AIG Retention Bonuses Paid to FORMER Employees
The NYT reports:
Seventy-three employees were paid more than $1 million in the newly minted bonuses at the insurance giant, American International Group, according to the New York attorney general Andrew M. Cuomo.
The attorney general provided some new details on Tuesday about some of the $160 million in bonuses that the insurance giant paid out last week in a letter sent to Representative Barney Frank, the chairman of the House Committee on Financial Services.
Mr. Cuomo did not name the recipients of bonuses, but said one employee received more than $6.4 million. The top seven received more than $4 million each, and the top 10 received a combined $42 million. Eleven of those who received “retention” bonuses of $1 million or more are no longer working at A.I.G., including one who received $4.6 million, he said. (emphasis added)
This story gets more and more interesting. Bloomberg is reporting that:
“American International Group Inc., the insurer under fire for handing out bonuses after its $173 billion government bailout, budgeted $57 million in “retention” pay for employees who will be dismissed.”
AIG disclosed the payments, part of a larger $1 billion program meant to retain staff, in a March 2 filing. The insurer was chastised yesterday by President Barack Obama for awarding $165 million to staff of the derivatives unit blamed for the firm’s near collapse, and New York Attorney General Andrew Cuomo said he’ll subpoena AIG to get details on those payments. (emphasis added)
The latest idea: 100% taxes on bonuses from bailout firms:
Well it looks like the whole American International Group Inc. (NYSE:AIG) bonus hoopla might not blow over after all. With public anger growing, Congress is jumping all over the issue and vowing not to let the troubled insurer’s executives walk away with the money, even if it means writing laws specifically to get money back.
While Democrats haven’t yet matched Iowa’s Republican Sen. Chuck Grassley’s suggestion that AIG’s brass commit suicide, they are throwing out some radical threats on the $165 million in bonus money. According to The Associated Press, “House and Senate Democrats were crafting separate bills to tax up to 100% of generous bonuses awarded by companies rescued by taxpayer money.”
Right now my long pitchforks and torches trade is looking pretty sweet!
>
Hat tip Dan Greenhaus
Sources:
Cuomo Offers Some Details of A.I.G. Bonuses
LOUISE STORY
NYT, March 17, 2009
http://www.nytimes.com/2009/03/18/business/18cuomo.html
AIG Plans Retention Pay for Staff Facing Dismissal
Hugh Son
Bloomberg, March 17 2009
http://www.bloomberg.com/apps/news?pid=20601087&sid=arI_buLviQ9g&
Congress prepares 100% taxes for AIG
The Deal, March 17, 2009 at 3:16 PM
http://www.thedeal.com/dealscape/2009/03/congress_prepares_100_taxes_fo.php
March 17th, 2009 at 1:44 pm
Just saw that. What else is there to say at this point? Many, many people in influential positions really need to go to prison. I know that the wheels of justice grind slowly but I’m astonished this hasn’t happened yet.
March 17th, 2009 at 1:45 pm
the entire nation is on Ambien. They won’t wake up until the bill comes due.
March 17th, 2009 at 1:59 pm
If 9/11 is code for terrorism, shouldn’t AIG stand for terrorism 1.2?
March 17th, 2009 at 2:04 pm
What pisses me off most is not the lack of character shown by AIG execs (and apparently, many who are no longer AIG execs) in taking the bonuses – people will always find a way to game the system to the fullest extent of their personal self interest – this is to be expected, and planned for.
What I find absolutely infuriating is the retrospective, feigned outrage on the part of public officials who are shocked (yes, shocked!) to discover that these bonuses were given after bailout funds were provided.
I’m sure there are those with legal/technical proclivities on this board who can come up with myriad reasons why the bonuses had to be given (none of them good) but it comes down to governmental incompetence and I expect better from the Obama administration.
March 17th, 2009 at 2:11 pm
Rick Santelli has analyzed the situation and determined these AIG bonus recipients are not “losers” putting an extra bathroom in their house. Therefore it would be morally wrong to deny them their well-earned cash incentives.
March 17th, 2009 at 2:14 pm
160 Billion of bonuses? Did they add another couple zeros on the end of that
~~~
BR: Doh! Good catch — I’ll fix that.
March 17th, 2009 at 2:16 pm
Andrew Cuomo has the bit between his teeth here, and I suspect he will find support from the US AG and the White House. Let’s hope he follows in the footsteps of Robert F. Kennedy in the fearless pursuit of corruption.
AIG bonus recipients are going to discover that $1M can be the loneliest number…
Barry, I think you have played a role in bringing this into the public consciousness, via MSM, along with the wretched affair of the ratings agencies. Keep up the good work !!
March 17th, 2009 at 2:17 pm
This is why you let bad companies fail. If you suck, you don’t get a bonus because your company has no money. There is no such thing as a public-private partnership – either it is public and meant for the “greater good” or private and meant for the company owners. You can’t serve two masters. Anything in between will be gamed – period.
March 17th, 2009 at 2:18 pm
From the informtion I have seen regarding Santelli, he has been against all the bailouts across the board- so I am pretty certain he would not agree with bonuses being paid by bailed out companies
March 17th, 2009 at 2:19 pm
the last administration not withstanding, the current one evidently forgot to read the fine print (that wasn’t there) in the agreement prohibiting bonus payments. also, anyone know how much is going to the overseas unit in London? like they could give tinkers damn about being taxed by the US.
what we’re not seeing is the individual performance of those receiving the bonus’. maybe they actually deserved it. bonus payment, or any payment, pullback claw-back is a very, very dangerous precedent to set. recession or not.
March 17th, 2009 at 2:19 pm
one of the lessons of this whole event is the insanity of suggesting the banks should be nationalized so we’d have a situation where every decision is politicized
And I suppose that’s worse than the corrupt status quo in which every political decision is bank-ified?
March 17th, 2009 at 2:21 pm
For those who are not quite angry enough about the AIG bailout, consider today’s WSJ editorial:
http://online.wsj.com/article/SB123725551430050865.html
One of the points made is the following:
“Since September 16, AIG has sent $120 billion in cash, collateral and other payouts to banks, municipal governments and other derivative counterparties around the world”.
. . . . . .
IMO, let’s not get too worked up over a measly $160M in bonuses.
March 17th, 2009 at 2:21 pm
Ottovbvs- Right on with the nationalization comment. I can just see Chuch Grassley and McCain Twittering on the fact that , horor of horrors, Citi uses two ply toilet paper.
March 17th, 2009 at 2:22 pm
Agree wholeheartedly with LB, Barry has done an amazing job keeping the issues front and center and the bad guys in focus.
