New AIG bonuses more fuel for outrage

Your tax dollars at work.

This type of deficit spending should put many people back to work.

They need to be criminally charged with fraud.

Notice how Frank James tries to put all the "outrage" on the shoulders of AIG.

AIG deserves their share of "outrage". But what about the Dem Congress and the Obama administration? The ones that pushed through this bailout? When they passed the bailout they either knew, or should have known, about these pre-existing bonus contracts. Yet they rammed the bailout through anyway.

I'm sure the "lawmakers" will fake some outrage in front of the tv cameras. Outrage for something those very same lawmakers sanctioned! I guess they expect their media buddies to once again cover up their own guilt, cover up their own pay hikes, cover up their own royal lifestyle.

In a letter to Geithner dated Saturday, Liddy informed Treasury that outside lawyers had informed the company that AIG had contractual obligations to make the bonus payments and could face lawsuits if it did not do so.

But God forbid you go to the people who are owed and ask them in light of the current situation to postpone these bonuses until the firm is back on their feet. Geeze...how do these people sleep at night? How can they look their children in the face...just say we got ours, the rest of them can suffer? Oh, and by the way America, we'll need another bailout thank you.

One advantage of letting some of these companies going bankrupt is that all of these contract obligations could have disappeared. It might have been costlier but politically things like this only increase peoples anger and resentment over a system that seems to have totally broken down.

Well, as Reagan would say, there they go again...

The Masters of the Universe must be paid.

Or else they'll jump ship and go to work for.....

Lehman Bros.?

No,

How 'bout Bear Stearns....?

Guess not.

Where would these arrogant Masters of the Universe end up if they hit the bricks?

Probably sitting with a laptop at Starbucks surfing the want ads.

No other act of corporate greed & arrogance in recent memory so underscores the impotence of the govt. to impose any control or oversight as they shovel taxpayer money out the window.

Here's a brain teaser: will this "---- you" gesture to the American taxpayers be greeted with a market rally tomorrow?

These bonuses are for the Financial Products division in London. You know, the one that wrote all the credit default swaps that got the company into so much trouble. There's really no excuse for that. But despite consisting of many divisions, a few making money, AIG the parent company is failing. There should be no bonuses for anyone. Period. Go ahead, get a job somewhere else.

Also, idiot Bush thought it would be a great idea to bring back a practice blamed for causing the Great Depression.....

"The government concluded during the Great Depression that short-selling exacerbated the market collapse. A so-called uptick rule was implemented in 1938 to regulate bearish traders to only shorting a stock on the uptick--when the price has increased. The Securities and Exchange Commission canceled the rule in 2007."
"The impact of the uptick rule is debated. But no less than Wall Street giant Charles Schwab wrote in December that the uptick rule, "slowed the short selling process making it more expensive and limiting the ability of short sellers to manipulate stocks lower by piling on, driving the share price quickly down and quickly profiting from the downdraft they created." And as Schwab put it, "without this vital control mechanism, short-sellers have been having a field day."
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http://www.realclearpolitics.com/articles/2009/03/profit_patriotism_and_bear_rai.html
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Bob Dole. (Remember him?)

Bob used to say, "Where is the outrage?"

We always knew Larry Summers and Tim could be rolled. That was a given.

With this new provocation, the question is: can Obama be rolled?

Why are my posts not making it on your blog? Am I too conservative????? Am I not marching to the beat of the Messiah Obama??

Who's to blame for the biggest financial catastrophe of our time? There are plenty of culprits, but one candidate for lead perp is former Republican Sen. Phil Gramm. Eight years ago, as part of a decades-long anti-regulatory crusade, Gramm pulled a sly legislative maneuver that greased the way to the multibillion-dollar subprime meltdown. Yet has Gramm been banished from the corridors of power? Reviled as the villain who bankrupted Middle America? Hardly. Now a well-paid executive at a Swiss bank, Gramm cochairs Sen. John McCain's presidential campaign and advises the Republican candidate on economic matters. He's been mentioned as a possible Treasury secretary should McCain win. That's right: A guy who helped screw up the global financial system could end up in charge of US economic policy. Talk about a market failure.

Gramm's long been a handmaiden to Big Finance. In the 1990s, as chairman of the Senate banking committee, he routinely turned down Securities and Exchange Commission chairman Arthur Levitt's requests for more money to police Wall Street; during this period, the sec's workload shot up 80 percent, but its staff grew only 20 percent. Gramm also opposed an sec rule that would have prohibited accounting firms from getting too close to the companies they audited—at one point, according to Levitt's memoir, he warned the sec chairman that if the commission adopted the rule, its funding would be cut. And in 1999, Gramm pushed through a historic banking deregulation bill that decimated Depression-era firewalls between commercial banks, investment banks, insurance companies, and securities firms—setting off a wave of merger mania.

