Ruth Marcus, financial writer, argues:
"The worst malefactors at AIG are gone. The new top management isn't taking bonuses.
"Driving away the very people who understand how to fix this complicated mess may make everyone...feel better, but it isn't particularly cost-effective.
"Remember, the contracts were negotiated long before the government put a cent into AIG. 'The plan was implemented because there was significant risk of departures among employees' at the company, AIG wrote in a paper explaining the plan....'retention incentives appeared to be in the best interest of all AIG stakeholders.'
"And federal legislation explicitly states that compensation limits for companies receiving bailout funds do not apply to pre-existing contracts.
"That was then, this is now is not a valid legal principle. 'We are a country of law,' economic adviser Lawrence Summers said [a week ago]. 'There are contracts. The government cannot just abrogate contracts.'
You want to abrogate contracts? Bankruptcy is the legal mechanism designed precisely for the abrogation of contracts.
-IBD Editorials
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