Dennis Jones is a Jamaican-born international economist, who has lived most of the time in the UK and USA, and latterly in Guinea, west Africa. He moved back to the Caribbean in 2007. This blog contains his observations on life on this small eastern Caribbean island, as well as views on life and issues on a broader landscape, especially the Caribbean and Africa.







**You may contact me by e-mail at livinginbarbados[at]gmail[dot]com**

Monday, March 16, 2009

Making My Blood Boil

Every now and again something happens that makes my blood boil fast and long. Over the weekend, I had one of those visceral moments when I read about US insurance giant, AIG's, plans to pay out bonuses of US$ 165 million (some figures cite US$ 450 million) to the same group of executives that had nearly taken the company into the oblivion of financial ruin. I heard, but really did not read in detail, arguments about their having contracts. Where, I asked myself was their moral compass pointing? Clearly, the extent to which any of those involved in the decision and due to receive the money realise what most of the world's and the US economy is suffering as a result of a range of missteps by financial companies is limited. They should be shouting from the roof tops "We don't want the money. We don't deserve it. Give it to a fund for unemployed people and towns that are losing jobs or those who are facing foreclosures" or something similar. Add to this the difficulty that Congress had had in getting details of to whom AIG was paying bail out money. It's not AIG's money, it belongs to the tax paper, so it's about time to fess up. The list of bonus recipients will be released, I am sure, openly or slyly and then I fear for those whose names are on it.

I read this morning, a comment from the Chairman of the US Federal Reserve, Ben Bernanke. Now he comes from simple enough roots as the son of a South Carolina pharmacist. He is trying hard to show that he understands that Wall Street and Main Street, if not joined at the hip, have to move hand-in-hand. Everyone is in this mess together, and solutions that seem to favour those whom most view as the bastions of greed and unscrupulous behaviour can only fuel a fire of anger that could rage relentlessly. The problem is that Wall Street 'types' are often so divorced from those who have to deal with Main Street, or even mainstream issues, that they really just keep on not getting it.

The odium does not need to be limited to principals in the US because we have heard of the pension plan negotiated by Royal Bank of Scotland to get rid of their failure of a leader, which turned the man into a millionaire overnight. Give back the money, weasel! I was so glad to see that some in the UK are gearing up for a ding-dong battle over this, as British pension funds are to sue Sir Fred Goodwin and the Royal Bank of Scotland (RBS) in the American courts for hundreds of millions of pounds (see Times report). Part of their argument is that Goodwin “falsely reassured” investors that the bank was in good health when it was “effectively insolvent” because of bad loans. The class action lawsuit is open to all European and US investors in RBS to join. Their legal champion will be none other than Cherie Blair (as Ms. Booth, QC), wife of former PM Tony B. She has a sharp social conscience and I suspect will be glad to dig her legal nails into the eyes of the financial sector raptor.

It is easy to foresee that many people will become similarly angry. I actually understand a little about finance and can rationalise a lot of what seems like nonsense and gobbledygook. But those who cannot, and they are the vast majority, will see millions and billions going to the 'undeserving', the 'makers of our misery', and they will make little distinction between whether they are the downright crooks of the Bernie Madoff ilk or someone who was driven by an incentive package to take bad risks. The justifiable question will be "Why are ordinary people paying several times over for these people's mistakes?"

I read this morning that the Obama Administration is concerned that there will be a public backlash (see NY Times report): they fear a populist backlash against banks and Wall Street, and worry that anger at financial institutions could also end up being directed at Congress and the White House. They all deserve a piece of public anger, but I sympathise with the new president who is having to live with 'another fine mess' left behind after a wild party of lack of regulation and oversight. Hearing former Vice President Dick Cheney say on Fox TV that "stuff happens", makes me say "Yes, it does, and in dark alleys."

Larry Summers, director of the President Obama’s National Economic Council called the AIG bonuses “outrageous” on ABC TV yesterday. I personally heed the words of Robert Reich “Never underestimate the capacity of angry populism in times of economic stress,” a professor of public policy at the University of California, Berkeley, and labor secretary under President Clinton. I don't think I need to add to those comments. Maybe Jon Stewart will bring some of these characters onto his show: the stampede for tickets could be nasty.

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