Public outrage over the AIG bonuses continues to occupy public discourse. The executives at AIG’s Financial Products division must have initially felt some sense of satisfaction when they received their bonus checks that, in some cases, had a number followed by six zeros writ large in the upper right-hand corner.
Before they had a chance to spend their newfound wealth, however, the executives were urged to give it back. The public had come to believe, perhaps rightly so, that these same executives caused the financial crisis that now engulfs the world. Not long ago, AIG was gleefully insuring banks and other mortgage lending companies against potential losses from so-called subprime mortgages. What seemed a good idea at the time proved disastrous as new homeowners, lured by low interest rates, found that they couldn’t make their mortgage payments when the rates rose a couple of percentage points.
What would Ben Franklin say about the behavior of AIG executives?
Here’s what he’d say: “They paid too much for their whistles.”
In 1772, Ben Franklin wrote a letter to his nephew that has since become famous. In it, he told the story of something that happened to him when he was 7 years old. Franklin bought a whistle in a shop after hearing another boy play a tune on a similar toy.
After Ben got home, he played his whistle continuously. His brothers and sisters, tired of hearing the gadget’s cacophonous sound, told Benny that he spent four times as much for the whistle as it was worth. His relatives laughed at him for his folly. This, in turn, brought more chagrin to young Ben than the pleasure he received from playing the whistle.
Throughout the rest of Franklin’s long and illustrious life, whenever he saw someone who was too ambitious, too willing to give up virtue in exchange for possessions, or too quick to sacrifice improvement of the mind for pleasurable sensations of the body, Franklin said to himself: “He’s paying too much for his whistle.”
Indeed, when I read in a recent New York Times that the president of AIG’s Financial Products division received an accrued salary of $250 million over the eight years that he aggressively promoted the sale of insurance for residential mortgage-backed securities, I realized what Ben Franklin would say about the situation: “The world has paid too much for this man’s whistle.”