The Pirates of Finance

In what seemed like the longest standoff in U.S. History, Captain Phillips was safely rescued Easter Sunday, at the expense of 3 Somali “pirates.” Great. We, as a nation, have reason to be proud.

And really worried.

Not only does the U. S. military have a responsibility to protect the homeland, but many of our interests abroad. This cannot be debated; it is a necessity. But with this act of piracy, something hardly new to this region, we are spending resources on protecting those that 1. Willingly put themselves in harm’s way, and 2. Could, at additional cost, be protecting themselves.
The inherent dangers in this part of the world are no secret. Even before this particular act pushed it into the spotlight, stories on piracy were not uncommon on every news channel. Training is routinely done to prepare crews for a pirate attack. Nothing that happened in this case was a surprise.

When something of value is open to obvious danger, additional measures are taken. Armored cars are aptly named for a reason. Every day, vehicles carrying millions of dollars deliver to hundreds of banks under the protection of those with holstered weapons and extensive training, paid for by the banks that employ them. As necessary as the banking industry is to the economic state of the country, the government does not pay for this service. You and I do, in the form of bank and interest fees. It is, quite simply, a cost of doing business. Pretending that the danger of a robbery is not real will not make it go away, it must be taken seriously and accounted for.
The shipping industry has made a calculated risk. Last year, there were approximately 111 successful hijackings of ships in this region. Of the thousands of ships going through annually, this is a tiny percentage, something the industry has taken into account when calculating the potential cost of ransom fees vs. the cost of arming the ships. This is a conscious decision on how to deal with a very real and documented risk.

So why is the American public paying for military support of this private industry? If large banks suddenly decided to deliver cash in unarmed minivans, should the government be called on to provide security? If I, as a white man, decide to open a 24 hour bodega in Harlem, should I really be surprised if I am robbed? Or is it on me to pay for an armed guard at the door? If I choose not to have one, who is to blame when the obvious happens?

These companies have made conscious and calculated decisions, based solely on financial reasons, not to pay for armed guards, despite knowing that the unarmed or poorly armed ships are the exact target of the pirates. They then send these unarmed ships to the region most known for pirate activity, expecting that some will actually be hijacked, but because the percentage is low enough, it is fiscally worth the risk. Completely ignored is the fact that no insurance will come anywhere close to issuing a policy for the trip, for this exact reason. If something goes wrong, despite being expected, the Military serves as the ultimate insurance policy, with the taxpayer footing the enormous bill.

Just add the shipping industry to the list of bailout recipients.

The AIG Debacle

This is getting to be a bit much.

How far can this AIG mess go? It’s bad enough that the taxpayers handed over in excess of 180 billion to the financial giant, but nothing compares to what just happened. Not the fact that 200 million went out in bonuses. That’s an ethical issue to be debated in bars and living rooms throughout the country. That our congress insists on yet another inane kneejerk reaction to it is what we really should be upset about. Americans are protesting outside the homes of AIG executives, when it should be on the mall in Washington. It is simply another example of horrifically misguided anger on all sides of this mess, and serves as a blind diversion to the real issues at hand.

Why do we suddenly care about 200 million, hardly 1.5 percent of the amount given to AIG? These were contractual bonuses, and the inclusion in the original bailout of the provision that allowed them saved a small fortune in potential legal fees. Who in the world would not sue for their bonuses when it was clearly written into an employment contract? Lawyers would have a field day with this. Now, Chris Dodd must fight for his political life for doing exactly what some rather intelligent lawyer told him to (I am leaving out the little flop-flop of denial, however).

Isn’t the real issue, considering the global nature of AIG, the amount of the bailout that has been siphoned overseas? Not to mix the bailout with any stimulus package, but Americans have the right to believe that cash handed to a corporation in the U. S. should, at the very least, stay here. Since transparency has not yet (ever?) hit AIG, we have no idea. Whether the bailout was necessary is a debate left for those far more intelligent than I, but a high I.Q. is not necessary to realize that a politician handing out taxpayer dough has a responsibility to know exactly where it is going.

And I.Q. is the primary reason we should not have such a huge issue with these legally-mandated bonus payments. Economists all over the globe cannot fully understand, never mind explain, the AIG mess. Many of the executives responsible have since left the company, some not so voluntarily. It would be a very prudent move to keep as many of those involved, those that actually understand this disaster, in the rolodex. Concern needs to be paid on the return of the 180 billion, and if 200 million in bonus payments is the best shot we have at keeping the ones that can make that happen onboard, and also avoids the millions in additional legal fees we would have faced should Mr. Dodd left that one line out, then why would we fight this? If the employees can be coerced into voluntarily returning the cash, as some already have, great. Short of that, we need to just let this one go.