March 17th, 2009 at 2:23 pm
It would be interesting to hear what exactly these people did to “earn” those bonuses.
I suppose this is another example of how private enterprise uses capital more effectively than the government …
March 17th, 2009 at 2:24 pm
Interesting, the top 25 Chrysler execs had 2 sign a waiver on bonuses as a condition of the bailout. Hmmmm.
March 17th, 2009 at 2:26 pm
If they would have allowed AIG to fail to begin with, we wouldn’t be having this discussion.
March 17th, 2009 at 2:27 pm
i find it hard to complain about $160m when we’re in the process of spending $2T (that’s TRILLION) and probably won’t be able to track a third of it. maybe we’re focusing on the wrong spender.
~~~
BR: Thats where we differ — I have no problem being irritated by all of it – and this AIG bonus money is particularly odious.
March 17th, 2009 at 2:32 pm
@call me ahab: Santelli hasn’t been anywhere near as “outraged” over bailouts for the Wall Street elite (read: his people & his firm’s parent company) as he was/is with the the bailouts of the “losers” on Main Street. He merely continues to the right wing tradition of dividing and conquering the masses by getting them/us to turn on one another while he and his ilk take off with the loot. He’s a right wing hypocrite and phony populist. I’ve lost a lot of respect for the man in recent weeks.
March 17th, 2009 at 2:32 pm
Transor Z Says:
March 17th, 2009 at 2:19 pm
one of the lessons of this whole event is the insanity of suggesting the banks should be nationalized so we’d have a situation where every decision is politicized
And I suppose that’s worse than the corrupt status quo in which every political decision is bank-ified?
~~
Transor,
sadly, too many will think you’re j/k..
March 17th, 2009 at 2:34 pm
hmmmm… Why doesn’t the US GOVERNMENT just use the IRS (and the new legislation) to clawback the income (aka the bonuses paid) to the AIG employees by changing the tax code to force all the bonuses to be 100% taxable.
And… to keep those nasty employees in there positions… give them their bonuses in 5 or 10 years time if the company turns itself around and those said employees are still with the firm.
The US treasury has the names of the employees… it’s not to hard to accomplish… come on Mr. President… you have the power to stop the crazyiness… YES, WE CAN…. YES, WE CAN.
And that way you won’t break them contracts… fuck them executives… make’m work… for that money.
March 17th, 2009 at 2:35 pm
How big is my bonus for not costing the gov’t $200B? I have to be worth at least $3-5B by these standards.
March 17th, 2009 at 2:35 pm
@arcticpup: I believe that many of these folks in Ponzi Products at AIG are based in the UK. Can’t see how any tax penalties would affect them.
March 17th, 2009 at 2:37 pm
steel breeze Said:
March 17th, 2009 at 2:23 pm
It would be interesting to hear what exactly these people did to “earn” those bonuses.
reply:
———————–
These are ‘retention bonuses’. Not performance bonuses.
http://static1.firedoglake.com/1/files//2009/03/ny12532-_432294-v7-white_paper_-_aigfp_retention_plan.pdf
Excerpt:
In the first quarter of 2008, AIGFP adopted a retention plan for about 400 employees that provided guaranteed payments to employees if they worked through specified payment dates (or either resigned for good reason or was terminated without cause before the relevant dates
———————————————————
In other words, if you were there at the right time, you won the lottery regardless of your employment status, for almost any reason, afterward .
March 17th, 2009 at 2:39 pm
well… I say then… Putting them on a “Do Not Fly List…” and recouping the cash… if then want into the country.
I’m sure that that YES, WE CAN… get that money back.
March 17th, 2009 at 2:41 pm
Publish the names and the addresses of our derivatives geniuses.
Give them a choice: charitable donation or disgorgement to the US Treasury.
Or else it is going to be pitchforks and torches this summer.
March 17th, 2009 at 2:42 pm
@ MEH:
Thanks for noticing — I was actually kind of proud of that one.
I think the folks who are paying attention will get it.
March 17th, 2009 at 2:42 pm
“steel breeze Says:
March 17th, 2009 at 2:23 pm
It would be interesting to hear what exactly these people did to “earn” those bonuses.”
TPM has an excerpt of a deposition that Cassano gave in a 2004 lawsuit. The info there might offer some idea of the earning: http://tpmmuckraker.talkingpointsmemo.com/2009/03/cassano_aig_finance_staffers_are_generally_well-co.php
Interesting quotes: “Q: And what function does Mr. Finigan perform as an advisor to you? A[Cassano]: He’s still helping us through the transition. Q: What is his compensation? A: I don’t remember. I don’t remember.[...]Q: Since he began in his role as advisor, have you sought his advice? – A[C]: No.”
Also, tell me I’m not the only one who noticed that Finigan rhymes with Shenanigan. It’s like they’re rubbing it in our faces.
Bonus:http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389×5269920
March 17th, 2009 at 2:44 pm
There’s an interesting political conundrum developing….The Dems are making a push to pass some tax bill to claw the bonuses back…..Quite a smart move actually….I detect Schumer……. Will the Republicans resist or support…..Anyone willing to hazard a guess?
March 17th, 2009 at 2:45 pm
yes! publish my name if it’s on that list. i’d take the lawsuit return (tax free i believe) and probably treble damages over my bonus payment anyday.
March 17th, 2009 at 2:49 pm
Are they bonuses or is it hush money? Is the real concern that these people will walk if not paid or that they will talk if they aren’t paid?
March 17th, 2009 at 2:52 pm
This mass free-for-all looting being done now by Wall Street and their enabling political servants was too predictable, and predicted on this blog, back when TARP I was passed in the fall. Actually, we can trace the origins of this mass looting to Bear Stearns in March ‘08.
March 17th, 2009 at 2:53 pm
Hush money.
Don’t let the people know that money is fake! They might not be so amenable to wage slavery if they do!
March 17th, 2009 at 2:53 pm
mannwich-
I cannot tell you the amount of times people tried to lie to me for a home loan- blatant fraud- and after I passed on the deal they walked down the street and got a loan from some other bank who facilitated their BS. I have zero sympathy for anyone who bought into the notion that they could commit fraud so they could “get in” on the “no way you can lose” real estate action. It is a guaranteed lock that no-one wants to pitch in to help these folks just like they don’t want to pitch in to help the piss-poor run banks.
March 17th, 2009 at 2:55 pm
I hear you, ahab. I have no sympathy for those people either but I DO have sympathy for the people who were unwitting victims not trying to take place in any fraudulent activities. The last I checked, it was incumbent upon the banks to do due diligence on their loans and not commit fraud, so the burden fall more on them to protect the banks’ assets than it does on the person looking for a loan.
