This contribution is from friend and colleague Lucas Graves, Columbia Communications graduate researcher, COI affiliate, and journalist extraordinaire.

Wherever you stand on the AIG retention bonuses, or the bank bailouts in general, it’s impossible not to notice how our ideological seams start to show in moments of high unsettlement. Here’s Thomas Friedman weighing in on why the AIG bonuses have to be returned voluntarily or not at all:

“We do not want the U.S. government abrogating contracts — the rule of law is why everyone around the world wants to invest in our economy.”

The rule of law creates an inviting climate for business. That sounds eminently reasonable, even obvious, until you consider the equally common claim — made by Friedman and countless others — that it’s precisely the lack of certain onerous laws that draws entrepreneurs to the land of opportunity from more rule-bound societies. (Like, say, France, Friedman’s favorite bête noir.) When laws seen as unfriendly to business do make it onto the books, the Chamber of Commerce and industry groups will argue quite openly for laxer, more “reasonable” enforcement, for instance of labor or environmental standards. Suddenly the rigidity of the rule depends on the nature of the law.

Meanwhile there are entire worlds of meaning in this beautifully parenthetical dismissal, from Andrew Ross Sorkin’s NYT column one day earlier, also arguing for the inviolable sanctity of contract where AIG bonuses are concerned:

“If government officials were to break the contracts, they would be ‘breaking a bond,’ Ms. Meyer says. ‘They are raising a whole new question about the trust and commitment organizations have to their employees.’ (The auto industry unions are facing a similar issue — but the big difference is that there is a negotiation; no one is unilaterally tearing up contracts.)”

An excellent if inadvertent reminder that contracts are legitimately broken all the time; that legitimacy is precisely the contested issue here; and that invoking the abstract principle of upholding contracts actually, and paradoxically, does the rhetorical work of claiming that in this case, as opposed to others, contract must be upheld. Likewise, it goes without saying that what constitutes legitimate bilateral “negotiation” is a matter of argument, not fact, as any auto worker can attest. No doubt “renegotiating” AIG bonus contracts a la Luca Brasi (i.e. at the point of a gun) would be perfectly acceptable to the bloodthirsty masses.

See this NYtimes article for an example of emerging and ongoing construction of justifications for the AIG bailout.  The content of the claims for why AIG and not Lehman?  Goldman Sachs and the London unit.

Note the different qualities of the arguments mixed in the same piece.

With regards to Goldman, there is more than a whiff of the classic accusation – powerful interests with ties to important people.

  • “The only Wall Street chief executive participating in the meeting was Lloyd C. Blankfein of Goldman Sachs, Mr. Paulson’s former firm. Mr. Blankfein had particular reason for concern. / Although it was not widely known, Goldman, a Wall Street stalwart that had seemed immune to its rivals’ woes, was A.I.G.’s largest trading partner, according to six people close to the insurer who requested anonymity because of confidentiality agreements. A collapse of the insurer threatened to leave a hole of as much as $20 billion in Goldman’s side, several of these people said.”

The involvement of the London unit takes on a technical flavor, having to do with dynamics of financial contracts, accounting and the firm’s organization.

  • “Because the London unit was set up as a bank and not an insurer, and because of the way its derivatives contracts were written, it had to put up collateral to its trading partners when the value of the underlying securities they had insured declined. Any obligations that the unit could not pay had to be met by its corporate parent. / So began A.I.G.’s downward spiral as it, its clients, its trading partners and other companies were swept into the drowning pool set in motion by the housing downturn.”

Powerful interests or systemic risk?  The article explores the tension but gives no verdict.  If anything it tends towards a hybrid justification where the two are interrelated.

  • “Yet an exploration of A.I.G.’s demise and its relationships with firms like Goldman offers important insights into the mystifying, virally connected — and astonishingly fragile — financial world that began to implode in recent weeks.”