QotD: "The real scandal is what's legal"

I still can't understand how AIG, beneficiary of $152 billion in federal subsidies and loan guarantees, could get away with giving management $400 million in year-end bonuses for a year in which management did one of the worst jobs in financial history. That money was forcibly removed from your pocket and placed into the pockets of incompetent scoundrels — yet Congress does nothing! Now it turns out federally subsidized Merrill Lynch, the Bank of America subsidiary given $20 billion of your money two weeks ago, lost $15.3 billion in the fourth quarter of 2008, and yet handed its senior managers $4 billion in bonuses. Four billion, not million, forcibly removed from your pocket — or borrowed, with the bill handed to your children — and put into the pockets of scoundrels who did a terrible, horrible, awful job. Merrill Lynch managers must be laughing out loud: They screwed up in a major way, and for screwing up were lavishly rewarded, while blameless federal taxpayers were punished. Why isn't our Democratic-led, supposedly populist Congress incensed about such abuses?

Unfortunately, I do understand — because Congress is to blame for the abuses. Congress enacted October's $700 billion bailout of banks and Wall Street without including fraud provisions. At the moment of maximum leverage with banks and Wall Street, Congress simply handed over vast sums of your money without getting any accountability concessions in return. If a Pentagon contractor abuses federal money, if the vendor who supplies staplers and paper clips to the National Operational Hydrologic Remote Sensing Center abuses federal money, federal prosecutors move in, because contracts issued by federal agencies have fraud clauses. The October deal by which Congress handed over hundreds of billions of dollars to banks and Wall Street doesn't contain fraud clauses!

The AIG and Merrill Lynch top dogs may be despicable, but it's legal for them to stuff your money into their pockets as bonuses. As Michael Kinsley once said, "The real scandal is what's legal." That billions of the $700 billion bailout fund are being looted directly in front of our eyes is legal, owing to the carelessness of Congress.

Gregg Easterbrook, "Super Bowl Pick and Unwanted All-Pros", ESPN Page 2: TMQ, 2009-01-27