March 17th, 2009 at 2:59 pm
@ mannwich
agreed
March 17th, 2009 at 2:59 pm
Keep in mind that this is only what we find out about.
March 17th, 2009 at 3:02 pm
ottovbvs @ 2:44
Yes, it’s potentially an interesting political conundrum. But the devil’s in the details. They can’t just create a new tax law that targets AIG employees…. the courts would never go along with it (admittedly, I’m neither a lawyer nor a tax expert). In order for the law to pass legal muster, it would have to be sufficiently broad to potentially cover employees of any company.
So, whether it proves to be “interesting” or not depends on the wording of the bill.
March 17th, 2009 at 3:03 pm
I am an educated, rational person. But right now pitchforks and torches are starting to sound pretty good to me.
March 17th, 2009 at 3:10 pm
@ DL-
I am pretty sure that congress could pass a law that would allow them to retroactively claw back the bonus money- whether the law is used in the future would depend on whether it was enforced by the AG office. There are many laws on the books that can be enforced or not enforced depending on what goal of the administration is. Look at the RICO Act- they have used that in many cases to try and convict someone even though the nature of the crime was not the original intent of the RICO Act.
March 17th, 2009 at 3:11 pm
On Clusterstock, they are reporting there is some sort of AIG default clause that if they don’t pay bonuses in France, then the French government gets involved, which triggers a default and causes CDS’s to trigger all over creation. Apparently there is no end to this shit (or the interpretation of it).
March 17th, 2009 at 3:12 pm
“Veblen? Veblen? Thorstein Veblen?”
“The leisure classes do not work. Rather, they hold offices. They perform rituals. They enact deeds of honor…The leisure class is predatory as a matter of course… The relation of overlords to underlings is that of predator to prey. Vested interests… live off the work of others by right and tradition, and not by their functional contribution to the productivity of the system… Predators rely on prey for their sustenance, but they also require and must motivate their assistance…”
True story- the first girl I ever loved cheated on me in the house where Ferris’ friend Cameron lived with his father’s ferrari. With the son of a Colombian engineer who owned an Apple Store which was a front for coke dealing. And that’s why I hate Ben Stein. And identify with Sara Jessica Parker. But the son and I became pals after she dumped him too. C’est la vie.
March 17th, 2009 at 3:15 pm
Obama: 360 degrees of change you can believe in!!!
This country is so f***ed it’s not even funny.
March 17th, 2009 at 3:17 pm
the dichotomy between the financial services industry and the auto industry in its bailouts, terms is blood boiling disgusting. Treasury and the Fed are in bed with the financial services industry and are their front running gate keepers. Off with their heads.
March 17th, 2009 at 3:19 pm
big tony says:-
“Obama: 360 degrees of change you can believe in!!!
This country is so f***ed it’s not even funny.”
That’s funny!
March 17th, 2009 at 3:22 pm
call me ahab @ 3:10
Perhaps you know more about the law than I do. But for me the question would be, how does Congress pass a NEW law which RETROACTIVELY seizes property, such that this new law is not inconsistent with existing statutes and case law. I’m not convinced; members of Congress might very well pass a law that they believe will be shot down by the courts. (It has happened in the past).
March 17th, 2009 at 3:24 pm
Former NY AG Spitzer seems to think that this is nothing but a DISTRACTION from the real scandal,
http://www.slate.com/id/2213942/
Yep, he implies that former and present Treasury chieftans as well as the Fed Head are stealing a lot more money than Madoff. And unlike Madoff’s victims who gave him $$$ voluntarily, 300 million Americans have no say as their (mine, our) money being STOLEN for the benefit of a few bankers.
March 17th, 2009 at 3:25 pm
Obama may have had great intentions but he immediately allowed himself to be surrounded by those cut from the same fraternity cloth as those who have been at the helm over the past decade. No change was possible with the same old boys clubs at the helm, irrespective of what political party was elected. Summers and Geithner have to go before any real reform can be attempted. If not, Dante’s inferno straight ahead.
March 17th, 2009 at 3:29 pm
I hear you, ahab. I have no sympathy for those people either but I DO have sympathy for the people who were unwitting victims not trying to take place in any fraudulent activities. The last I checked, it was incumbent upon the banks to do due diligence on their loans and not commit fraud, so the burden fall more on them to protect the banks’ assets than it does on the person looking for a loan. — Mannwich.
Thank you.
On this topic:
In 2005, a year before my wife and I got married, she bought a house under the very loose mortgage environment at the time. $85,000 with 15 percent down. Because she is self-employed, getting a mortgage was difficult. We probably could not get one now. But during the closing process, the mortgage provider would repeatedly send her documents with the mortgage terms materially altered from what she agreed to, specifically, the documents kept changing the mortgage from fixed rate to an A.R.M., which she did not want, and changing the agreed upon interest rate. She would call the mortgage provider and tell them this and ask them to change the language back to what she had signed and agreed to, and they would send her new papers which …. still contained the doctored language. It became very clear that the mortgage provider was hoping she would not read all the documents and would not notice that they had substantially changed the terms of the mortgage from what she had agreed to. What they wanted her to sign was a much more dangerous and costly mortgage.
March 17th, 2009 at 3:31 pm
@b_thunder 3:24PM , I don’t disagree . Madoff is just a “chicken thief ” .
March 17th, 2009 at 3:32 pm
hey – i’m pissed off at AIG too. and every other too big to fail institution. But i find the notion that the government can arbitrarily write new laws targeting individuals, break contracts and incite threats of harm or death against citizens pretty scary. i also find it a little strange that so many obama supporters expected more of him. this is the government – they are not any more competent at this business than the bankers were – why would you expect they would be?
i think the next bubble that needs to burst is that the government is capable of fixing the problem of the financial crisis (eagerly inflated by many obama supporters who are now crashing back to reality). the truth is, an awful lot of people contributed to the various bubbles and we created a widespread cultural expectation that was unrealistic. it cannot be “fixed.” it needs to be allowed to fail so that the rest of us can get on with moving on.
had the government not injected itself into the process of saving the financial world from itself, we would not have to suffer these indignities. no amount of populist fire-breathing, riot inciting, media grabbing nonsense can change those facts. instead of trying to jail, convict or harm individuals for failing at the intended and fully legal business, we should focus our energy on convincing the government to pursue the right course in this financial crisis. they can start by honestly accounting for what the problems are that we face and how little they can do to fix it. our expectations need to be adjusted downward and we need to plan how to move forward from that point.
March 17th, 2009 at 3:33 pm
@Douglas Watts: Sounds a lot like buying a car.
