Get News & Views Updates
Most Popular This Week
Popular content
Today's Top News
From Iraq to AIG
Sometimes I wonder whether this country not only has lost its moral compass, but does what it can to forbid its recovery. Then I remember: of course it has. Iraq. Afghanistan. Black sites. Torture. Guantanamo. AIG. Bear Stearns. George Bush. The gathering depression. Tim Geithner turning courtesan for his old Wall Street pals. It's all of a piece. There's no pretense of propriety or civility, let alone of anything resembling moral behavior. There's greed. There's thievery. There's more greed. Then there are apologies for the thieves and the greedy, half of that compliments of the government we thought we'd elected to clean house.
What brings it all in perspective is the scandal over the AIG bonuses, and the lies surrounding the supposed contractual necessity of paying them, or President Obama's revoltingly timid order to Geithner, of all flaccid vertebrates, to do what he can to stop AIG from the paying the bonuses. Don't taxpayers own this company? At last check, yes: 80 percent is U.S. government property, meaning you and me (and the Chinese, given their stash of Treasurys) own it. But first, a little clarity on the numbers, which even our dearly beloved Obama is getting wrong. No, it's not $165 million in bonuses. It's $1.2 billion.
Here's how the Wall Street Journal broke it down today:
On Sunday, new criticism emerged about $450 million in bonuses paid to employees of AIG 's Financial Products unit, which made a series of bets on credit default swap contracts that drove $40.5 billion in losses last year. [...] In his letter to Mr. Geithner, dated Saturday, AIG 's Mr. Liddy said the firm's "hands are tied" on making $165 million of the payments that were due Sunday.
The payments at AIG 's financial-products unit are in addition to $121.5 million in incentive bonuses for 2008 that AIG will start making this month to about 6,400 of its roughly 116,000 employees. Separately, AIG is also making $619 million in retention payments to 4,200 employees.
Together, the three programs could result in roughly $1.2 billion in retention and bonus payments to AIG employees. At least some individual employees are receiving millions of dollars -- at the financial-products unit, for instance, seven employees will get more than $3 million for 2008, according to an AIG document.
Retention payments? To the employees who created the very mess they're being paid to clean up? From a company owned by taxpayers? This is the company Obama is putting silk gloves on before slapping around. The financial crisis has exploded in his face. He couldn't do anything about that. The political crisis now exploding about him is his own making, if he doesn't demolish corporate moralists' claim that AIG is under contractual obligation to pay these bonuses.
Companies left and right facing tighter profit margins (not even bankruptcy) are renegotiating contracts, firing people outright, imposing new wage scales or, in some cases, shutting their doors. AIG is bankrupt, and would have been so three times over had it not been for three successive cash infusions from you and me. It has no contractual obligations because it's no longer a company. It's in receivership. It doesn't get to say what should be done anymore. It gets told what gets done. Here's what.
- Those 400 employees at AIG's Financial Products unit who are mostly responsible for this catastrophe? Fire them. They're lucky they're not in prison. Then offer to re-hire them, if they're so crucial to fixing the mess they created. At Wal-Mart, meaning slave, wages. They'd be lucky to have a job. But here's the thing: they're not that crucial. Follow the money isn't just a reporter's trick. It's every financial regulator's and auditor's duty. Those derivatives AIG Financial Products gambled with weren't regulated. (Credit-default swaps, a speculator's wet dream for being entirely untracked and unregulated, were invented 10 years ago, and Congress purposefully kept them off the regulators' purview.) It's time to account for them. Why trust the crooks who embroidered them to unravel them?
- For the rest of the company, it's not news to any of its 116,000 employees, if it still has that many left, that AIG is the mother of this recession, and that taxpayers own the thing. Nor is it news to anyone that when an individual or a company is in bankruptcy, it no longer calls the shots, especially not the sort of shots that drilled holes in a whole world's financial structure. Those bonuses for anyone else? Gone.
- Tim Geithner? Fire him, too. No need for sorcery's apprentice on the job.
- Last but not Lehman: Nationalize the goddamn thing and be done with it. Nationalize the banks, too. It won't make a difference: the catastrophe is already nationalized. Might as well be formally so, so time-wasting scandals like this week's bonus folly don't take up our time better spent polishing resumes and wasting time dreaming about jobs vanishing before our eyes.
Speaking of contractual obligation: it'd have been nice if our employers had stuck to theirs while we did our part. But as always, it's never more than a one-way street.
Comments
Note: Disqus 2012 is best viewed on an up to date browser. Click here for information. Instructions for how to sign up to comment can be viewed here. Our Comment Policy can be viewed here. Please follow the guidelines. Note to Readers: Spam Filter May Capture Legitimate Comments...
27 Comments so far
Show AllSounds like a way to get money, while letting the taxpayer take all the risk, a great deal for AIG.
"...the Federal Reserve Bank on September 16, 2008, created an $85 billion credit facility to enable the company to meet collateral and other cash obligations, at the cost to AIG of the issuance of a stock warrant to the Federal Reserve Bank for 79.9% of the equity of AIG..."
