As The Anger Fades

Manzi, as usual, is a voice of reason on the AIG bonuses:

Do you really want zero comp at risk for people operating this company in its current state?

Or is it that many people hate the fact that senior employees of AIG Financial Products (i.e., "the same people who almost destroyed the world financial system") are being paid $100 million in retention bonuses to make sure they stay to unwind these positions?  I don't like this any more than anybody else.  But as a taxpayer, which is to say, partial owner of AIG, I'm not looking for cosmic justice, I want my equity to retain some value.

The aggregate size of AIGFP positions appears to be on the order of $100 billion dollars.  $100 million is 0.1% of $100 billion.  I don't know if the incremental value that having these guys around to do the unwinding is worth more or less than that, but it's not an inherently crazy idea either.  I am confident that Barney Frank is no better a judge of this than I am, even if his incentives were aligned with mine, which they are not.

In the end, what I think this highlights is the need to get the government out of the business of managing risk capital as rapidly as is feasible.

Agreed.