Secretary Geithner recently had one of those Lady or the Tiger choices to make. Except in his case, the doors were clear glass.
Behind one of them stood a beautiful woman dancing the mambo and singing a freedom song. That door was marked… “Just say no to AIG Bonuses.”
Behind the other door stood Barney Frank in a tiger suit backed by a mob of unemployed factory workers carrying pikes, hot tar and feathers. That door read “Take the other door, stupid.”
Secretary Geithner, wearing his Wall Street loafers with little tassles on them, a Brooks Brothers Suit and Ivy League club tie, consulted with his lawyers and set lose the mob.
Now you can’t fault a guy for listening to his lawyers, even when his lawyers are not making sense. I mean the lawyers told him he had to do it, right? If I had been his lawyer, here is what I would have told him. All contracts can be broken. The question is what do the parties do after the breach? The wronged party (in this case the AIG employees whose $165 million would not be paid) can always sue. They can also ask to settle for something else.
My advice would be let them sue. It would take from three to five years for the matter to be settled in court. In the meantime, I would have leaked to the press the fact that the Secretary had a hard balls meeting with AIG over bonuses and told them they would not be paid. The Secretary would instantly overcome a growing suspicion that the boy wonder is not so much wonder as boy. He would become a hard balls guy every bit capable to doing the tough job he has been handed. If asked about lawsuits, he would cavalierly answer, “That’s what we have lawyers for.”
To the notion that the U.S. Government does not have the authority to tell the company to abrogate the contracts, we should point out that we own 80 percent of the company. We could call a shareholders meeting and throw all the bastards out, including the CEO.
The President has done what he could to clean up this mess, but this should not have been necessary. The fact that this was a missed opportunity could not be lost on the President.