The Federal Reserve Bank is privately owned. According to your information the stock was issued to the Federal Reserve Bank. If this is true, the credit facility must have been set up with taxpayers' money but with no ownership stake in the deal.
http://www.theyorkshirelad.ca/12loweringtheante/loweringtheante.html
Wow, must be a great job where you get a bonus regardless of whether or not your company goes bankrupt, loses money, etc. A more insidious part of this is that if you reward people for destructive or reckless behavior, what's the disincentive to keep them and others from repeating it in the future?
aig is a strand in the wig of the finance debacle
there has been no economic growth in the us since bush took office in 2000
the government has admitted this
the only profits turned - during this time period when millions of american jobs were lost to wally wally wal mart and their business partners n communist china - the only profits turned were part of this ponzy scheme of financial products - swaps and such
most of that money went to wall street, banks and their associated hedge funds
obama is surrounded by wall street exec's
people like geitner and bernanke and emmanuel
hello - is this thing working
obama is a psyop - he is a cruel hoax perpetrated against a weary public who feel like they are at the end of their rope
we were hoping for something just a hair shy of salvation and we were desperate
the controllers knew this and sent in the judas goat
a black one at that
after colin powell and condi the idiot you might think that black folks would want to opt out of being so poorly represented
brother barak also deflects attention from the issues of black america
brother obama has to act and act quickly in order to get the last few pennies in the federal coffers into the hands of the controllers because his shelf life - i predict - will be short
we are gonna wise up to this little bastard soon enough and they know it
once we realize we have been cruelly hoodwinked again i think the coming storm will be loosed and we will see some serious conflict erupting from coast to coast
it will be "game on" and we will see who has stones in this country and who has not
i say this will come to a head within 6-8 months
Retention payments. That is the worst part of this whole mess. The Kleptocracy is working hard to insure that the same corrupt people are still running everything after the "recovery." The only tarp the citizens will see is a tarp over the cardboard in their Obamaville while the financial geniuses will recover and go on to run new bubbles and schemes. It would make impending poverty so much more bearable if it meant a renewal of our freedom, our government and our financial system. It would rejuvenate the capitalist system if all the deadweight at the top was removed.
Pierre writes "Credit default swaps, a speculator's wet dream for being entirely untracked and unregulated, were invented ten years ago, and Congress purposefully left them off the regulators' purview..... It's time to account for them." I agree entirely.
Further, I propose the federal government should now account for credit default swaps by giving them all an economic value of zero - null, void funny paper ab initio - declaring these exotic, incomprehesible financial instruments to be nothing but 21st Century Wall Street alchemy, sliced and diced and marketed like snake oil to super rich suckers at home and abroad who were trying to cleverly hedge their own bad investment decisions. In the esoteric jargon of the trade, credit default swaps were referred to as "toxic waste" for damn good reason.
Not all troubled assets are equally troubling. Mortgage backed securities (even if inflated in value) at least were based upon real houses and real commercial properties where real people lived and worked, trying to make ends meet. Bundling up mortgage or even credit card indebtedness and selling the bundles off to Wall Street for resale to wealthy investors at least did have a multiplier effect on the originating lending institutions' ability to raise, leverage, and recycle new capital to help grow the general economy. Those types of now "troubled" assets should be written down or restructured, but not written off.
In contrast, credit default swaps operated in a market that had zero social utility in terms of providing products or services to real, live human beings, or even lubricating the flow of available credit back to Main Street. I diversify my speculative portfolio by swapping some of my funny paper for some of your funny paper. Then we both pay AIG a transactiion fee premium to cover some or all of our respective losses if (when) the house of cards collapses.
The whole reason the Congress left this wacko game of chance in the big global financial casino entirely unregulated was because only the super rich, super sophisticated would even get invited to sit in at the table and ante up.
Ain't we clever, sophisticated, savvy investors though? These credit default swap instruments (and AIG's insurance thereon) were so opaque they could just as easily have been written in Latin.
Well, caveat emptor, as far as I'm concerned.
Bill from Saginaw
There will be no solution to the financial crisis until the Credit Default Swap Ponzi scheme is eliminated. An issue my neighbor raised who used to work for Morgan Stanley and financial services is whether there is a legal obligation for AIG to pay Goldman Sachs, Merrill Lynch etc.
However what if a totally different approach is taken - since basically this whole
scheme amounts to gambling and bets why shouldn't they be prosecuted as illegal
gambling?
How is somebody buying credit default swap coverage for a transaction in which they had nt stake any different than somebody betting on a pro football game which
they are not playing?
Much of the Credit Default Swap Ponzi scheme was simply gambling and could be prosecuted as such.
There is no obligation to honor an illegal Credit Default Swap bet any more than to honor an illegal Super Bowl bet.
This could be the stick to outlaw any further CDS's and then unwind them as
suggested in a Jan 24 NY Times column by Gretchen Morgensen:
http://www.nytimes.com/2009/01/25/business/25gret.html
Pay back the premiums on the same time scale they were paid and Credit Default Swaps are declared null and void.
