Bailouts

My brother and I were discussing the bonuses paid to AIG executives this morning. I told him I was wasn't necessarily angry at the bonuses paid because it all depends on how good the executives are at what they do. He didn't understand my reasoning until I came up with a sport analogy:

Suppose that the Cleveland Cavaliers get bailed out by the government and decides to caps the all players pay at half a million. This would be a wonderful salary for "95% of Americans", but what about Lebron James? No doubt, there would be other NBA teams willing to pay millions for Lebron and millions more in bonuses to entice Lebron to leave the cavaliers and join their team. Lets supposes that Lebron leaves the Cavaliers, and his ability were essential to the cavaliers success; the cavaliers now suck and began to lose revenue since people don't like to waste money on losers and therefore cannot pay the government back. So basically, in order to keep Lebron in Cleveland, the Cavaliers would have to pay Lebron ridiculous amounts of the tax-payer funded money to stay competitive with other teams that are vying for him. This is all assuming that his skills are so unique that he is not easily replaceable.

And so back to AIG, I am not aware of how valuable these executives skills are. My intuition tells me that they are just ivy league grads or people with wealthy connections with no special talent, they did after all, stupidly insure a bunch of incredibly risky assets. However, in the case that there are some Lebron James equivalents in the AIG executive branch, those bonuses might be essential to keeping him or her from going to an company with a better offer; and quite frankly, if the taxpayers ever want to see this money again, we are going to need some very talented people working at AIG.

In other news, FiveThirtyEight ran a logistic model on Obama's NCAA bracket and concluded that he had a biased towards swing states