walkitout (walkitout) wrote,

why the contracts-are-sacred argument is not a good one

The major argument for paying the boni to AIG execs seems to be that contracts are sacred, and if you start breaking them, all hell will break loose. Especially if it is the government breaking them.

We're seeing a lot of credit card defaults (contract breaking). We've been seeing a lot of foreclosures and jingle mail (contract breaking) and short sales (renegotiation). Bankruptcy court is _all about_ contracts all being broken.

If we're going to unwind all this real estate crap, we're going to have to write down principal, and we're going to have to force the senior tranches to co-operate in renegotiating mortgages wholesale. All that requires contract breaking.

We might as well get used to it now, and set up a framework for doing it fairly. Which does _not_ involve paying out big boni. I'm pretty sure about that.
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