March 17, 2009 at 1:00 am

Laura Berman

Common sense is lacking at AIG

Insurance giant needs to reflect on failures instead of paying out $165M in bonuses.

Question: What's the difference between the best and the brightest and dumb and dumber?

Answer: The chairman at AIG thinks we're dumb and dumber.

How else to explain the mega-firm's decision to pay $165 million in bonuses to executives this week? Or the chairman's naive belief that the American people would sign the checks as easily as he?

Outrage. That's the word on everybody's lips, from Treasury Secretary Timothy Geithner to President Barack Obama.

But if you go beyond that genuine and rightful feeling, you can see that AIG's CEO Edward M. Liddy has done us all a huge favor by reminding us what matters.

He's opened up his insurance aerie, where the business is protecting against risk, and the executives are the best indemnified of all.

Liddy, a career insurance executive appointed to head AIG only last September, seems not to understand that his company has failed -- and that its failure argues for new standards and values.

Last weekend, Liddy argued the need to pay $165 million in bonuses this week to "attract and retain the best and the brightest talent to lead."

Best? Brightest?

These are the people who valued computer models over common sense, whose business model was, essentially, deciding that spoiled hamburger mixed with fresh filet mignon was just as good as the filet mignon by itself.

Author David Halberstam effectively coined "the best and the brightest" phrase. It was the ironic title of his bestseller about the 1960s group of Ivy League "whiz kids": These promising members of their generation had obvious smarts, but they lacked the foresight, wisdom and humility to navigate the mess that became Vietnam.

In the ongoing economic meltdown, the best and brightest of America's financial community similarly failed. Unable, and unwilling, to imagine failure, they created it.

Nowhere was this truer than at AIG, whose own whiz kids wrote trillions of dollars of credit default swaps -- insuring bonds backed by subprime mortgages.

My mother -- and probably yours, too -- would say the AIG crowd was too smart for their own good.

In Michigan, where employers are cutting workers, slashing pay, demanding furloughs and expecting UAW workers to chew on their contracts for lunch, Liddy's argument for paying bonuses to keep "the best and the brightest" is morally insolvent.

At AIG, after all, the best and brightest created an out-of-control monster. Liddy wants us to believe that only Dr. Frankensteins -- the brainiacs who got his firm into this mess -- can get us out.

This is a time for Liddy and his henchmen to reach back and remember that trust, caring and caution, not creativity and IQ, are historically the watchwords of what they do.

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