March 17th, 2009 at 3:34 pm
from
http://abcnews.go.com/TheLaw/Economy/Story?id=7102261&page=2
“FBI and SEC investigators are hunting for WHISTLE BLOWERS and is subpoenaing company e-mails and internal documents to see if the facts match the company rhetoric. Contacted by ABC News, AIG declined to comment on the matter.”
I can see these guys saying “pay me or I talk to the feds”
I’d love to see someone or some group set up some massive reward/protection fund for any one that comes forward with knowledge and evidence of blatant wrongdoing at AIG and these other firms.
March 17th, 2009 at 3:36 pm
@b_thunder: Great article by the Spitz-man. Thanks for sending.
March 17th, 2009 at 3:36 pm
@b_thunder: Great article.
March 17th, 2009 at 3:41 pm
@Douglas Watts-
read my comment to Mannwich- I agreed with his reply- it is incumbant upon the banks to “do the right thing” and not fraudulently orginate loans- because mortgage banking is largely commissioned based their is an incentive for the loan officer to “make the deal work”- law authorities would term this as fraud.
March 17th, 2009 at 3:42 pm
just announced that Sen. Menendez demands that JP Morgan not pay the retention bonuses promised it’s brokers. anyone smell a dangerous trend?
March 17th, 2009 at 3:42 pm
So this is the situation. I need to put a roof on my house this year and probably wont take a vacation with the kids because of it. At the same time a massive future tax burden on my kids just went to bonuses (for people who don’t need it) and to counter parties to make them whole on bad bets they made.
Double down on pitch forks and torches!!!!!
Honestly we need to just shut the bailouts down. I can’t take it anymore.
March 17th, 2009 at 3:47 pm
DL Says:
March 17th, 2009 at 3:02 pm
ottovbvs @ 2:44
Yes, it’s potentially an interesting political conundrum. But the devil’s in the details. They can’t just create a new tax law that targets AIG employees…. the courts would never go along with it (admittedly, I’m neither a lawyer nor a tax expert). In order for the law to pass legal muster, it would have to be sufficiently broad to potentially cover employees of any company.
So, whether it proves to be “interesting” or not depends on the wording of the bill.
…….Er…….no law is ever going to pass because as you point out it’s not going to pass legal muster…it would be thrown out by the courts….which just rather confirms the point I’ve been making that this was not a decision that was in the hands of the govt it was a corporate decision which it is next to impossible to either stop or fault retrospectively…..which the outraged morality crowd don’t get…..On the political front it’s theater but does put the Republicans in a bit of tough spot
March 17th, 2009 at 3:50 pm
How about we force them to purchase toxic assets from banks with their bonus money?
March 17th, 2009 at 3:50 pm
Stuart said: “Summers and Geithner have to go before any real reform can be attempted. If not, Dante’s inferno straight ahead.”
Agreed, brother. Patience, for I hope that this first year’s dealings with the devil will yield to a purer administration once this dirty business has been cleaned up. The cover-up is starting to crack here.
I don’t have any problem with the government changing or simply using existing law to deal with these cattle rustlers. The RICO statutes should be quite sufficient to prosecute any firms that were blatantly manipulating the CDS market, thereby lowering prices of many stocks and bonds and amplifying the losses of investors.
Naming names. GS and AIG. We know what you did and we know how you did it. Now we know where some of the money is. This is crime and it is not that different from Madoff.
March 17th, 2009 at 3:53 pm
hey there Says:
March 17th, 2009 at 3:32 pm
hey – i’m pissed off at AIG too. and every other too big to fail institution. But i find the notion that the government can arbitrarily write new laws targeting individuals, break contracts and incite threats of harm or death against citizens pretty scary. i also find it a little strange that so many obama supporters expected more of him. this is the government – they are not any more competent at this business than the bankers were – why would you expect they would be?
……You’re contradicting yourself a bit here buddy……First you say entirely correctly that you can’t just abrogate laws or set the IRS on people……then you put the blame on Obama or govt incompetence…..they were in a legal straight jacket at two levels……firstly these guys getting the bonuses had contracts…..and secondly the decision to give them was vested in the management
March 17th, 2009 at 3:56 pm
Good to see Spitzer back from the dead. I’m no fan of prossies but I know what it’s like to be horny. He was a good AG though.
Just for some good conspiracy theory: He knew what was going to happen all along, the Illuminati sent a prostitute to temp him, and used that to bring him down. Now he’s back for REVENGE!
I’d watch that movie.
March 17th, 2009 at 3:56 pm
every time i see people posting ‘ let’s get the pitchforks and torches and head for wall street!’
i feel compelled to remind them that it is a federal crime to advocate the violent overthrow of the US government.
March 17th, 2009 at 4:00 pm
leftback Says:
March 17th, 2009 at 3:50 pm
“I don’t have any problem with the government changing or simply using existing law to deal with these cattle rustlers.”
……..leftback….that way lies Dante’s inferno…..Enabling acts…..Nixon’s pursuit of political enemies….Bush’s secret prisons and torture memos…Hoover’s political enemies list….Because what’s good today is good tomorrow……Haven’t you learned anything
March 17th, 2009 at 4:01 pm
I’ve dealt with retention bonuses on projects, and not in anything close to the million dollar range, and my understanding has always been that it’s a payment you receive at the END of the period they want you to stick around for. In my world, that usually translates into “stick around to the end of the project rather than jumping to a better job and you’ll get $10K”. Not surprisingly, many people do leave right after the bonus is paid. That’s the point. It keeps them there until you no longer need them.
So it’s not surprising to me that some of the people who got those bonuses chose to leave right after they got them. Most likely, the expected bonus was the only reason they stuck around.
The question to me is whether there was ever a need to retain those individuals in the first place.
On another note, I’ve heard persistent rumors from several guys who know the CDS market very well, that many of the bonuses in fact went to guys at the CDS desk in London, many of whom are not US citizens, would not owe US taxes no matter what laws the government passes, and would probably have to be sued under British contract law in a British court. Anybody really think that would fly? The Brits may have no great love for bankers right now, but they hate the US government meddling in their affairs even more.
-btc
March 17th, 2009 at 4:02 pm
Hmmm- “retention” bonuses paid to former employees. Maybe its time we pay certain people to just go away. Money well spent?
March 17th, 2009 at 4:05 pm
Leftback…. I hear the patience message. I just don’t know realistically how much time we have before Joe Q public gets really ugly, in alot of places.
March 17th, 2009 at 4:06 pm
“[I]t is a federal crime to advocate the violent overthrow of the US government.
But it’s a great way to get out of jury duty.
