Breaking AIG News (Sort of) from the WSJ.
"Obama told Geithner to take all legal means to block bonuses awarded to employees of AIG, Reuters reported, citing White House adviser Goolsbee." The full Reuters report, though brief, has more puzzles:
WASHINGTON (Reuters) -- President Obama has told the Treasury secretary Timothy F. Geithner to take all legal measures to block hefty bonuses awarded to employees of AIG, the insurance company that received up to $180 billion in bailout money, a White House adviser said Monday.
"The president told Secretary Geithner ... to take every legal means that he has to push back against this, to figure out who put this in the contracts and when, and to make sure this doesn't happen again," Austan Goolsbee, a member of Obama's Council of Economic Advisers, told Reuters Financial Television.
"Obviously we're not going to break the law, but there are a number of legal means that we have to push back, and the president instructed Secretary Geithner to do so," he said.
The puzzles include: Tim Geithner, as then President of the New York Fed, attended and even hosted the meetings in New York in mid September that decided to bail out AIG. Also at those meetings were the super bankers whose companies were at risk if and when AIG broke apart and could not pay the billions owed on the bad deals. Chief among the super bankers was L. Blankfein, boss of Goldman Sachs. The Treasury Secretary supervising the decision was Hank Paulson, ex-chief of Goldman Sachs. The Chair of the Federal Reserve at the time was the same man who is there now, Ben Bernanke. In sum, the crew that bailed out AIG is still largely in place. These dignitaries lobbied the 110th Congress to go along with the scheme, along with the TARP money that accompanied the scheme. The first puzzle is, when did it occur to them that by keeping the bankrupt and ruined AIG alive with the public treasury that this meant, logically and legally, that all the employee contracts for bonuses would be paid in time? Do any of them now say they didn't know? The second puzzle is, (2) When did the White House realize that the money was going out? Friday evening? Guru Larry Summers was on TV within the weekend declaring the bonuses an "outrage," but did he not chat with Tim Geithner and Ben Bernanke about those bonuses when he joined the White House economic emergency team in January? A third puzzle is, (3) Why now? The big news of the weekend was supposed to be the comity of the G-20 finance minister meeting in Sussex. Instead now the narrative has changed profoundly to protest, indignation, obfuscation, explanation, derogation about the AIG deals. The Obama administration spotted the rebel mob of taxpayers going by outside on its way to burn down the bankrupt and zombie AIG, and so the White House decided to join the mob, sort of, and perhaps lead it if it can be done with measured pomposity. The Obama team has lost control of the story. The president now goes on air to explain to the mob how this came about, how everyone was only doing the right thing to clean up the mess and no one wanted the AIG bankrupts to be rewarded for their failures, but gosh, it is a nation of laws, and gosh, those are contracts. This points to that dependent clause from the president to Tim Geithner, according to Austan Goolsebee: "to take every legal means." This is Washington talk for, There's nothing we intend to do about it but talk about it. The president also goes on to restate the problem as if he was just told: this is smooth Washington behavior. Make yourself important by pontificating on the problem that everyone already knows about: It is raining, so state loudly that getting wet is icky. Or, Frankenstein is a monster, grab a torch and pitchfork (below), let's get him!
"All across the country, there are people who work hard and meet their responsibilities every day, without the benefit of government bailouts or multimillion-dollar bonuses. And all they ask is that everyone, from Main Street to Wall Street to Washington, play by the same rules. This isn't just a matter of dollars and cents," he added. "It's about our fundamental values."
Big Brother Dresses Well.
The AIG weather report continues to deteriorate. The bonuses paid this weekend are the first wave of perhaps $1.2 billion more to be paid to the dead firm's failed and disgraced executives. All the big rascals of the firm have already fled with their pensions and pay-outs and consulting deals. What is left is the little rascals who can and will hire rascal lawyers to make sure the bonuses keep flowing. The national upset about the notion of bailing out failed companies, such as banks and their pals, has found a focus. AIG is face on the poster of the bail-out. It is grinning at us. Looks like Big Brother in a $3,000 suit? Looks like Goldman Sachs and JP Morgan Chase and Deutsche Bank and the rest of the banks who got their money back (and their chiefs who got their bonuses too) and also looks like Congress? Only the well dressed part of Congress, the lobbyists. It does not look like us. We can't afford to dress so well. We have to pay for AIG's wardrobe.
“Big Brother dresses well” indeed. And that is precisely what this whole furor (orchestrated by the Obama administration) is all about: to obfuscate the truth behind our government’s failure to protect us in the first place. Government not only failed to protect us, but leads the raid on our pensions, healthcare, freedoms, etc. What happens now is smokescreen – a diversion – so we might not realize who the real robber barons are. Millions are being paid out in bonuses. What about the billions that were paid out to GS, domestic and foreign banks? Perspective, people!!! The success of the ruse depends on the people not understanding the difference between the letters “m” and “b”. And why were the payouts necessary in the first place? Correct answer: toxic paper stemming from the sub prime mess. And who started that? Correct answer: government policy.
