The American people rescued AIG, and AIG spit in their face – up next?…Governmental Creativity

Image by jurek d. via Flickr

The pompous ignorance of AIG needs to be met with a little creativity on the part of the government.  The following from Aaron Zelinsky is a good start.  One thing that keeps me wondering is this, business is all about branding.  AIG had a good brand and good name.  AIG made some major financial mistakes.  The American people came to AIG’s rescue, not for the good of AIG, but for the good of the American people.  In turn, AIG has spit in the face of the American people. 

What does this mean for AIG and its brand?  There are only two possible answers.  1.  Follow Blackwater and rename your company something people cannot pronounce, or 2. Get bought out.

There is no way that most self-respecting Americans would do any business in the future with AIG as it stands right now, which is not a good sign as it relates to the American people collecting on their debt.

Treasury Secretary Tim Geithner should direct the Commissioner of Internal Revenue to challenge the AIG bonuses as unreasonable compensation under the Internal Revenue Code. Finding the AIG bonuses to be unreasonable compensation would render them nondeductible for federal tax purposes, and would strengthen potential shareholder derivative suits to recapture The Great AIG Giveaway.

Section 162(a) of the Internal Revenue Code declares:

"There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including . . . a reasonable allowance for salaries or other compensation for personal services actually rendered."

Aaron Zelinsky: Larry Summers: Stop the AIG Bonuses. Yes You Can.

Vaccinate us from the ‘Big Three’ - The ‘Transportation Enlightenment’ is on the horizon

Bailing out the three auto companies would not be good governance and would prevent, or at the very least, slow the oncoming transportation enlightenment.  A bailout would be akin to a massive effort in the 11th century A.D. to bail out the Dark Age.  There.  I said it.  Wow.  That feels good.

Some companies, no matter how large they are, deserve to fail, regardless of the consequences.

I have had a bad feeling about the auto bailout since it was proposed, and that feeling has not gone away.  However, until today, I just figured that the right choice will be made in Washington.  If the bailout attempt fails, which appears to be the case, it will be a good example of the avoidance of “groupthink.”  (According to Answers.com, Groupthink is, “The act or practice of reasoning or decision-making by a group, especially when characterized by uncritical acceptance or conformity to prevailing points of view.”)

Bad companies should fail, regardless of the consequences, especially if they are going to be bailed out at the expense of innovation.  I personally know, as most of us do, many people who will lose their jobs and become financially devastated by the auto company failure, but like a recruit at boot camp in the Marines, the auto industry needs to be torn down so it can be built back up in a grander image.

Michael Moore, love him or hate him, documented the failure of GM over 20 years ago when Roger Smith, the CEO of GM at the time, was systematically betraying the American “widget” worker, sending jobs oversees.  Instead of investing in the American automobile company and technical innovation, he put GM’s massive resources in to buying large stakes in completely unrelated businesses.

GM and Chrysler are bad companies that deserve to fail.  Unfortunately, like the sinking of the Titanic, they are going to bring down a lot of innocent people with them.

But here is the good news.  GM and Chrysler’s pending failure, and possibly Ford being not far behind, does not eliminate the demand and the need for new cars.  Because we are still a largely free-market based system, other companies will pick up where GM and Chrysler failed.

I believe that while we will take our lumps in the process, this will lead to a sort of automobile/personal vehicle/transportation period of enlightenment.  The transportation enlightenment is on the horizon.  Many of the workers who will lose jobs will get new ones in the same industry, but in the meantime, perhaps we should take the same $14 Billion that is proposed to bail out the auto companies and use it to provide career training and other support services to those workers to help them get back on their feet.

Instead of bailing out poorly run businesses, we should invest in the ingenuity, grit, and future of the American worker.  Our government needs to look at this current financial crises as an opportunity to vaccinate our free market system from the ignorance and greed of the bolo-hatted businessman, and put it back in to the education, workforce, and business systems necessary for economies to thrive in the 21st century.

For more reading, visit http://freakonomics.blogs.nytimes.com/2008/12/11/whats-the-point-of-bailing-out-the-auto-industry/

Flashback - Auto CEOs should fly private

I made the following post about GM CEO Rick Wagoner driving his hybrid to Washington D.C. from Detroit on Tuesday.

CEO Rick Wagoner taking unnecessary security risk driving to D.C.

Of course, he made it safely, hopefully he makes it back o.k.

Also, Time magazine ran an article on Wednesday on the same topic, but they took a different approach, and it had nothing to do with safety.

http://www.time.com/time/business/article/0,8599,1863640,00.html?iid=tsmodule

The best thing about flying corporate isn’t the comfy seats or the jumbo shrimp, or even the ego massage. The best thing about a corporate jet is that it’s not a commercial-airline jet. The best thing is avoiding long airport-security lines and having to simultaneously untie your shoes, take off your coat, get a laptop out of a carefully packed bag and walk at the same time; it’s avoiding the crummy, overpriced airport food, the packed planes, the overstuffed overhead bins and the frazzled, overworked crews. And being No. 175 for takeoff. When you fly corporate, you are driven up to the plane, you get in, and when everyone is ready, they tell the pilot to go. And then you do. That is real, unadulterated luxury.

GM CEO Rick Wagoner taking unnecessary security risk driving to D.C.

I have a bad feeling about this.  Every body and his mother is going to know his car is on the highway.  What if he gets in an accident?  What if some economic-induced crazed ex-autoworker decides to run him off the road?

This may not be the popular point of view, but let the man fly his jet.  I don’t want his blood on my hands, and this still is a capitalist country, even if our government is about to bail them out.

Of course, he will probably make it just fine in his car, but I think it is an unnecessary security risk now that it is all over the news.

GM CEO heading to Capitol by way of Malibu - Autos- msnbc.com

DETROIT - This time, GM Chief Rick Wagoner will drive a company car to Washington instead of flying by corporate jet as he seeks a government bailout, a spokesman says.

Wagoner will drive in a Chevrolet Malibu hybrid sedan when he makes the 520-mile trek from Detroit to Capitol Hill, General Motors Corp. spokesman Tony Cervone said Tuesday.