To Big to Fail or a Big Failure?

In a galling display of dishonesty, President Obama is feigning outrage this week of executive bonuses at AIG, being paid with taxpayer bailout money. The fact that Sen. Dodd has now admitted slipping in a provision protecting bonuses at the specific request of the administration aside, the idea of a government being outraged at a moral hazard it created is appalling.

When a government uses taxpayer money to bailout out a failing corporation, why is it a surprise that the corporation continue fiscal irresponsibility, especially when the money is given hastily, without debate or any strings attached? When bad management is subsidized by taxpayers, why should we expect anything but more bad management?

If AIG had been allowed to fail, there would not have been lavish corporate retreats, and there would not have been undeserved executive compensation. When a company fails it is able to rewrite its otherwise legally binding contracts under protection of Chapter 11 bankruptcy. The overpaid and underperforming executives could have been forced to rewrite their contracts or get in line like all the other creditors, instead the Government bailed them out and took away any leverage for forcing the executives to restructure their deals.