An Even Happier St. Patty’s Day

On this day, a day that all of America takes on the green of Ireland, we have a little present for our Irish brethren across the sea– we’re goign to teach you a bit about real football. President Obama has just named Dan Rooney– yes, that Dan Rooney, owner of the Pittsburgh Steelers– as the Ambassador of the United States to Ireland. Not only do you get a prince, you get one who knows the difference between soccer and football!

Happy St. Patrick’s Day

Erin go bragh! Erin go braghless! Really, whichever makes Erin more comfortable is fine with me.

Where Are the Wizards?

It has been said that the line between magic and technology is located where the common person can look at a system and have no idea of not just how it functions, but why it functions. I cannot build an internal combustion engine (hell, I can barely change a spark plug), but I can look at one and figure out how it works, at least in broad strokes. Looking at a circuit board, however, isn’t going to provide and spark in my brain that will tell me how the computer I’m writing this on works, how my 46″ big screen is showing Handy Manny at this moment, or how I can talk to someone in Peru or Vietnam by dialing 13 digits into the phone the board may have come from. It is complex beyond my ability to ascertain, and I must simply rely upon it to work, to reply upon others to provide the networks upon which it draws, and to build be a new one when this one fails. Before it was retired in April of 2008, Air Force pilots had to rely upon their computers to make constant adjustments to the flight surfaces of their Stealth Fighters to keep the unaerodynamic Nighthawks in the air. Think about that– is there a higher presumed expert on the science and craft of flying than a trained US Air Force pilot? Even their skills and expertise could not keep an F-117 in the air; they had to rely upon a system with more expertise than they could ever hold. The trust inherent in relying upon these gadgets and systems of gadgets is awesome when you consider it, especially in those cases when even the “experts” are outside of their capacity in understanding and manipulating them, as in the Air Force example.

But is that trust warranted?

Much like my laptop and the Internet (series of tubes…?) themselves, our financial system is complex beyond simple understanding, even by the “experts”. The derivative nightmares that have crashed our economy were not the product of a bunch of execs sitting in a room trying to come up with a better way to make money but rather the end product of extraordinarily complex mathematical formulae that redefined risk in a way so out of keeping with realistic definitions of the concept as to have made these bundled junk loans look like an asset worthy of investment. Take those instruments and throw them into a milieu that sees incredibly complex markets interacting with complex personal decisions and trending, with overseas financial and security needs and philosophies, with complex logistical realities mandated by our “just in time” systems of inventory management amongst a host of other complexities and intangibles. Once you’ve done that, take a look at some of our experts on that overarching economic system– say Alan Greenspan, Paul Krugman, Larry Summers, Zhou Xiaochuan, and Daniel McFadden– and understand that they have wildly divergent opinions of not only how to fix the system but in fact on how the system works and exists at all.

This is a system so complex that, although we rely on it for fundamentals such as food delivery, power generation and medical care, nobody does completely– can completely– understand it. We are assured by many “experts” that they have a handle on this thing, that they can tame and manipulate it to our universal benefit, that they can shield us from its temper tantrums and benefit us from its soaring successes… they think.

The same is true of so many systems in the world in which we live– can the President be expected to understand and process the self-interests of the many nations on the planet when they are all just guessing at their own self-interests? And if we can not hold that expectation, then are we prepared to accept that judgements made on war and peace are made in a manner that must ultimately be accepted as uniformed?

We are at a point in our societal evolution where our artificial systems have merged with natural systems with ultimately unpredictable and uncontrollable outcomes becoming more the norm; it has long been a favored chestnut of science fiction writers, but the reality is truly emerging now into the public consciousness as a result of the financial crisis. What the implication of that will be for the future remains to be seen, but we cannot get to that point until we accept the concept that experts on these systems are not wizards and that while they can make educated guesses, they cannot speak with the authority that an expert on civil engineering can speak on bridge construction; to take anything they say as a firm prediction of probability may be a stretch; taking them as gospel is insanity.

It seems we have extended and expanded our reality right back to the point of trial and error. Welcome to the Nineteenth Century, circa 2009.

We’re Losing Our Minds

Nothing can mess up a marriage like money problems; hell even Billy Joel has popularized that concept in Scenes From an Italian Restaurant. When money becomes an issue, everything else goes on the table– bitterness, greed, jealousy and the real killer, irrationality.

In the marriage between our government and the American people, money has become an issue, and irrationality is raising its head above the swirling currents of anger, frustration, and fear.

Take, for instance, this week’s explosion of craziness over the A.I.G. bonus payments. Yes, on the surface it is maddening– the American taxpayers are floating A.I.G. and they’re busy shipping TARP money overseas or handing it out in bonus checks to the idiots who were the engineers and mechanics of the train wreck that A.I.G has become. While many families struggle through layoffs and while houses are being taken by the banks at rates never before seen, the rich are getting richer; anybody can understand the anger that would generate. The problem is that we’re getting lost in that anger and risk doing serious, lasting damage to our nation as a result of it.