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.
Nationalize! Nationalize! Nationalize! The banks and all corporations as well and have them run democratically from the bottom up eliminating all CEOs and managers who live like bloodsuckers off of the backs of the working people who are the only creators of real wealth.
Sounds simplictic? Well -- it is!
It is so nice for the rich and powerful elite who own lots of the world, to have such a simple strategy that always works for them for everything, at least within their lifetimes. It works for Global Warming, maintaining US Hegamony, and keeping up the vast inequalities of income and wealth that makes them what they are today. The strategy includes the big players of the Major Parties, the corporate heads, and "elected" officials. Keep it simple, the strategy says to keep sucking out the wealth and power from everyone and everything else, because that is where it comes from.
How will this help global warming? If all the money, including all of the debt slavery, is owned by fewer people, eventually the rest of the world cannot pay for food, electricity or fuel. The overall carbon consumption drops, while the elite can still have the power and lifestyle for which their heavily responsible positions make them eligible. The problem is that it is not really a conscious deliberate strategy for global warming. Its just a side effect of what human decision makers do best at. When your live is going to be charmed anyway, why worry about the world post death? The result is that more effective anti global warming strategies which would have neutral or negative effects on elite lifestyle, power and profit concentration, are thoroughly ignored.
The problem lies is in the current leadership and structure of power and influence, and the lack of sufficient heckling from the people. The current US president is no more than a glorified appointee of the Zionist movement and Wall Street. There is no hope for change in one strait-jacketed individual. Throw away the shackles and chains and rise up. A good fight might help reduce the numbers of overconsuming human beings more quickly, and will scare the intestinal contents out of the powerful.
Making sure AIG does not pay bonuses is just putting lipstick on a pig. We know they will get their bonuses even if they are deferred to next year or are paid by off-shore wholly-owned subsidiary corporations to executives accounts in the Cayman Islands .
We need a balanced budget, balanced trade, peaceful relations with all foreign states, and a consistently applied rule of law. We have none of these. Neither the dems nr the repubs support any of these.
But there is no reason why, when the government owns 80% of the shares, that an emergency stockholders meeting cannot be called at which the board of directors can be fired.
Personally I think the US government should not nationalize any banks but should set up it's own temporary people's bank. every individual can save and check there with all assets guaranteed. No corporate entity or business is allowed to hold an account, but non-financial businesses can seek loans on good terms.
Then just let all the banks fail, heck, the people's bank can buy them up for a song when they go bankrupt. Money would still flow to the real economy until we find out who the major players are that are left.
Unless the payments are stopped, the public cynicism that will result if the "bonuses" and so-called “retention incentives” lavished on AIG execs are paid will enormously harm the credibility of the entire "bailout" process started by the prior Administration.
Considering that decisions of those at AIG getting the so-called “bonuses” were not merely bad decisions, but disastrous ones that may have destroyed the company itself as well as the entire world economy, shouldn’t we be instead suing those wanting the bonuses or at least investigating their actions for possible, or even probable, fraud, misrepresentation, conversion and/or collusion? After all, it was their job to have known of the danger. That’s what they were educated, trained and hired to do and therefore they must have acted with either gross negligence, reckless indifference or even criminal intent.
If the AIG directors concede such bonuses are ill considered, but claim nothing can be done, why not take the company into voluntary bankruptcy? The bankruptcy court can cancel any executory contracts including contracts for bonuses even if they are otherwise unbreakable contracts.
If the current directors made such a terrible decision and claim nothing can be done, then since the government now apparently owns about 80% of the company, shouldn’t we at a minimum be seeking to remove all the current directors for total incompetency?
In any event, wouldn’t it be perfectly legal to fire anyone who actually accepts a bonus? Let them try to find a new job in the depressed economy they helped damage.
Signed: Lawlessone [for more irreverence, see resistence-is-possible.blogspot.com]
The bonuses are shut up money. Eventually when these big money corporations run out of shut up money, some of the people who did this dirty deed are going to tell the tale. Then we'll find out the extent of what the regulators now know nothing. While they can hold on for million dollar bonuses, they'll be shut up tight as a vice.
This article is factually inaccurate. AIG is not in bankruptcy. They've been bailed out. They should be in bankruptcy. Then the courts would be in their books and we'd know what the regulators don't know.
Sometimes I wonder whether this country not only has lost its moral compass, but does what it can to forbid its recovery.
Only on a site like CD would anyone hear a truth like the above. All that's left now is The Great Scam. The Bald Eagle is no longer the national bird. It is now Wankerbird, a cross between a vulture and a vacuum cleaner which can both eat the dead and scoop up its few remaining assets all at the same time and faster than Usain Bolt can sprint 100 meters.
The 100 million USans who voted lesser/greater evil in the 2008 elections assigned evil the task of disempowering itself. Not smart.
How is this like stock options at a set price? How is it different?