But Gramm's most cunning coup on behalf of his friends in the financial services industry—friends who gave him millions over his 24-year congressional career—came on December 15, 2000. It was an especially tense time in Washington. Only two days earlier, the Supreme Court had issued its decision on Bush v. Gore. President Bill Clinton and the Republican-controlled Congress were locked in a budget showdown. It was the perfect moment for a wily senator to game the system. As Congress and the White House were hurriedly hammering out a $384-billion omnibus spending bill, Gramm slipped in a 262-page measure called the Commodity Futures Modernization Act. Written with the help of financial industry lobbyists and cosponsored by Senator Richard Lugar (R-Ind.), the chairman of the agriculture committee, the measure had been considered dead—even by Gramm. Few lawmakers had either the opportunity or inclination to read the version of the bill Gramm inserted. "Nobody in either chamber had any knowledge of what was going on or what was in it," says a congressional aide familiar with the bill's history.

It's not exactly like Gramm hid his handiwork—far from it. The balding and bespectacled Texan strode onto the Senate floor to hail the act's inclusion into the must-pass budget package. But only an expert, or a lobbyist, could have followed what Gramm was saying. The act, he declared, would ensure that neither the sec nor the Commodity Futures Trading Commission (cftc) got into the business of regulating newfangled financial products called swaps—and would thus "protect financial institutions from overregulation" and "position our financial services industries to be world leaders into the new century."

It didn't quite work out that way. For starters, the legislation contained a provision—lobbied for by Enron, a generous contributor to Gramm—that exempted energy trading from regulatory oversight, allowing Enron to run rampant, wreck the California electricity market, and cost consumers billions before it collapsed. (For Gramm, Enron was a family affair. Eight years earlier, his wife, Wendy Gramm, as cftc chairwoman, had pushed through a rule excluding Enron's energy futures contracts from government oversight. Wendy later joined the Houston-based company's board, and in the following years her Enron salary and stock income brought between $915,000 and $1.8 million into the Gramm household.)

But the Enron loophole was small potatoes compared to the devastation that unregulated swaps would unleash. Credit default swaps are essentially insurance policies covering the losses on securities in the event of a default. Financial institutions buy them to protect themselves if an investment they hold goes south. It's like bookies trading bets, with banks and hedge funds gambling on whether an investment (say, a pile of subprime mortgages bundled into a security) will succeed or fail. Because of the swap-related provisions of Gramm's bill—which were supported by Fed chairman Alan Greenspan and Treasury secretary Larry Summers—a $62 trillion market (nearly four times the size of the entire US stock market) remained utterly unregulated, meaning no one made sure the banks and hedge funds had the assets to cover the losses they guaranteed.

In essence, Wall Street's biggest players (which, thanks to Gramm's earlier banking deregulation efforts, now incorporated everything from your checking account to your pension fund) ran a secret casino. "Tens of trillions of dollars of transactions were done in the dark," says University of San Diego law professor Frank Partnoy, an expert on financial markets and derivatives. "No one had a picture of where the risks were flowing." Betting on the risk of any given transaction became more important—and more lucrative—than the transactions themselves, Partnoy notes: "So there was more betting on the riskiest subprime mortgages than there were actual mortgages." Banks and hedge funds, notes Michael Greenberger, who directed the cftc's division of trading and markets in the late 1990s, "were betting the subprimes would pay off and they would not need the capital to support their bets."

These unregulated swaps have been at "the heart of the subprime meltdown," says Greenberger. "I happen to think Gramm did not know what he was doing. I don't think a member in Congress had read the 262-page bill or had thought of the cataclysm it would cause." In 1998, Greenberger's division at the cftc proposed applying regulations to the burgeoning derivatives market. But, he says, "all hell broke loose. The lobbyists for major commercial banks and investment banks and hedge funds went wild. They all wanted to be trading without the government looking over their shoulder."

Now, belatedly, the feds are swooping in—but not to regulate the industry, only to bail it out, as they did in engineering the March takeover of investment banking giant Bear Stearns by JPMorgan Chase, fearing the firm's collapse could trigger a dominoes-like crash of the entire credit derivatives market.

No one in Washington apologizes for anything, so it's no surprise that Gramm has failed to issue any mea culpa. Post-Enron, says Greenberger, the senator even called him to say, "You're going around saying this was my fault—and it's not my fault. I didn't intend this."

