by J Scott Christianson, Columbia Daily Tribune Columnist
There’s a reason I don’t play poker for real money: I can’t stand to fold on the first round. The optimist in me always wants to believe there’s a chance my hand will win, even if the odds are against it. Unfortunately, that is why odds are called odds and not hopes.
Of course, the more money one contributes to the pot, the more invested one is in continuing to play the hand, no matter how bad it is. It gets harder and harder to fold as the ante is increased. This holds true for any investment — throwing good money after bad isn’t an exercise limited to the poker table.
Right now, our government has placed a lot of bets on trickle-down economics: Bear Stearns, $30 billion credit line; Fannie Mae/Freddie Mac, $200 billion investment; IndyMac, $8.9 billion from FDIC insurance fund; AIG, $40 billion stock purchase plus a $110 billion loan; auto industry, $25 billion loan; companies invested in subprime mortgages, $700 billion via yet-to-be-finalized structure.
Of course, now that we have placed such huge bets on these companies and industries, there’s no way we can fold, right?
And like the casino “house,” the companies on whose tables we have laid our bets seem to know we’re in it for good. After receiving its first cash infusion from the public till, AIG thought its execs needed a little retreat from the stress of ruining the company, so they took a $250,000 trip to the spa. When questioned, they explained that this was from a different pot of money and no public money was used for the vacation.
What kind of morons do they think we are? As a lawyer friend of mine has explained to me, “Money is fungible.” In other words, money from the retreat fund could have easily been used to offset losses in the operating fund. Perhaps if they hadn’t received the bailout, they might have had to loot the retreat fund. God forbid!
Now AIG has set aside $500 million for year-end bonuses for its “top talent.” AIG’s defense this time is that it might lose this top talent if it doesn’t hand out the bonuses. Don’t these already well-paid employees have any loyalty to their company? Or to the public that is financing their monthly salaries?
It’s hard enough to get a job at McDonald’s today, and I’m betting financial firms and banks aren’t hiring like they were two years ago. If some of the AIG wunderkinds want to take a hike and take their…