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Block Those Bonuses
Picking up on a call by one of the loudest congressional critics of the no-strings-attached bailout of banks and insurers, President Obama today ordered Treasury Secretary Timothy F. Geithner to pursue legal challenges to the American International Group's plan to pay out hundreds of millions of dollars in bonuses to executives.
"In the last six months, A.I.G. has received substantial sums from the U.S. Treasury," Mr. Obama said of the embattled insurance giant that wants to give one percent of its bailout buckage to the people who made the mess -- and have yet to find a way out of it.
A.I.G., which intends to pay its executives $165 million in bonuses, has collected $170 billion from the federal government.
Sensing a heist could be taking place, Obama is deputizing Geithner to block what looks like bailout banditry.
The president told his treasury secretary "to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole."
That's precisely the approach urged on the White House by Wisconsin Senator Russ Feingold, a lawyer and veteran member of the Senate Judiciary Committee, who raised the call for a legal strategy with regard to A.I.G.
Feingold began pressing Geithner after details regarding the A.I.G. bonuses became public to explore legal options for canceling the bonuses, recouping the money from the recipients, or suing the executives for breaching their fiduciary duties to AIG shareholders.
In a letter to Geithner, the senator wrote:
I am deeply troubled by reports that the American International Group intends to pay about $165 million in bonuses to its executives. As you know, the federal government has provided AIG with $170 billion in taxpayer money and currently owns 80 percent of the company. I share your outrage that a company which has been bailed out by the taxpayers for its mistakes would turn around and pay its executives such a staggering sum of money.Reports suggest that AIG's chairman claims AIG is legally obligated to pay some or all of these bonuses. I write to ask why any bonuses would be legally required, given the company's abysmal performance. In addition, I would like to know what legal options have been explored for canceling the bonuses or recouping the money from the recipients, and in particular whether the administration has considered holding AIG executives accountable in court for any breaches of their fiduciary duties to the shareholders.
Feingold, one of the handful of senators who was smart enough to oppose the no-strings bailout, rejects AIG's ridiculous -- and, frankly, insulting -- defenses of the bonuses.
AIG says the money is needed to attract "talent." Feingold replies, "Since some of the recipients of these bonuses may have been responsible for the practices that drove the company to the brink of collapse -- jeopardizing the financial system -- I am sure many Americans will question whether they are indeed 'the best and the brightest' and whether they deserve this level of taxpayer-subsidized compensation."
That's the right analysis, as Feingold notes. "President Obama is doing the right thing by pursuing all legal options to cancel these bonuses," says the senator. "At a time when millions of Americans are losing their jobs and trying to make ends meet, it is outrageous that a company that has been bailed out by the taxpayers for its mistakes would turn around and pay its executives such a staggering sum of money."
Obama's move signals that his administration will be more serious than George Bush's when it comes to holding bad bankers to account.
That's good news. But Feingold, Vermont Senator Bernie Sanders, Ohio Congresswoman Marcy Kaptur and other progressive-populist critics of the bailout won't be resting.
Blocking the A.I.G. bonuses is merely the first step in bringing an end to the bipartisan neglect of real economics and real responsibility that, over the past several decades, created the crisis that has spread from Wall Street to Main Street.
- Posted in
50 Comments so far
Show AllAs almost everyone else on the planet is pointing out, it appears that a few of our leaders are willing to abrogate some contracts such as those with labor unions but not those affecting their buddies in the corporate world. As I've pointed out before, it's the old boys' club at work.
Feingold may be the most progressive member of this Congress. I believe that history will vindicate every stand that he has taken over the past decade.
It's nice to see Obama taking the correct side of this issue. Unfortunately, his strong stand here contrasts sadly with his fecklessness on many other important matters.
q
Obama and the other crooks that promoted and implemented the unconditional bailouts kept telling us that the sky was falling and there wasn't time to include CONDITIONS in the bailout packages. Funny how they found time to impose many conditions on the automakers.
Obama proceeded to staff his adminisration with insiders, many of whom helped cause the financial meltdown. Not exactly a formula for CHANGE.
Two months after the inauguration, Obama still hasn't fired Ben Bernanke whose monetary policy not only facilitated but exacerbated the meltdown, and whose policies continue to accelerate the economic freefall we are in.