March 17th, 2009 at 4:06 pm
…..I must say I love the way all these little con-ser-vat-tives and little lib-ber-rals(judging by their past inputs) are both quite happy to junk laws, dig up obsolete laws, pass new laws, set the IRS on people………..f@#$% hilarious
March 17th, 2009 at 4:09 pm
There will be no pitchforks and torches and no new laws. I suspect that what has occurred is in fact racketeering on a grand scale and that the people and certain branches of the government are in fact united.
The people who are bleating are missing the point that crime was committed on a grand scale in Bush World and it will take at least a full term for Obama’s guys to clean it up. In the mean time, free speech and protest are healthy.
March 17th, 2009 at 4:14 pm
One more post…I just don’t understand the size of the compensation. To 99% of Americans a million dollars is still a very big deal. If these companies are that profitable (well not any more) why don’t they pay dividends to the investors.
As for the fear of lawsuits over clawbacks on bonuses let’s let her rip. At this point I’d much rather see my tax dollars spent on lawsuits and perp walks. Let’s get overone in a court room under oath and let the shit fly.
March 17th, 2009 at 4:15 pm
@xnycpdx
“it is a federal crime to advocate the violent overthrow of the US government. ”
Is it a crime to take to the streets and advocate for the ‘nonviolent’ overthrow of the US but not U gummint?
Every interaction a citizen has with the govt at present has the threat of force behind it.
WRT Spitzer, the federales were able to track (probably through a gross violation of the 4th amendment) his transactions to pay the escort service for discreet services but completely missed the massive orgy happening in front of their noses. Huh?
Will we ever come to grips to the astounding criminality loosed upon the world under Bush. Instead of a period maybe I should have ended the sentence with a link to the latest leak from the ICRC.
http://www.nybooks.com/articles/22530
March 17th, 2009 at 4:16 pm
my apologies – i didn’t mean to imply that incompetence was limited to the obama administration (though i am appalled at their inability to get out a consistent message). i meant that hyping the government as the solution to the whole financial crisis is the problem. they aren’t any more capable of solving the problem than the bankers were. they created this quasi public institution in AIG which has not turned out to have a host of problems with it – sort of like fannie mae… had they not injected themselves into the superhero role, the company would be bankrupt and the contracts could be more easily voided. but that would require a level of humility that our current (and prior) government did not have.
March 17th, 2009 at 4:16 pm
leftback Says:
March 17th, 2009 at 4:09 pm
….Depends on whether you believe in the screw up theory of history or the conspiracy theory……there will be some new laws passed on the regulatory front but none of the pitchfork variety…..in fact in political terms if Obama’s got some regulatory reform in his back pocket nows the time to bring it out…..
March 17th, 2009 at 4:21 pm
leftback
hahahahahahaha- yeah right- never happen- graft follows politicians of all parties in all countries at all times.
March 17th, 2009 at 4:21 pm
SWMOD52,
And you are in the majority, my friend.
For those “unconcerned” about a mere one million dollar bonus, try to remember that you could employ 20 people at $50,000 a year for that amount. Two hundred million and you could employ 4,000 people. And these “executives” are the same ones that scream socialism and union tyranny and cry havoc over the Employee Free Choice Act.
The average person gets 5 to 10 years in prison for armed robbery if they rob a quick stop of $300. We have a very serious perspective problem here. The ones with the maximim “problem” are the “suprised” and “shocked” individuals that the unimpressive “press” writes about. I suspect the press has a continuous conflict between there income and printing the truth.
But most people get it. We have had and continue to have massive grand larceny at the highest levels of government and corporations. Until the assets are returned to the people, things will deteriorate.
Finally, I don’t give a damned who you are or what you do; NOBODY deserves to be paid $1,000,000 plus a year.
March 17th, 2009 at 4:22 pm
hey there Says:
March 17th, 2009 at 4:16 pm
…….The problem is the current admin inherited the AIG mess after the Paulson/Bernanke was forced to step in and don’t kid yourself they were looking down the barrel of a gun……you were looking at global implosion……and the problems are just taking longer and more money to unwind…..this bonus matter while maddening is chump change….and it was simply impossible to abrogate all these credit default swaps…..
March 17th, 2009 at 4:25 pm
Mr. Spitzer’s article in Slate outlines the issues very clearly, and most people now realize what has occurred. GS created and marketed trash products, and then bet heavily against their own products in a profitable trade. AIG was the bookmaker and is well aware of the horse doping that went on. The bonuses are hush money.
To the best of my knowledge Goldman Sachs is not an arm of the US Government and Lloyd Blankfein was not elected by the people, and nor was Henry Paulson, for that matter.
March 17th, 2009 at 4:27 pm
Mannwich: Sounds a lot like buying a car.
Exactly.
Buying a house is a classic asymmetrical exchange. The seller (the bank or mortgage provider) knows 1,000 percent more than the buyer. The buyer, especially for working class and middle class people, is more like a supplicant than an equal in the transaction. Bankee says no likee = no mortgage.
When banks were local and banks gave mortgages, there was a strong disincentive for banks to monkey with mortgage terms or give mortgages that people could not reasonably be expected to be able to fulfill (ie. a mortgage not based on real estate prices appreciated 10 percent each year or the person getting a huge promotion).
In my limited, minuscule world view, what seems to have happened this decade is that a lot of the traditional checks and balances in the home financing system (which we all had taken for granted) were allowed to fall apart.
March 17th, 2009 at 4:28 pm
I agree this bonus matter is a merely a distraction from the bigger issues at hand and political theater but it just sort of hammers home to the average person who don’t understand all of the details just how corrupt and effed up everything is. It just doesn’t smell right and it makes people very uneasy about everything. That will not lend itself to having Joe/Jane Retail Investor return to/stay in the market any time soon. Confidence and trust matter in our society. Have said it many times, I know, but they matter a lot. Without either, a recovery is just a dream. The so-called “capitalists” are eating everything, including each other, and have thus ruined capitalism.
March 17th, 2009 at 4:32 pm
“On Monday, Sen. Jon Kyl ridiculed politicians for being quick to “demagogue” the AIG issue. And while rapping AIG for soaking up taxpayer funds before issuing bonuses, he warned — during an appearance on Fred Thompson’s radio show — that pols like him would “just ride the horse and beat it into the ground.”
I’m sick to say that Kyl is from my state; and a testamonial to the reason of why the Republicans got voted out. He doesn’t even have a clue that this about the moral issues and not about the size of the bonus packages. He falls into the same category as Santelli; they are both brain-dead to any understanding that this is about the faulty thinking of the financial genius’ that helped run this country’s economic situation into the ground. They are also a carbon copy of the auto industry executives; they don’t have a clue.