And who gets slammed? The employees of AIG; nine-to-five working stiffs who commute to work every morning tying to keep up with their mortgage payments and their kid’s tuition costs. The strategy is to get us turning against each other. That way we’ll be much too busy to see what’s really going on. It’s a classic Marxian ploy to divide the population along some economic fault line; and divide them further by gender, race, creed, etc. And then set them off to fight each other on some pretext for paid amusement; while others stand by and watch, clucking, taking bets, and eating chicken – little realizing that they’ll be next in the pit.
Just outside the tent, the armored truck stands idling noisily before driving off with the evening’s purse.
Listening to Limbaugh today, he covered the AIG bonuses story for 50 minutes while I was screaming at the radio that he was missing the point, and finally, finally, he got to the real story. The real outrage is that the AIG bailout is a backdoor way to provide billions directly to big banks (and probably hedge funds), foreign and domestic, who held the default swaps. The AIG bonus outrage is a misdirection ploy. It is political theater, a circus designed to distract the media from much deeper, more outrageous rip-offs.
John Batchelor makes the point in this column that the folks in charge today were there when the bailout was first concocted and must have had full knowledge -- this is not news to them. Senator Chris Dodd, AIG's largest single recipient of campaign donations during the 2008 election cycle, specifically wrote into law an amendment to the stimulus bill to limit executive bonuses, except those contracted before February 2009, which would naturally include all the bonuses Obama and the media are screaming about now!
I'm shocked, shocked, that a Senator supported with donations from failed AIG would act to legally protect their millions in bonus money.
Are they doing this to us just so we all get outrage fatigue???
AIG did exactly the right thing with the TARP money as far as I can see. Paid its loans off. We may not like the nature or size of the loans it incurred, but we should be applauding it for settling its accounts to the best of its ability. When the G20 people tell us to get our banks in order, what they're really saying is "Better make sure you pay our country's banks and other financial institutions the money you owe them". We give the money to AIG, AIG pays off its debts, that's one less ambassador that that turkey Geithner has to avoid at the G20 meeting.
Banking, especially international banking, is and always has been built in relationships based on trust, and the foreign bank makes an assessment as to the default risk of the domestic bank based in part on how reliable the domestic bank's government is perceived to be. If we start jerking AIG around to the point where they can't pay off their lines, then we might as well be wiping our .... brows with the money as giving it to AIG. Remember that AIG and BofA and Citi are all looked at as the various children of the U.S. around the world and those children have gone into the various shops around the world and stolen candy they couldn't afford and now mom and dad have to go around and help pay for the candy.
Exactly right, Lou! As far as any of us can tell, it was our politicians who caused this mess. I haven't yet heard of anyone fingering any other country. If that were the case, you can be sure we'd never hear the end of it.
Sure, they're now going around blaming us, the banks and capitalism itself. This is the best by way of 'talking points' they can come up with. And what's distressing is that most of us believe them as we're continuing to be spun into socialism.
Peter and Lou - you both have it precisely right. Also recommend Glen Beck show today - with diagrams about how AIG acts as a funnel to dispurse the money to other banks and countries' banks. Show repeats on Fox 11PM PDT (2AM EDT). Mark Levin show also spent extensive time on this today saying that this 'bonus $$' is perhaps 1/1000th of the REAL taxpayer $$ - but that the actual AIM of this current WH administration is 'statism'. Both Beck and Levin reach wide audiences - but there are still too many people who will be 'wowed' by Obama's appearance on Leno on Thurs. night - charmed by his 'coolness' and fluff questions about 'the dog' and the WH playground set. Very calculated. WAKE-UP America!! But I fear it is too late. Depressing.
Wow, there is some wild speculation going on here. Anyone an economist with the inside track for these stories? Sit in on any back room voicings or hearings? Got a dollar?
As far as bonus compensations, maybe it was simply just determined that it would be more beneficial and less expensive to pay them out rather than to get tied up in litigation that would be forthcoming and drag on for years in breach of contracts that typically pay thrice damages and fees.
All this talk of Marxism and socialism and anyism is easy and obnoxious when there is no basis in fact. Seems like a big and really fat capitalistic endeavor that is really occurring.
Scrutiny should be born by all parties involved. If this is a payola funnel for some that didn't scrutinize their interests, then they should be left dangling for a while for all to see, wherever in the world they are.
But, I think there is more to it than these simple and spurious attempts to explain a very complicated and as all is indicated... a super global meltdown.