Obama still hasn't taken any action to re-regulate the financial industry. His murmuring about "oversight of banks that are too big to fail" indicates he is either hopelessly clueless or hopelessly corrupt. It doesn't take a 3 digit IQ to know that the only solution for any organization that is too big to fail is to break it up into oganizations that are not too big to fail. FDR's Glass-Steagall Act and other New Deal legislation did precisely that for 65 years until Clinton dumped them. Dust the New Deal off, Obama, and you are off and running.
Obama's apparent consernation at "the bonuses" is simply theatrics. If he was truly angry he would have taken at least SOME ACTION by now to control the financial industry.
Let me know when the bonuses are STOPPED....then, I'll have something substantial to believe beyond O's golden rhetoric. Since the US owns 80% of the damn company, it's ludicrous to believe those bonuses cannot be halted.............directly or indirectly...like firing those thieving bastards! Give me a reality break, please!
"Since the US owns 80% of the damn company, it's ludicrous to believe those bonuses cannot be halted............."
I don't think this matters, I think the real issue is who would prevail in court upon the inevitable lawsuits.
Fire the execs...break the contracts....keep it in court for years...who cares?..what the hell is the use of owning 80% of the company if you have no power to make decisions? It's all about the Fed...the ones who really make the decisions...and no one has the courage to confront them any longer...lest they wind up like JFK et al....
"Fire the execs...break the contracts....keep it in court for years...who cares?"
Would you care if the execs prevailed in court? And you would need some basis for keeping it in court for years. We'll see.
Please explain..From Senator Feingold himself.................
In a letter to Geithner, the senator wrote:
I am deeply troubled by reports that the American International Group intends to pay about $165 million in bonuses to its executives. As you know, the federal government has provided AIG with $170 billion in taxpayer money((((( and currently owns 80 percent of the company.))))))) I share your outrage that a company which has been bailed out by the taxpayers for its mistakes would turn around and pay its executives such a staggering sum of money
Does the US government own any AIG stock, and if so, how much? Anyone?
I still thik it doesn't matter, legally, it's a question of how contracts will be supported in the courts.
"Does the US government own any AIG stock, and if so, how much? Anyone?"
The current version of the Wiki article says this:
"In exchange for the credit facility, the U.S. government will receive warrants for a 79.9 percent equity stake in AIG, and has the right to suspend the payment of dividends to AIG common and preferred shareholders"
you guys need to read the discussion b/n DaveBronstein and TNModerate under Pierre Tristam's article in today's CD.
in any case, the gov't clearly could do something if it wanted to. it rips up contracts (via the courts or congress) all the time.
and any shareholder or business person will tell you that in trying times, bonuses are the 1st thing to go. call me stupid, but i think AIG qualifies.
contracts are not inviolable, not by any stretch of the imagination. anybody saying otherwise is a damn fool.
"in any case, the gov't clearly could do something if it wanted to. it rips up contracts (via the courts or congress) all the time. "
It normally doesn't do so willy nilly, there has to be some legal basis, and the point is whether it would hold up under due process. We'll see.
tell that to GM. the gov't, collaborating w/the UAW, management, & shareholders, effectively extorted sweeping concessions out of the workers.
this kind of shit happens all the time. (but this is finance, not labor. that's the only difference).
i'm not a labor or contract lawyer, but i can guaran-damn-tee you everyone of those bonus clauses (or retention clauses) in every single contract was conditional. "you will get x bonus if....y happens." not even AIG is stupid enuff not to have written contracts that way.
moreover, every employee at AIG is an "at will" employee. if they can fire you w/o cause, they can damn sure not pay you your bonus w/o cause.
the argument that AIG *must* honor these contracts reveals more about the ideology of the person making that argument than anything else.
"tell that to GM. the gov't, collaborating w/the UAW, management, & shareholders, effectively extorted sweeping concessions out of the workers."
Whether your characterization is correct or not, the above represents the *renegotiation* of contracts by the parties involved, and that's very a very different thing than the government coming in as a third party to rewrite or refuse to uphold. The purpose of the government is to enforce contract law, and not become a new party to an existing contract.