March 17th, 2009 at 4:39 pm
Subject: London Times obituary
Right after my last post, I found this in my e-mail. It is old, but it fits this fiasco.:
An Obituary You Really Must Read
An Obituary printed in the London Times – Interesting and sadly rather true.
Today we mourn the passing of a beloved old friend, Common Sense, who has been with us for many years. No one knows for sure how old he was, since
his birth records were long ago lost in bureaucratic red tape.. He will be remembered as having cultivated such valuable lessons as:
– Knowing when to come in out of the rain;
– Why the early bird gets the worm;
– Life isn’t always fair;
– and maybe it was my fault.
Common Sense lived by simple, sound financial policies (don’t spend more than you can earn) and reliable strategies (adults, not children, are in charge).
His health began to deteriorate rapidly when well-intentioned but overbearing regulations were set in place. Reports of a 6-year-old boy charged
with sexual harassment for kissing a classmate; teens suspended from school for using mouthwash after lunch; and a teacher fired for reprimanding an unruly student, only worsened his condition.
Common Sense lost ground when parents attacked teachers for doing the job that they themselves had failed to do in disciplining their unruly children.
It declined even further when schools were required to get parental consent to administer sun lotion or an aspirin to a student; but could not inform parents when a student became pregnant and wanted to have an abortion.
Common Sense lost the will to live as the churches became businesses; and criminals received better treatment than their victims.
Common Sense took a beating when you couldn’t defend yourself from a burglar in your own home and the burglar could sue you for assault.
Common Sense finally gave up the will to live, after a woman failed to realize that a steaming cup of coffee was hot. She spilled a little in her lap, and was promptly awarded a huge settlement.
Common Sense was preceded in death, by his parents, Truth and Trust, by his wife, Discretion, by his daughter, Responsibility, and by his son, Reason.
He is survived by his 4 stepbrothers;
I Know My Rights
I Want It Now
Someone Else Is To Blame
I’m A Victim
Not many attended his funeral because so few realized he was gone. If you still remember him, pass this on. If not, join the majority and do nothing
March 17th, 2009 at 4:39 pm
So there is no way to retrench on the legal contracts of our AIG super-heroes?
Apparently such reluctance is not universal:
http://globaleconomicanalysis.blogspot.com/2009/03/judge-rules-vallejo-can-void-union.html
SO, it’s OK to void teacher’s union contracts but the sanctity of CDS must be upheld?
This smells to high heaven and the cover-up is going to be uncovered sooner or later.
March 17th, 2009 at 4:46 pm
Agree that President Obama inherited the bulk of this mess but he and his team stepped in it this time. My guess is that among others Rahm Emanuel, who himself made a fracking fortune turning money into money, convinced the Prez to let the bonuses slide through as an appeasement to the Kudlow/CNBC/WSJ echo chamber.
Once the unwashed rabble (aka the 99% who don’t make millions) got wind of these outsized bonuses to The Firm That Should Burn Forever in Hell it was all over. That the episode rose to visibility in the wake of the Jon Stewart disemboweling of Jim Cramer is probably a contributory factor to the change-we-can-believe-we-have-to-make Obama pivot.
March 17th, 2009 at 4:47 pm
leftback @ 4:39
Yeah, probably there’s no way to abrogate the CDS’s outside of bankruptcy.
I’m all in favor of bankruptcy, but at the same time, I think it would be messy. For one thing, the court (or someone) would have to “freeze” all insurance contracts; otherwise, everyone would want to get out (like a run on a bank). And that, in turn, might result in a quagmire of lawsuits.
So we shouldn’t kid ourselves into thinking that a bankruptcy of AIG would be a walk in the park. In any case, however, I’m all in favor of it.
March 17th, 2009 at 4:51 pm
deanscamaro Says:
March 17th, 2009 at 4:39 pm
“- Why the early bird gets the worm”
_______
The early bird might get the worm, but the second mouse gets the cheese.
March 17th, 2009 at 4:51 pm
Douglas Watts Says:
March 17th, 2009 at 4:27 pm
“In my limited, minuscule world view, what seems to have happened this decade is that a lot of the traditional checks and balances in the home financing system (which we all had taken for granted) were allowed to fall apart.”
…….Douglas you have it…..The atrophy of regulatory oversight, deliberate or accidental, is one of the four sides of this box that we’ve gotten into….add cheap money……deficit spending….and financiers miscalculating risk…..that’s it.
March 17th, 2009 at 4:51 pm
@leftback: Don’t be silly. Of course it’s OK to void union contracts. “Sanctity of contracts” only apply to those who call the shots in our elite classs. Union members are not part of the elite master class on Wall Street or Corporate America. Unfortunately Main Street allows itself to be disracted, divided (and ultimtately conquered) over issues like this all the time. The real shame in all of this is that Main Street has real power in numbers if it stopped being divided by our “elite” masters in government and corporate America, however, we get distracted and lack the will to stand together to change things. In France, their government and corporations fear the power of the people. In the U.S., the people fear the government and its corporations.
March 17th, 2009 at 4:51 pm
Leftback,
BANKRUPTCY COURTS can and do void contracts every day.
Congress and the states are constitutionally prohibited from doing so. Actually, Congress has no constitutional authority to legislate on the matter of contracts and contract law at all, with the exception of the treatment of contracts in bankruptcy.
Which is why this thing deserves to be in bankruptcy court, which is the proper forum for seperating the good from the bad and getting to the bottom of what happened.
But of course, if we did that, we’d find out a lot of things that the insiders on Wall Street and in Washington would prefer we didn’t. Thus the smokescreen over bonuses on the same weekend that we found out how much of the bailout funds are going to bail out Goldman and a bunch of foreign banks.
-btc
March 17th, 2009 at 4:52 pm
DC @ 4:46
“My guess is that … Emanuel … convinced the Prez to let the bonuses slide through as an appeasement to the Kudlow/CNBC/WSJ echo chamber”
Maybe so. But at the same time, Obama is going to come out way ahead politically if he stands up to the bonuses.
March 17th, 2009 at 4:55 pm
There is no way that Blank Man and Hanky Panky are going to get away with the heist.
The NYAG’s office and FBI will be all over this for years, and Tiny Tim cannot save them.
March 17th, 2009 at 4:57 pm
“Obama is going to come out way ahead politically if he stands up to the bonuses.”
Exactly. The POTUS is being under-estimated by the criminals.
There is never a penalty in the court of public opinion for being in the right.