We tend to think of laissez-faire and capitalism as going together like bread and butter. But, when you have taxpayers footing the bill for maintaining the semblance of capitalism, is it really capitalism anymore? What we really have here is the government of the U.S. making a transfer payment to foreign governments, with corporations within the U.S. and corporations in other countries serving as conduits. Zombies as John and Simon call them. I suppose you could argue the nuances and gradations of socialism all you want, but to me, the hallmark of socialism is that form of legalized theft commonly known as taxation. It's convenient to think of it in percentages. Complete freedom is 0% socialism; complete confiscation of all private earnings is 100% theft is 100% socialism. Bush was 35% socialist; Obama is 40% socialist but he'd sure like to go higher. JB is x% socialist where x is whatever percent of our budget is spent on NASA. A scant few like Margaret Thatcher and Ron Paul have called socialism by its real name. The enemy of the people. Freedom is everthing; coercion is death. When was there more cheering, when the Berlin Wall was built, or when it was torn down? I personally am 0% socialist; I consider all taxation, for whatever reason, an impardonable crime.
To imply that you have to be an economist to have an informed opinion on this matter is exactly the trap that is causing this problem in the first place. Government saying: leave this to the experts, we know better. What has to happen is for people, little people, to wake up and say "No, actually, you don't know better". What else is a technocrat besides someone who hides behind big words to steal with impunity from others?
since the news on the street now indicates the Government is gonna to tax these bonus' at 100 % Now is an opportunity to review some of the bonus earnings of the failed leadership involved w/ HUD/Fannie Mae/Freddie Mac... It truly is a slippery slop.
By the way, I am still on look out for the wall of shame that the national press loves to plaster up after similar debacles ... The Ken Lay's of the world...
there are a couple but many have escaped such attention...
Mr. Batchelor... this mob has it's pitch forks and torches... do you have the filthy monsters address'?
Looks Good- Smells and Tastes Good- Sounds Good, Too. It Ain't Real Though.
How many earmarks was it that Mr Paul stitched into the fabrica of the Budget? I forget
I object to that strategy of raising the marginal tax rate to 100% on those bonuses at this point to recover the money - in case anybody forgot, we still have a Constitution, and that august document specifically prohibits ex post facto application of a law. Forgetting the fact that the Constitution also implicitly prohibits practically everything Congress and the President have done over the last few months.....
Why on earth would anyone seek guidance on the AIG matter from Rush Limbaugh?
AIG was not bailed out to provide some sort of a back door bailout to banks, that is nonsense. AIG was bailed out to avoid causing a massive credit default swap "double default" which would have then caused BASEL II regulated banks to default on their reserve requirements and become insolvent.
Nicely Done, CRB
Yes, and then what?
That's what I look forward to - some genius with no political axe to grind, sitting down and figuring out what really would have happened if those banks had become insolvent. More than half the world goes to bed hungry. Would they be any hungrier now? We keep hearing of a meltdown - it borrows from nuclear terminology, I believe - but would it have led to nuclear war? The AIG building wouldn't have melted. "On the brink" we hear over and over, but how many people would have actually jumped off a cliff?
When I hear this Erma Bombeck-like hyperbole I assume that somebody is trying to intimidate me into not asking what the real consequences would be (because they don't know, naturally.) My guess is you would have seen a lot of formerly wealthy people turned out on the streets wandering through dumpsters or living in the modern-day equivalent of Hoovervilles ("Baracks"?) Bring it on, I say. The problem with our generation is that we have never known true want.
While I think it's plain that a lot is going on behind the scenes, I really don't think the AIG bonus outcry is staged. People were too sluggish/stupid to have ever figured out or cared who the real robber barons were. This just woke up the sleeping dogs for no reason at all and they are just going to be thrown a trazadone-laced bone and put back to sleep for a while longer.
Please explain what it means to say that AIG wasn't bailed out to bail out the banks, it was bailed out to keep the banks from becoming insolvent.
Yes, and then what?
Banks that survive stop lending to each other entirely and hoard even more cash.
Businesses in relationships with the failed banks lose their operating lines of credit and cash deposits, leading to further downsizing and outright failures.
Unemployment rises even further and the economy's downward spiral gains momentum.
Not a pretty picture.
On the flip side, saving AIG keeps the banking system operating and gives time for the toxic mortgages to work their way out. Eventually the foreclosure rate will return to normal and the recovery can begin, as long as the system survives that long.
Barring your disclaimer at the end, that would add up to Barack's biggest nightmare. You can bet he won't let it go down without first rolling some deserving conservative heads.
The only thing that keeps this story alive is the suspect notion of "tell-tale" hearts and the watch for someone to go over the edge and succumb to the beat.
The banking system machinations are obviously beyond comprehension of the most learned who have devoted their lives to understanding them. Making them out to be stupid or ingrate or even involved in conspiracy is no solution. Even Einstein was proven wrong on occasion. Greenspan was lauded as the greatest ever, yet, even he confesses that he doesn't get this one.
The impulse to try and make simple something unanswerable doesn't advance us one iota. Yes, as a whole, we have contempt and it's natural to want to see "heads roll." But, if thought out clearly, that means our own necks are in jeopardy, too.
As far as the investment in our financial institutions... they do business daily; they know the routine; they know the clamor and the discord; they work in that realm.
I don't. And I assume that most who decry and debase don't either.