to blame Edward Liddy, the former chief executive officer of Allstate Corp., who was recruited by former Treasury Secretary Hank Paulson in September to steer AIG away from the shoals.
Liddy is paid $1 a year for his efforts. â€œMy only stake is my reputation,â€ Liddy said in a March 16 open letter to Treasury Secretary Timothy Geithner.
His only crime, as far as I can tell, is inheriting compensation contracts providing for retention bonuses for certain AIG derivative traders, some of whom have left the company, and listening to lawyers on his options. …
Iâ€™m not alone in noting the parallels in the governmentâ€™s evolving response to the financial crisis. For a year Iâ€™ve been waiting for Paulson or Geithner to announce â€œthe John Galt Plan to save the economy,â€ which is right out of Randâ€™s novel.
It wasnâ€™t until the AIG bonus brouhaha broke last weekend and I watched government officials flailing to contain the fallout that I realized the government is losing its leverage. Or maybe it never had any leverage to begin with.
Let me explain. The government has been propping up teetering financial institutions, including AIG, Citigroup and Bank of America, creating the illusion that the banks need the government.
The government doesnâ€™t care about these institutions. It cares about the stability of the financial system: the totality, not the parts.
Congress can refuse to allocate more money to institutions in which it already owns a share (80 percent in the case of AIG). It can levy a tax on the AIG bonus payments or withhold them from the next $30 billion cash infusion, although who would notice? And it can install new management.
Why hasnâ€™t the government put in its own people already? Maybe no one wants the job.
The government needs Liddy and Citigroupâ€™s Vikram Pandit and Bank of Americaâ€™s Ken Lewis to continue working to restore their firms to prosperity in the same way the looters in Randâ€™s novel need Hank Reardon and Francisco dâ€™Anconia and Dagny Taggart, respectively, to run their steel mills, copper mines and railroad.
From their perches as chairmen of the House Financial Services Committee and Senate Banking Committee, respectively, Democrats Barney Frank and Chris Dodd fulminate about the lack of regulation and about inflated CEO compensation. For Dodd, itâ€™s a good opportunity to deflect attention from his sweetheart mortgages from former Countrywide CEO Angelo Mozilo and his questionable real estate deal in Ireland.
All thatâ€™s left for life to imitate art completely is for these CEOs to quit. Let Barney Frank and Chris Dodd run AIG. Letâ€™s see how they fare.
The government needs these companies to survive — and buy back the governmentâ€™s ownership stake — more than they need the government. Most of these CEOs are already wealthy. They donâ€™t need a job working for the government, which is what running a bank amounts to today.
Whatâ€™s in it for them? One dollar of compensation? Their reputations? The house on the lake looks more appealing by the day.
Is anyone surprised sales of â€œAtlas Shruggedâ€ have spiked in recent months as reality comes to resemble Randâ€™s fiction?