March 17th, 2009 at 4:57 pm
DL Says:
March 17th, 2009 at 4:47 pm
……Two of my kids work in the financial industy….one is heavily involved in cleaning up the Lehman mess which is going to take years…..It’s not my field but from what they tell me an AIG default is out of the question….which of course is why Bernanke and co aren’t going to allow it to happen.
March 17th, 2009 at 4:58 pm
I hope you’re right, lb, but I fear we won’t ever get to the heart of the matter here. Too many people in power have too much at stake for the whole system to be exposed for the fraud that it was/is.
Now I’m off to the gym to sweat off some of this angst.
March 17th, 2009 at 5:00 pm
DC Says:
March 17th, 2009 at 4:46 pm
Agree that President Obama inherited the bulk of this mess but he and his team stepped in it this time. My guess is that among others Rahm Emanuel, who himself made a fracking fortune turning money into money, convinced the Prez to let the bonuses slide through as an appeasement to the Kudlow/CNBC/WSJ echo chamber.
????????????????????
March 17th, 2009 at 5:03 pm
about the best the government could do in this case is make it so that these bonuses to companies that have been given bailout money can’t take those bonuses off their (companies) taxes. cause there is a clause in that Constitution thing that precludes making among other things illegal retroactive , or making a specific individual’s action illegal. but they can change the tax laws all year long.
not sure that this isn’t just more of the same nonsense that the finance industry puts out that they need to pay unreasonable amounts of money or they will loose their staff. to which i wonder who?
and i wonder why the auto companies solved this problem by having them sign waivers. and that was for loans.
they just need to unwind the toxic junk that has been accumulated.
not sure why any body thinks that people who just got elected can solve a problem that took almost a decade to create in a few months. if they had that magic they would probably have been able to back in January, say on the 22nd?
March 17th, 2009 at 5:12 pm
@ leftback
“….Depends on whether you believe in the screw up theory of history or the conspiracy theory…”
Napolean Said, “Never ascribe to malice, that which can be explained by incompetence.”
… but then again, he did try to conquer the world.
March 17th, 2009 at 5:26 pm
Re: incompetence vs. malice;
It would be incompetence if, trying to always rape, loot, and pillage from the people, that a good percentage of the time the fumbled and actually helped the people instead; that is incompetence.
Since they never fail to enrich themselves and their kleptocrat cronies, it cannot be ascribed to incompetence.
March 17th, 2009 at 5:28 pm
Three things about where the market put/call is today…the 10 day MA is right on 3 year lows…the 21 day is slightly above 3 year lows. However, the 10 day is 9% below the 21 day…this is quite extreme and usually results in a snap back of the 10 day higher (and likely a market drop). Finally, if the market were to rally a few more days with low put/calls, we could see lows in the 10 day MA that I would not have believed.
March 17th, 2009 at 5:32 pm
It will get more interesting Wednesday. Edward Liddy, the CEO of AIG, is scheduled to testify Wednesday morning before a House Financial Services subcommittee…
Citadel (a hedge fund) just received $200 million from AIG’s securities lending program. Looks like we (US taxpayers) are also bailing out the hedgies.
P.S. I think Apple has a serious problem too… http://adamobydell.com/
March 17th, 2009 at 5:35 pm
Treasury should force AIG to spin off AIG Financial Products and then put FP into bankruptcy.
The CDS contracts are just a form of ‘hot potato’ game right now. AIG was bad to write so many CDS, but so were the fools who bought undercapitalized ‘insurance’ on the Titanic from a passenger on the Titanic. The important state interest here is avoiding a self-reinforcing spiral of bankruptcy. That has largely been accomplished by backstopping bank depositors (FDIC insurance increase), money market funds, big banks, all those acronym ‘facilities’ at the Fed, etc. Anybody holding crappy assets who can’t lend them to the Fed for liquidity isn’t half trying.
Now that the chain of dominoes has been stopped, it’s time to start triaging the financial casualties. Dropping the CDS tar-ball into the courts through bankruptcy of AIG Financial Products would be a fine way to start. It might be even better to go into that bankruptcy with some kind of framework agreement for how much various CDS will pay off before being torn up, but one way or another it’s time to cut to the chase.
March 17th, 2009 at 5:43 pm
willid3 says:
“not sure why any body thinks that people who just got elected can solve a problem that took almost a decade to create in a few months. if they had that magic they would probably have been able to back in January”
It would have been fixed by AIG going under. No bonuses to worry about then. No never ending infusion of tax dollars. It would have been ugly and brought on other issues- but hey- this is either free enterpise and capitalism or it isn’t. Can’t have it both ways- but it looks like they’re trying.
March 17th, 2009 at 5:47 pm
Hush money. Period.
March 17th, 2009 at 6:20 pm
However hard one tries, it is impossible to make that stuff up.
March 17th, 2009 at 6:28 pm
It would require novel legislation but right now you could pass a bill bringing back tar and feathering…It seems like these bonuses must be hush money, if we really need these people to figure how to unwind these CDS instruments, I would suggest DRAFTING THEM…for the ‘duration of the economic crisis’….Aside from the entire discomfiture of being the oldest buck privates in this man’s army, they would under military discipline be ever so much easier to handle…and as for compensation,”It’s not just a job….it’s a hundred and nineteen dollars a month”
March 17th, 2009 at 6:34 pm
http://www.huffingtonpost.com/steve-clemons/alexander-hamiltons-scorn_b_175575.html
March 17th, 2009 at 6:53 pm
woodyy Says:
March 17th, 2009 at 6:28 pm
…..I love the practicality of it all……Forget the huffing and puffing in congress you cannot pass a bill aimed at one individual or entity and it withstand the scrutiny of the courts….. Remember Schiavo, courts threw it out in a heartbeat…. it’s the same principle……We should be thankful this is America….and not subject to the latest whim of la populace
March 17th, 2009 at 6:57 pm
call me ahab Says:
March 17th, 2009 at 5:43 pm
It would have been fixed by AIG going under. No bonuses to worry about then. No never ending infusion of tax dollars. It would have been ugly and brought on other issues- but hey- this is either free enterpise and capitalism or it isn’t. Can’t have it both ways- but it looks like they’re trying.
………”It would have been ugly”……….Yes, you could say that
March 17th, 2009 at 7:02 pm
AGG,
Some poster on another thread stated the fact that our Forefathers such as Hamilton and Jefferson are probably spinning in their graves at such high RPM’s, we should look to use it as another form of energy.
Those who want to make this a partisan issue are full of shit. This has tentacles throughout DC regardless of party.
Don’t tread on Me!
