Conservatism Lives!

Let there be no mistake, I am a capitalist through and through. I believe in free enterprise, and I also believe that “big business” is often unfairly and unjustly skapegoated by the left. That being said, as a true capitalist, I also happen to think that poorly run companies ought to actually fail. Now, to be fair, not all companies fail because of poor management. There are a myriad of circumstances that can sink even the best run companies. As someone who has been a business owner for several years now (in a business that my partners and I, by the grace of God, built from scratch) I can speak to this with some authority. We have struggled and fought the good fight and so far, survived. Many business owners that I have met over the years have not been so lucky, while others have thrived. That being said, there are few things so purely American, honorable, and just, in my opinion, than to put your own capital at risk in the pursuit of a dream. But that’s another post for another day.

In case you missed it, news broke recently that AIG (the same AIG that the government has “bailed out” with multiple cash infusions now totaling over $170 Billion) paid out over $165 million in bonuses to their executives over the weekend. People are angry. Congress is angry. President Obama is angry. And I have to say, all of this anger is completely justified. The sad thing is, its just pointed in the wrong direction. Clearly AIG was ultimately a poorly run organization that was headed up by a team of executives that were more concerned with their own short term gain than the long term financial stability of the organization who long ago abandoned their fiduciary duty to the company and its shareholders.

So everyone, including president Obama, seems to be asking WHY these executives, who have just bankrupted their company and “borrowed” $170 billion from the American people (that we in turn borrowed from the Chinese in order to lend it) would take these bonuses? Simple. Because they can. What amazes me about this story the most, is that no one seems to be asking the obvious and most basic of questions. Why were they permitted to retain this level of latitude and control? The simple fact that they were, in my opinion, is one of the greatest recent examples of the growing problem of incompetency with team Obama.

As someone who has signed many a business loan in my day, let me tell you, lenders who do the proper due diligence on a borrower simply do NOT expose themselves to this level of risk. Competent lenders are always in control. Read this, and read it well. No competent lender would ever allow a situation in which they loan a large sum to a company in trouble only to have that company’s executives suck out what was supposed to be operating capital in the form of bonuses. It is extremely commonplace for lenders to include executive compensation caps with the terms of a given note. Certainly a company in AIG’s position had absolutely no room to bargain these types of covenants out of any deal that would have been crafted. The simple fact of the matter is that a group of slimy, selfish executives just stole $165 million from the American taxpayers because team Obama wasn’t competent enough to stop them. Unbelievable.