"but i can guaran-damn-tee you everyone of those bonus clauses (or retention clauses) in every single contract was conditional. "you will get x bonus if....y happens." not even AIG is stupid enuff not to have written contracts that way."
Agreed, and it is the job of government to enforce the contracts as written.
"moreover, every employee at AIG is an "at will" employee. "
Not true. "at will" status varies from state to state, while some portion of the employees could be covered under an employee contract, the terms of which are enforcable.
"if they can fire you w/o cause, they can damn sure not pay you your bonus w/o cause. "
Non Sequitur. They *may* be able to fire some employees without cause, but they can't withhold bonus pay if it is in accordance with a contract, else they have breeched the contract and are subject to legal action.
"the argument that AIG *must* honor these contracts reveals more about the ideology of the person making that argument than anything else."
Explain how. I'll tip my hand though: An environment where contracts are *enforced by the government* where there is a dispute is essential to a sense of stability in the economy that would attract people to invest and otherwise do business in that economy. OTOH, if the environment were characterized by a government that *arbitrarily changed or disregarded contracts* would quickly become unattractive to investment.
For the record though, it is still possible for AIG and the employees involved to sit down and renegotiate the bonus contracts.
"Blocking the A.I.G. bonuses is merely the first step in bringing an end to the bipartisan neglect of real economics and real responsibility that, over the past several decades, created the crisis that has spread from Wall Street to Main Street."
Note the use of the word "bipartisan." Note also how it deflates the thrust of the whole article. If we say our problems are "bipartisan," we're never going to solve them, since they were all caused by right-wing policies.
Conservatives would never undercut their cause in this way, but liberals almost always do.
Saying Republican screw-ups are bipartisan is a misguided effort at fairness that only serves to weaken the left. It's another reason the Repubs stayed in power for so long.
I know everyone on the left does this--but I think it's time we knock it off. Maybe it's a self-esteem problem...
And it's certainly more than the past few decades. The problem and theft started with the illegal creation of the Federal Reserve...neither federal or reserve. This is the real problem and until it's addresed, it's all smoke, mirrors and obfuscation. For the first time I can remember on national TV, Barney Frank admitted that the first AIG bailout was accomplished outside the government and We the People. Finally, the root of the problem..but, maybe it was just a slip.
TOTALLY bipartisan. glass-stegal repealed under who again? oh, right, that evil president phil gramm.....when did the dot.com bubble occur? and the housing bubble started as who was leaving office and who taking over?
Dont worry, this situation has already been resolved. Andrew Cuomo has written them a stern letter!
That, combined with a couple of petitions will surely do the trick!
Obama says one thing but does another. He is in league with the wealthy interests. Obama is not a people's president despite his rhetoric.
Once again, Obama and his cronies wait until public outrage requires them to step up. Is Obama truly furious and disgusted over the bonuses? I doubt it.
Let us recall one of the many moments from the classic film "Casablanca": the captain of the French garrison (Claude Rains) reacts when German soldiers raid Rick's Café because illegal gambling is taking place:
Captain Renault: I'm shocked, shocked to find that gambling is going on in here!
[a croupier hands Renault a pile of money]
Croupier: Your winnings, sir.
Captain Renault: [sotto voce] Oh, thank you very much.
[aloud]
Captain Renault: Everybody out at once!
• Yr Obd't Servant
O.S. You nailed it!
exactly. obama is in fact telling AIG (& co) to *act in their class interest* by cooling their jets a bit about "excessive" behavior, lest too many americans get pissed off and the whole bailout boondoggle come under question.
As the 80% owner of the company, the US government can change the process for dispersment of the bonus money....
"We placed your bonus check in the bottom of this box full of poisonous scorpions, vipers and spiders...please feel free to reach in and retrive it...you have 10 seconds to do so, or we will consider that you have voluntarily rejected the bonus."
"The only means of strengthening one's intellect is to make up one's mind about nothing, to let the mind be a thoroughfare for all thoughts." - John Keats
Obama has no intention of blocking these bonuses because all of the Senators and Congressmen and his reelection fund are still getting heavily lobbied and subsidized by AIG with our taxpayer money. Has any of the Merrill Lynch money been returned? Not a chance. These bailouts are taking place because our Congressmen from both parties are in bed with these criminals.