Whether or not Gramm had bothered to ponder the potential downsides of his commodities legislation, having helped set off an industry free-for-all, he reaped the rewards. In 2003, he left the Senate to take a highly lucrative job at ubs, Switzerland's largest bank, which had been able to acquire investment house PaineWebber due to his banking deregulation bill. He would soon be lobbying Congress, the Fed, and the Treasury Department for ubs on banking and mortgage matters. There was a moment of poetic justice when ubs became one of the subprime crisis' top losers, writing down $37 billion as of this spring—an amount equal to its previous four years of profits combined. In a report explaining how it had managed to mess up so grandly, ubs noted that two-thirds of its losses were the fault of collateralized debt obligations—securities backed largely by subprime instruments—and that credit default swaps had been "key to the growth" of its out-of-control cdo business. (Gramm declined to comment for this article.)

Gramm's record as a reckless deregulator has not affected his rating as a Republican economic expert. Sen. John McCain has relied on him for policy advice, especially, according to the campaign, on housing matters. The two have been buddies ever since they served together in the House in the 1980s; in 1996, McCain chaired Gramm's flop of a presidential campaign. (Gramm spent $21 million and earned only 10 delegates during the gop primaries.) In 2005, McCain told a Wall Street Journal columnist that Gramm was his economic guru. Two years later, Gramm wrote a piece for the Journal extolling McCain as a modern-day Abraham Lincoln, and he's hailed McCain's love of tax cuts and free trade. Media accounts have identified Gramm as a contender for the top slot at the Treasury Department if McCain reaches the White House. "If McCain gets in," frets Lynn Turner, a former chief sec accountant, "we'll have more of the same deregulatory mess. I like John McCain, but given what I know about Phil Gramm, I wouldn't vote for McCain."

As a thriving bank exec and presidential adviser, Gramm has defied a prime economic principle: Bad products are driven out of the market. In John McCain, he has gained an important customer, so his stock has gone up in value. And there's no telling when the Gramm bubble will burst.

Notice how Frank James tries to put all the "outrage" on the shoulders of AIG.AIG deserves their share of "outrage". But what about the Dem Congress and the Obama administration?
Posted by: Inconvenient Truth | March 15, 2009 9:36 AM
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Sounds like your tin foil hat is cutting off the blood flow to your brain again, Teresa.

Shouldn't you be out bashing unions today for your Republican oligarchy overlords?...you know, the one's who got us into this economic mess in the first place

Teresa....who would that be and why?

Outrage is right Frank James, well put.

I always wonder why any sane person would give Limbaugh, Cantor, Boehner, McConnell or any of the Republican congresscritters the time of day.

GOP tax cuts for the rich and deregulation are the 2 primary causes of our ongoing economic crisis. The GOP is like a compulsive gambler who recommends that moving to Las Vegas will solve the family's financial woes.

Republicans keep whining about how corporations have a higher tax rate than anyone else. What they fail to mention is the corporate shenanigans that result in their paying NO taxes...moving offshore and taking advantage of a host of other loopholes that allow them to function without contributing a dime to society.

Teresa,

Thanks for asking about unions. If Obama really believes any employee who wants to be represented by a union should be able to be, he should support members-only bargaining. The National Labor Board, the first board FDR created to implement the employee right to bargain collectively through representatives of their own choosing, ordered elections when: 1. two unions disputed representation, 2. an employer questioned a union's claim of majority representation, or 3. when a substantial number of employees made the request. However, majority representation was not a prerequisite for bargaining on behalf of members only. By appointing an NLRB General Counsel who will enforce minority-union bargaining rights under existing law, as urged by prominent labor law professor Charles J. Morris in 2007, Obama can eliminate any need to gut the employee right to a fair and free secret ballot election conducted by a neutral agency of the US Government prior to vesting majority representation rights in a union, as the Employee-free Choice Act would do.

"Where would these arrogant Masters of the Universe end up if they hit the bricks?"
ornery,
They are going to that secret island to live with John Gault. That way they won't have any of the little people holding them down.

The Stimulus waste has just started-

WELL, WTF WOULD YOU CHARGE THEM WITH? There were no REAL limitations put on this.
How about this---we END THE STUCK ON STUPID WAR FOR OIL.
AND NATIONALIZE THE OIL COMPANIES, GO OVERSEAS AND RAID ALL THE $%&*%^$#@%&]SWISS BANK ACCOUNTS OR BARBADOS OR WTF
AND NATIONALIZE HALIBURTON AND EXXON AND CHEVRON AND SHELL AND PUT THOSE BASTARDS IN JAIL.
THEN WE GIVE EACH ADULT AMERICAN 13 GRAND--(ABOUT WHAT WE'VE EACH SPENT ON IRAQGANISKISTAN\) TO SPEND ON A HOUSE OR ON SOLAR PANELS.

Hey Geithner, here's an idea: STOP GIVING THEM FREE MONEY!

