Wednesday, March 18, 2009

The Problem with Government....

Okay, the title may be a little too all-encompassing, but I want to deal with one thing. A better title might be "The Problem with Government Owning Anything". No, not quite what I meant. How about this "The Problem with Government Owning Anything that was Previously Part of Private Enterprise". Getting closer. Oh well, the heck with the title.

We are seeing what happens when government takes control of something that was previously part of private enterprise, namely, AIG. The complexities of this huge insurance company has now been politicized to the extent that they cannot continue their business model, however flawed. Sure, they were their own worst enemy in regards to the mortgage business. However, there are huge parts of AIG that have nothing to do with any mortgage-derivative-related activity. Those elements of AIG's business are now suffering because of the taint that has been placed on it by government. If AIG had proceeded into bankruptcy, those profitable elements of its business would have been spared the "second-guessing". They might have been acquired by another, profitable insurance company. They might have spun off on their own. They might have had a chance if government hadn't used such a broad brush to paint the entire business as "failed".

This should be a lesson for everyone. Government cannot and will not deal with the complexities of running a business. Everything is viewed through a "POLITICAL" spectrum. That model completely destroys a business executive's ability to function as a "going concern". A lot of the bonus payment were "retention bonuses". In other words, they were trying to retain their existing talent. Good luck on that going forward.


  1. Don't waste too much time on "The 165 million dollar distraction.This is exactly what the administration wants the media to focus on. The focus should be on the billions of dollars that AIG funneled to other entities. Or perhaps the donations given to the politicians before the election.

  2. I completely agree. The $165M is the new "Straw Man" for the Obama administration. It is only the tip of the iceberg. What's underneath is far more important.