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Totally Corrupt

Entry 969, on 2009-03-19 at 20:41:44 (Rating 5, Politics)

Some people, companies, institutions and social/political/economic processes just seem totally corrupt. When you look at the way things work it often seems incredible that its allowed to happen that way, but when you look for alternatives its hard to realistically find one.

In case you haven't already guessed I'm talking about the global financial meltdown and its aftermath, especially the events associated with AIG. Barack Obama has said he's outraged that a company which nearly destroyed the American economic system, through greed and incompetence, is now paying its senior managers over 100 million dollars in bonuses.

It doesn't seem fair and it isn't. So shouldn't those bonuses, which come from taxpayer money given to the company to help it survive, be withdrawn? Apparently the recipients have been requested to give half of it back. Even if they do, is that good enough? I don't think so.

An alternative opinion was published in the New York Times where a commentator made a case for allowing the payments to continue. He made a couple of points which are actually quite valid. First, the bonuses are part of a legal contract and breaking that contract sets a bad precedent. And second, the people who created the mess in the first place are the best to help fix it because they know the details of what went wrong.

Both of these arguments are reasonable in some ways, but natural justice and setting a fair precedent dictates that the bonuses should still be cancelled.

Let's remove the events from the world of high finance and put it in a more familiar context. If you hired an electrician to install some wiring in your home and it malfunctioned and almost burnt down your house would you pay him a bonus and then pay him more to come back and fix the mess he made? Would doing that encourage him to be more careful in future?

Of course it wouldn't. If anything it would encourage him to be even more reckless in future because he knows he will end up winning no matter how bad a job he does. You might argue that any electrician can do the same job but setting up financial deals of the complexity which lead to the disaster takes more skill. That might be partly true but I suspect there's a lot less genius involved in these deals than they would want us to think.

Maybe we should call in a few Mafia leaders or other big crime bosses to fix the problems. They are good at setting up deliberately obscure and barely legal financial deals to further their own greed. Is there any difference between them and the financial geniuses which caused the crisis? Well at least the crime bosses are honest about what they do, and in the end they do a lot less harm to society than the financial geniuses - and in case you haven't noticed, I use the word "genius" here with deep irony!

I don't know if financial traders have a code of conduct or any professional standards they must adhere to - I suspect they don't - but I think any other professional who did such a grossly incompetent job would be banned from that profession in future. That's what we should do with these people as well.

Their assets should be confiscated and used to help pay off the innocent people they have disadvantaged. They should be banned from any similar career in the future and we should allow professionals - perhaps from universities or other organisations whose sole purpose isn't simply extracting the biggest pile of cash for the least effort - to untangle the mess they have created.

It might break a few contracts, but begging the government for money to save your company sort of negates any previous contracts anyway, I would have thought. And it might make untangling the mess a bit more difficult because the people doing it are less familiar with the processes than the people who made the mess. But it is the right thing to do and it will be a small step on the way to fixing a system which is totally corrupt to its very core.

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