Right on. Shutting off lobbying money and term limits would clean out the criminal behaviour of our government in just one election cycle.
Barack Obama is the head of the Bill Clinton Democratic Party, which is to say, the Democratic Party in a United States with almost no manufacturing base (it's currently like 10% of GDP). The so-called "financial services industry", which manufactures nothing, stepped in and tried to replace manufacturing but was never able to do it because such a thing is impossible. So, the BCDP takes its money from the same ganefs and paskudnyaks as the Republicans and tries to tell you that there is such a thing as Republicanism With A Human Face: Barack Obama. That, too, is an impossibility. Obama's dilemma is to bring back the economy while saving our totally corrupt system and the totally corrupt individuals who run it and own it. Is that really possible?
Apparently, we're told, the executives will leave if they don't get the bonuses.
Refresh my memory ... why would this be a bad thing?
Reports suggest that AIG's chairman claims AIG is legally obligated to pay some or all of these bonuses.
Then let that MoFo pay them from his own personal fortune, if he thinks those thieves and incompetents are indispensible and deserve a "bonus".
There is far too much corruption in our financial system, the Bush-era SEC, and in within the halls of congress. The very money that our slimy congress critters gave to the bankers, was used to lobby against any meaningful regulation, was used to increase offshore banking services in India, and now we get hit with this big bonus scandal. When you have the money, you can make the rules.
I hope some of you had the opportunity to see Harry Markopolos destroy the Bush-era SEC on CSPAN several weeks ago. It was awesome and timely. But almost nothing has changed; we still yet to have a commission to probe the real issues of corruption in the banking system and make recommendations for constructive changes to banking rules. Until that happens, the money makers win.
I'm reminded of a sign that someone protester flashed to the wall street elite and royalty at the beginning of the credit crisis: "Jump Fuckers, Jump".
The concept that something is too big to fail is hogwash. Everyone of these so called 'too big to fail' institutions have received money to not fail and they continue to fail anyway. The money spent to salvage these monoliths could have been saved by not sparing their delicate balance to ecomonics. If they had all failed (and may still fail) many new institutions would have filled the void left by these giants. As taxpayers we are now in the banking business without any voice. If the money saved had been used to establish a People's Bank, a bank for the taxpayers, at least we would have a voice and a representation that wasn't beholden to thieves.
Deepa
The decision of AIG to give bonuses to some CEOs and the inability of the government to do anything to stop AIG from implimenting its decision shows the KIND OF DEMOCRACY that is in practice in the US.
Some American corporate companies have free reign and these companies expect the government to bail them out with tax-payers money and to "SHUT UP" after that. They expect government not to interefere with their decisions about how they spend the tax-payers money they received from the government. If the government questions some of their decisions, that is perceived as communism and curtailment of FREEDOM. That means, FREEDOM is euphemism for exploitation of the weak and vulnerable to serve and satisfy the GREED of the RICH and POWERFUL.
Isn't this type of DEMOCRACY and FREEDOM the US trying to promote and preserve in other countries???
It's all a smokescreen. Let's get all worked up and indignant over a mere $165 million that the taxpayers spent in bonuses to these crooks and forget the thousand fold greater $170 billion that taxpayers have poured into a black hole.
Now even if Congress passes laws to supposedly get the money back do you really think that will happen? Congress as usual doesn't have a clue. How will the government go after bonuses paid to traders in Financial Services unit in London, England some of whom no longer work there.
The only chance in bringing these folks to justice is the Serious Fraud Office in the UK, or failing that getting them extradited by Mario Cuomo.
Mea culpa.
"let's get all worked up and indignant over a mere $165 million that the taxpayers spent in bonuses to these crooks and forget the thousand fold greater $170 billion that taxpayers have poured into a black hole."
You got it right on....
tru enuff, but $165 million is about 1/7 or 1/8th of the actual figure. it's more like 1.2 billion (but they are not technically "bonuses", but "retention fees" or some other claptrap).
and 170 billion is just the tip of the iceberg too.......
The U$A is now 3 for 3.
