AIG Bailout Recently, the American Essay

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President Clinton passed regulations that reformed the essence of the way banks can do business (Lal, 2010). These changes allowed banks to use their depositors money to invest in risky investments; also known as speculation. They had a range of new products to try to hedge their risks. One of these products was known as a derivative and AIG was the leader of the derivative business. Therefore, there was a systematic failure in the free market economy and AIG was at the centre. It is easy to put all the blame on AIG, however it should be shared equally with the regulators and the rules of the free market.

From the CEO's perspective, if I was the CEO, I would not have given myself the bonus; at least until all of the public's money was repaid.

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Obviously the CEO has a self-serving bias towards their own compensation and it is possible that they actually performed amazingly to keep the bank afloat. Yet a bonus is still a subjective measure and being paid millions right after the bailout had to generate a lot of bad publicity which has led to mistrust in the banking system as a whole. This can be easily seen in opinion polls as well as in movements such as Occupy Wall Street. This hatred engaged many citizens to become more active in the political process and demand more banking regulations from their leaders. Therefore, if I was the CEO, I would have at least deferred my bonus until the tax payer's money was fully returned to avoid the negative consequence that accepting this money had.

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