AIG bonuses

Several of my friends have sent me a variety of articles concerning the AIG bonuses. The following article has some very interesting details:

http://online.wsj.com/article/SB123741741674677723.html

Senate Banking Committee Chairman Christopher Dodd is at the center of the bonus controversy. The following paragraph from the above article describes an reoccurring incident in politics:

“Mr. Dodd was criticized for his role in the matter, a problem considering his already difficult re-election run next year. Mr. Dodd is the top all-time beneficiary of AIG campaign contributions, with a total of $280,000 in donations from the company's employees and fund-raising arm since 1990, according to campaign finance data collected by the nonpartisan Center for Responsive Politics. A Dodd spokesman had no immediate comment on the campaign contributions Wednesday.”

If we follow the money flow it is apparent that large campaign contributions have been rewarded with special treatment again. This may give a new definition to the term “too large to fail”. This term is used by politicians and economists to imply that an institution has such a large impact on the economy that the consequences of the firm’s failure would be catastrophic. We now may begin to understand that “too large to fail” actually means that the firm’s political contributions have been so large that its political connections will protect it from failure.