Why politicians should be kept far away from AIG

I'll be the first to admit that AIG's compensation structure is apparently divorced from reality. A compensation structure is supposed to reward employees who contribute positively to a company's income, and if a division is responsible for unprecedented losses, it's impossible to see how ANYONE in the division should deserve compensation. If nothing else, it's hoped that AIG's compensation formula is exposed, and that AIG and other companies use this as an example of what NOT to do.

But the anger over AIG's bonuses is getting into dangerous territory. On the local news this morning, I saw the results of a poll in which over 40% of those surveyed said that the AIG employees should return their bonuses.

50% of those surveyed said that the AIG employees should return their bonuses, and people should lose their jobs.

When people respond in such a way, politicians follow. Some of my readers from the right side of the aisle are probably predicting that the House of Representatives and the White House, both of which are headed by closet Marxists Pelosi and Obama, are drooling over the chance to punish AIG, clear out the employees, and mount a government-run takeover. And sure enough, you have a politician making statements like this about AIG:

"The first thing that would make me feel a little bit better toward them (is) if they'd follow the Japanese example and come before the American people and take that deep bow and say, I'm sorry, and then either do one of two things: resign or go commit suicide."

Incidentally, that statement was not made by someone from the House of Representatives, the part of Congress that supposedly sways whichever way the people are blowing. That statement was made by a U.S. Senator, who is supposedly immune to such pressure.

Oh, and that statement was not made by a Democrat. As you may have heard, it was Republican Senator Charles Grassley of Iowa who made that helpful suggestion to AIG.

To his credit, Obama hasn't yet demanded that AIG executives resign en masse. But there's a possibility that both parties may force us to adopt the attitude "These people messed things up; can't we do better without them?"

We can't. Perhaps there's some idea that you can get a bunch of people off the street and mount a "Hey, kids, let's run a financial services company!" effort. (Airing on VH1 Thursdays, 9:00 Eastern.) Or perhaps Barney Frank and Charles Grassley dispatch their economic advisors up to AIG and run the show themselves.

Or, better yet, you lure people from other, profitable financial services firms - oh, wait - OK, so you lure people from other financial services firms.

And if you can't get enough that way, then you lure some of the AIG people back.

And how do you lure them back?

By promising a bonus.

Back to square one...