“Capital Insights” with Jack Kern: Tim Geithner’s Revenge

“I disagree with people who think you learn more from getting beat up than you do from winning.” –Tom Cruise, actor, producer, controversial talk show guest and couch jumper.
 

AIG is in the news again, and this time it’s about the bonus payments to undeserving executives. As you can imagine, just about every pundit and a bunch of congress members all have opinions, and not surprisingly, they don’t agree. I think the issue has been fundamentally overblown, and if you take away the politics and headline grabbing news, this is a pretty simple issue.

Let me illustrate the point.

Just the other night, I was out to dinner with some colleagues and the conversation turned to federal policy. After a few drinks, someone made the observation that Tim Geithner was probably the kid most likely to be beaten up on the playground when he was in elementary school. While that might have been true, he’s now getting his revenge. With the unbridled power of the Treasury department, Geithner is in a position to plot the futures of almost every American. I can only imagine how much fun he’s having with people demanding his resignation while enjoying the support of the president.

AIG, if the facts that are out there are correct, paid bonus money because under their contracts, they were obligated to do so. That, in my humble opinion is the issue. Whether it’s politically expedient to dislike the decision is one thing, but I would hope that by rule of law, we’d respect AIG for following the terms of their agreements. I would find it reprehensible if other businesses felt they could make rule changes just because some idiot in Congress, (Richard “aw shucks, I’m stupid” Shelby for example R-Alabama) could force them to do so.

I think they ought to allow the AIG execs to keep the bonus, but instead of returning it, they should punish them by requiring them to listen to Barney Frank (D-MA) read the children’s book, “The Little Engine that Could,” over and over again, maybe 50 times. I believe a Republican version of the book was released not too long ago, called, “It seemed like a good idea at the time,” but I couldn’t find my copy.

Above all else, politics is a blood sport. Talk shows as chroniclers of public sentiment and Rush “the pill” Limbaugh’s constant barrage of inane observations, the concept that we are a nation of laws has to mean something. I can tell you that I know of many developers and owners who opted out of international real estate deals for just that reason. Even my friends in Canada recognize that AIG, while acting in it’s own incredibly foolish self interest, had a right to do so, and everyone respects Canada.

We have a right, as taxpayers to demand that public officials be held accountable for their actions, especially in the way that TARP, TALF, HASP and other programs have been managed, but let’s give Treasury Secretary Tim Geithner a chance to do his job. The last thing we need is instability in cabinet positions, and now is the time to stop beating him up.

(Jack Kern is the managing director of Kern Investment Research. He can be reached at 301.601.900 or jkern@kernIRC.com.)