1. The voters really screwed up when they went to the ballot box.
2. Those who were elected screwed up when they authorized the bailouts.
3. Now the scam of the century is the crapodile tears being shed in Washington and the cries to undo what has been done. Here’s the solution to the AIG bailout scam. Redo the tax code so that the bonuses paid will be taxed at 100%. No Courts. No lawyers. No problem.
If I could get Billions of dollars from the taxpayers, for my company, I would expect a big bonus too.
My God Americans are easy marks! Yes they want an end to corporate corruption (witness the current outrage) so naturally they vote for that scourge of the ruling elite Ralph, whaah… OBAMA?
I…see…you want change so much that instead of voting for someone who has been working for it for decades, you choose pick the guy who is backed by the interests that you claim to abhor, …uh…huh?!
What do they put in the water over there? No matter, if it is toxic, maybe you can ask AIG for some money to pay for your (not so) universal health care and all the other services you need and won’t be getting from your government.
I have not read this article yet-just got home -stealing the computer while everyone is gone...
But i wanted to mention something i heard this morning on CNN. I didn't catch whose idea this was but they were suggesting that the way to "punish"those who are getting those bonuses is to play the "shame game". By publishing the names of the people who are getting the bonuses. WEll, first of all I don't think most of the people getting them, would be ashamed because those in their social circle probably got them too.
But what i thought of was \,Hey what going on here. If those names are published you may as well be putting a target on their back. I do think there should be some justice here. But you have a lot of very disturbed people out here and I just think that putting those names out there is a BAD idea...
Pieces like this are worse than useless because they tempt people into taking seriously activity which is nothing but chaotic bungling, bungling which is dragging us down the road to financial ruin. And with this financial ruin will come the political ruin and destruction of our society. NO JOKE, FOLKS!
AIG and all the other institutions which are unable to meet their financial obligations must be put through bankruptcy reorganization, along with the federal government and the governments of states like California. Basically, we have to (1) identify and protect the useful functions provided by these institutions and (2) help them meet their financial obligations to the degree compatible with (1). Any approach to the current crisis which does not include this process is destructive. Public officials who waffle on this do so because they fear public display of the true nature of our economic situation and of the people who created the mess. Both groups -- the public officials and their financier owners -- are the mortal enemies of the American people.
Why do you care about $150 million or $450 million, whatever, in bonuses? How about the BILLIONS that Congress and the Treasury Dept have given away so fast and so stupidly to the crooks in the financial sector?
A BILLION is 1,000 millions.
Remember how it was necessary to act NOW, no time for consideration or debate, we had to give away billions NOW! It was exactly what Naomi Klein described in "The Shock Doctrine." And now that this stupid, hasty give-away of BILLIONS of tax dollars that we had to borrow from China hasn't helped the economy, the big ringmasters in Congress and the media are directing our attention to another ring-- Ladies and Gentlemen, Oh! Look at the bonuses!!!!!
They are directing our outrage and attention at the bonuses, which are mere peanuts compared with the BILLIONS that they have stolen from us. And when the bonuses are somehow cancelled or returned, we're going to be told that we won, that public outrage has made a difference.
As if.
If someone robs you of $200, and then gives you $0.50 back, do you feel justice was served?
Sioux Rose
PETRKROP: You eloquently stated what I had been thinking. Right on!
I suppose it's just the outright spit in your face audacity of these creeps. While people are losing their jobs by the millions, those who helped caused it are receiving huge bonuses! It's not the amount so much, but the mentality behind it that is disturbing to so many, more specifically what it symbolizes.
Pay the bonuses in Lehman stock...
"The only means of strengthening one's intellect is to make up one's mind about nothing, to let the mind be a thoroughfare for all thoughts." - John Keats
"Capitalism tries for a delicate balance: It attempts to work things out so that everyone gets just enough stuff to keep them from getting violent and trying to take other people’s stuff."
George Carlin
We don't want these collapsed casinos to pay bonuses to the gargoyles who program them cuz we want those gargoyles disabled from creating further chaos and destruction, ehh? Furthermore, we don't want these collapsed casinos back in operation. They will simply re-hire flying gargoyles to do "casino royale 2" which is exactly what we don't need. Shutter the casino royales!