I have recently researched the bad decision making of AIG (American International Group). Following current anger with Obama's bailouts issued under the recent introduction of the trillion dollar stimulus package one company has stood out in a big way. AIG a company owned majorly by the US government was recently bailed out by the FED in hopes of avoiding future collapse of yet another big name firm. Unfortunately in AIG's case, the free market system punishes us for bad decision making. Following a 86 billion dollar push from Greenspan and friends AIG issued major million dollar bonuses to many employees. Unfortunately, even though the major equity stake of 80% belongs to the government the only punishment they can issue is a large tax on the bonuses; some 35% has been proposed. The inconvient truth of the matter is the lag between creating law that prohibits this or installing the tax will make quick recovery hard. Many politicians and citizens have become enraged at the situation because it further supports how inneficient these government bailouts are. Though expansionary fiscal policy says it is important to increase government spending and decrease taxes, too much aid could eventually cripple the American free market system. But this lose, lose situation makes the decision making hard. Either risk inflation and further debt by helping out greedy banks and lenders or back off and let the country fall into a recession. On the upside the mass amounts of money the FED is pumping out, and government is spending, will eventually stabilize our economy because we still have a very small rate of inflation and these firms that are being saved are a vital part of American economic success.
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