In today’s New York Times, Andrew Ross Sorkin charts a personally dangerous course in his Dealbook column under the headline The Case for Paying Out Bonuses at A.I.G. There’s a case for paying out these bonuses? Really? The man must be insane and be courting a Rushdie-esque fatwa called down upon his head by Imam John Q. Public. In this environment who could ever support dishing out more money to the boobs at A.I.G.?

A very prescient man, that’s who.

The contract is the fundamental building block upon which American business is founded. No matter how onerous a deal may turn out to be in hindsight, a contract is a contract and must be honored short of bankruptcy. Yes, you can always ask the other party to renegotiate a contract for the mutual good, but you can not simply walk away from the provisions of a contract because one party just doesn’t like it anymore– at least not without a lawsuit that will see the walker getting nailed for doing so and ordered to perform. Without that surety, there is no such thing as a credit market– a loan or credit agreement is a contract, of course, assuring the lender that the borrower will repay the loan with interest or else forfeit some valuable property in lieu of cash payment. The contract is as close to a sacred concept as exists in the profane world of business and economics. It’s preservation is paramount to our very existence, and one of the key roles of government is providing the tools in the form of the legal system to enforce and ensure contracts.

And now, out of anger, we’re demanding that the government set a precedent that will hopelessly erode the sanctity of the contract because, well, we’re damned angry and have a right to be. The bonuses that are the object of so much ire right now weren’t concocted last week as a boondoggle to enrich a few financiers; they were the result of employment contracts signed before the wheels came off of the economy between A.I.G. and its employees. Whether or not those employees deserve the bonuses in light of all that’s happened, whether or not we want taxpayer money funding those bonuses, whether or not we’re out of our minds with anger, these bonus payouts are mandated by valid contracts that have to be honored simply because they are valid contracts. To have no less an entity than the Federal Government try to abrogate these contracts because the American taxpayer is angry… well, that’s not an avenue any sane person would seek to go down, is it? The slippery slope is an old argument, but precedent is also one of the underpinnings of our society. If the government can step in and simply toss out the provisions of a series of valid contracts because the Congress doesn’t like them, what is the point of the entire system?

The counterargument most offered by bloggers and commentators to this line of thought– that simply tossing out valid contracts is rank idiocy that will be killed by the Courts as it should be– is that A.I.G. is now largely owned by the taxpayers anyway and would have gone bankrupt had the government not stepped in… and bankruptcy is the ultimate voider of contracts. All well and good, save one tiny flaw– that damnable phrase, “would have”. Yes, the government stepped in and the American taxpayer got the bill… to prevent A.I.G. from going into bankruptcy. We stopped A.I.G. from going bankrupt and collapsing because their existence, as twisted as this might seem, is integral at this point to the economic recovery. When we made that choice– to prevent A.I.G. from going bankrupt by, essentially, buying the company, we bought not only its assets but its liabilities and commitments, as well. We are now a party to the employment contracts that mandate these “retention bonuses”, and as a responsible party that is interested more in the overall health and resurgence of our national economy rather than the sideshow BS of the A.I.G. bonus flap, we must hold back our bile and sign the damned checks. To not do so is unthinkable and, should this hit the courts some day, illegal. You don’t have to have stayed in a Holiday Inn Express last night to see that, even if like me you hate the concept of paying out this money.

Ditto the ire over A.I.G. taking bailout money and paying it to European and Asian banks rather than keeping it here int he States. A.I.G. owed debts to those institutions and needed to satisfy them under contractual obligation. We cannot give A.I.G. money with which to save itself and thus prop up our economy and then tell them that they can’t use it to satisfy their liabilities– what else would we be giving it to them for but to kill bad debts and satisfy other liabilities so that it may continue to function as a business entity?

Now, that doesn’t mean that we can’t ask for the money back, that we can’t publicly hammer the employees getting these bonuses in an attempt to shame them into not accepting them… but if they say no and want the money owed them, then it’s up to us to perform up to the terms of the contract.

There are no popular solutions to a financial crisis as deep as the one we’re in– the issues are too complex for the average person, myself included, to understand every intricacy and every interconnection. Moves that make sense may be counter-intuitive, and certainly may be the cause of immediate anger from the population. What me must use as our guide in determining sentiment is a baseline fundamental of common sense– do we want to live with contracts providing no surety? Do we want our employers to unilaterally change our contracts? Do we enjoy seeing products on the shelves of our stores, being able to borrow to buy a home or a car or a boat? Do we want to be sure that when we contract out a job that he job will be done? Of course to all of those, so, too, of course to paying out the bonuses contracted for. We cannot have one without the other.

Money can break up a marriage, but the one between our government and ourselves must be saved. We all need to take a deep breath, accept that there will be things that must be done that might not feel great up front but that must be done, noentheless, to get everyone back safe in their beds at the end of this long, dark day.