These guys made their position safe many months (years?) ago, now they know there's hardly any fast legal action to be taken against them. But it's not just problem of money - the bigger problem is the complete loss of reputation AIG suffered (and the whole insurance industry) because of them and this loss is worth much much more than some $170mil.
Lorne

According to NYT today, AIG has paid

GOLDMAN SACHS $12 BILLION

UBS about the same.

You remember UBS--Swiss bank that won't turn over tax cheat account information.

You remember Goldman Sachs--where Paulson and Kash&Karry worked before Bush put them in at the Treasury Dept.

Your tax dollars at work.

Why does Frank James whitewash the responsibility of tax cheat Geithner and the O'Bumble administration in all this?

Because Frank James wants to protect his fellow Democrats.

If these bonuses are outrageous, then why did Geithner and Obama saction the AIG bailout? If they knew of them at the time, they're responsible. If they didn't know, they're criminally incompetent.

Barney Frank stumbled his way through an interview about the AIG bonuses this morning on the Today Show. He said, paying millions in executive bonuses amounts to "rewarding incompetence." Strangely there was no comment or question about the government that CONTINUES to give billions to AIG and what that's rewarding.

They didn't pay the same respect to the UAW's contractual rights; the auto workers were willing to renegotiate their terms; what's wrong with the white collar boys?

Daniel Patrick Moynahan = " I can't believe what I just heard, and I don't"

Bernanke = The holes Bernanke and his ilk have been digging for each one of us appear to be about 4' wide, 6' long, and 6' deep. "Don't worry, trust me, I'm from the government and I'm here to help you." - Yeah, right

Obama = CYA his and his buddies and contributors

Uncle Sam = Hey, since we own 80% of AIG is there any excuse we haven't replaced the entire Board of Directors at AIG and replaced them with Americans who WILL FIRE THE INCOMPETANTS and ELIMINATE BONUSES TO REWARD MEDIOCRATY and/or CRIMINAL BEHAVOR ?

Yes, the AIG bailout is clearly the Obama administrations faut. They were the ones who bailed out AIG in September 2008, right?

Did Obama vote for the bailout legislation? Yes.

He should (for once) take some responsibility for his votes.

Flo, please produce one (1) example of how the UAW was willing to renegotiate its contracts before December 4, 2008. Keep in mind that this was the date that the federal government bailed out GM and Chrysler and attached the strings that UAW MUST renegotiate. They showed absolutely NO willingness to do this when the union leaders were dragged up to capital hill when the auto bailout was being discussed. This is one of the few things that Geithner has gotten right. If only he'd done the same thing to AIG.

The point is, Jeff, whether it was pressure from Congress the Treasury or whatever, they were willing to renegotiate and did. As for your other "point," you apparently didn't watch the hearings.

by The Associated Press
Wednesday December 03, 2008, 12:53 PM

AP Photo
United Auto Workers members Aaron Warfield, left, and Dave Page listen to UAW President Ron Gettelfinger speaks at a news conference during a meeting of UAW officials in Detroit on Wednesday.DETROIT -- United Auto Workers President Ron Gettelfinger said Wednesday that the union is willing to change its contract and will delay billions of dollars in payments to a union-run health care trust in an effort to help the struggling Detroit Three automakers.

Geithner is worthless garbage and proof that Limbaugh is right and Obama has no idea at what "change" is.
Sorry, but I voted for Obama and even sent in $75.
I knew he was a mistake when he picked Biden to be his VP.

Jeff, let me help correct your ignorance.

The 2007 UAW contract made major wage and other concessions.

http://www.autoobserver.com/2007/11/big-three-uaw-contracts-even-the-playing-field----eventually.html

Were there matching pay concessions from management? Hardly. Did management give up thier retirement healthcare? Nope. Did management send management jobs offshore? Of course not.

Labor did it's part in 2007, and is doing it's part now. When is management going to be asked to sacrifice? When is management going to be asked to take responsibilitry for the horrible decisions they have mad?

You seem to be the type that thinks the worker making $50,000 is greedy and the executive making $5,000,000 is underpaid, but try not to lie to make your point.

Enjoy the workplace safety, the 8 hour day, and so many other benefits that your union brothers and sisters have fought for decades to give you. They are on your side, even if you aren't on there's.

AIG is soaking the government big time.

A friend here in NYC works for AIG as a consultant (compiling all the documentation to pay off claims). The department where he works orders in lunch every day: shrimp cocktail, sushi, all catered!!

Obama and Geithner inherited this mess. However, it would take a team full time to manage this mess. This is indicative of the financial mess Bush and Paulson left.

What is not said here is how Paulson and Bush abdicated their reponsibility back in October. We have been spiraling down ever since.