March 17th, 2009 at 7:14 pm
@xnycpdx Says: March 17th, 2009 at 3:56 pm
“every time i see people posting ‘ let’s get the pitchforks and torches and head for wall street!’
i feel compelled to remind them that it is a federal crime to advocate the violent overthrow of the US government. ”
I’m surprised no one picked up on the implied message. Wall Street IS the US Government? It takes me back to the start of the unions, where government would protect the goons hired by business to prevent unionization of their shops. Different decade, different methods, same old story.
March 17th, 2009 at 7:21 pm
Can someone explain…..I don’t get how the 100% tax is going to do anything. The money has been paid, as I understand it. Furthermore, this FP unit of AIG was stationed in London, which suggests to me that many of the bonus recipients may not have been US citizens, or in any event, paying US taxes. So what does the taxation accomplish?
Also, we’re not trying to get the money back in taxes from AIG–they’d just give us our own money back! It has to come back from the recipients.
The only plan I’ve seen that looks like it would work for sure is this one:
http://www.huffingtonpost.com/william-black-tom-ferguson-rob-johnson-walker-todd/how-to-stop-aigs-bonuses_b_175351.html
March 17th, 2009 at 7:35 pm
The people are waking from their slumber to find that their pockets have been picked.
March 17th, 2009 at 7:56 pm
I dunno about waking up from a slumber. This type of news is getting tiresome and repetitive. They identified the crooks, failures, losers… and no one is in jail yet.
The old saying, “knowledge is power” is pretty true here, except those with knowledge are cheating and without any sense of remorse nor guilt for their mistakes/ill-intents.
Not only should we nationalized these failing banks/companies, we need to pursue all legal means and bring justice to these losers. We are rewarding and saving the wrong institutions. I would rather see bailout money go to better managed and responsible companies and see how they can revitalize the economy instead.
March 17th, 2009 at 9:06 pm
thanks porsche87 – this is usually a pretty quick crowd… maybe they were a little too distracted today for subtlety!
March 17th, 2009 at 9:16 pm
ottovbvs @ 4:57
“… an AIG default is out of the question…”
A bankruptcy is not a default, but in any case, I see no reason why it couldn’t happen. I would want to hear a detailed explanation of why, exactly, a bankruptcy would be “impossible” before I would begin to believe that it is true.
March 17th, 2009 at 9:37 pm
I see no reason that a pre-packaged bankruptcy, in which the insurance subs continue to operate (and are eventually sold off) and the obligations of the rest of the company are paid off from whatever’s left — probably at pennies on the dollar — would not work.
Certainly, the CDS holders would object, but their objections are unlikely to be heard or heeded by the bankruptcy court and trustee. The insurance subs are regulated companies, with required levels of capital which is not legally available as collateral for the obligations of the FP division. The fact that some CDS holders might wish for AIG to raid its insurance reserves to pay them off will not matter in the slightest. AIG can’t raid regulatory capital to pay off obligations of an unregulated business.
It means that Goldman will not get their billions for the CDSs and might have to go under or seriously reform itself (boo hoo!), and it means that many of the other counterparties would have to address their own problems, with their own governments. (Why the US taxpayer is throwing money at AIG in order for AIG to make SocGen, DB, Barclays and other foreign financial institutions whole, is completely beyond my comprehension.)
So, yes, toss them into a bankruptcy situation. Yes, we’ll probably have to bail out or wind down a bunch of other institutions here, and our friends in Europe and Asia will likewise have to figure out how to deal with their own failing institutions. But at least we will finally get to see the scope of the counterparties, and make intelliegent decisions about whether or not they need taxpayer support. Just tossing a blanket over AIG and ignoring what goes on underneath merely perpetuates the problem.
I wish there were another way, but it’s clear that none of this ends until there’s complete transparency, and complete transparency will not occur until AIG is picked to pieces and the results made public.
My expectations for the coming weeks are that this will not happen. AIG will attempt to cooperate with the government after the CEO resigns under fire. Unfortunately, pretty much everybody of significance from FP will also resign at the same time. The biggest of the bonus-getters will turn out to be in London and the US will wisely decide not to turn the whole thing into an international incident by suing British subjects in British court. A couple of weeks down the line, the government will march in and seize the empty shell using some sort of made-up authority, then do in a disorganized manner what a bankruptcy trustee would have done cautiously and judiciously. The results will largely be the same except that we the taxpayers will never recover a penny.
-btc
March 17th, 2009 at 9:43 pm
BelowTheCrowd @ 9:37
Probably much of what you have written is true or will become true.
And probably Obama will end up pumping in EVEN MORE money into AIG.
I really hate these politicians.
March 17th, 2009 at 9:50 pm
Porsche87 Says:
March 17th, 2009 at 7:14 pm
“every time i see people posting ‘ let’s get the pitchforks and torches and head for wall street!’
i feel compelled to remind them that it is a federal crime to advocate the violent overthrow of the US government.
______
It’s always, ostensibly, been a crime to overthrow any government, anywhere, anyhow.
I believe a case could be made – based on our Constitution, The Declaration of Independence, the intent of our founders, and our history – that the Federal Government, being of, by, and for The People, could be purged of its elected and appointed officials, as well as those making up the bureaucracy, and still remain on the correct side of the law, as long as The People didn’t declare the Constitution null and void. In fact, I could argue that it’s The People’s duty, as our government has been usurped. There is ample proof of the usurpation of powers by all three branches of government. It would not be a ‘revolution’, per se, but more of a reconstitution, or a reaffirmation of the Constitution, by rebellion.
That said, the powers that be would certainly resist. People would get hurt. Rebellions are not pretty things.
This comment is in no way, shape, or form, a call to action.
March 17th, 2009 at 9:52 pm
@ Porsche87 at 7:14 pm
“I’m surprised no one picked up on the implied message. Wall Street IS the US Government?”
Au contraire, the paucity of comment indicates it’s a given, understood by everyone.
March 17th, 2009 at 9:59 pm
$160,000,000/$160,000,000,000 = 0.1% (is my arithmetic right?)
0.1% is the amount of attention and effort that should be put into retrieving the bonuses. It’s money down the drain.
HOWEVER, there must be a 99.9% concentrated effort into resolving AIG soonest through a plan like that of BelowTheCrowd at 9:37 pm AND pursuing the maximum number of perp walks ASAP and for as long as it takes.
If prosecution and trials are still going on 10-20 years for now, it will continue to serve as an object lesson for the next generation.
March 17th, 2009 at 10:42 pm
Here’s the comment of a friend of mine who used to be high up in Aetna on what may have happened:
Everyone is agitated over the AIG bonuses. However egregious, it appears that legally they are entitled to the bonuses. Some argue that the auto workers have had contracts abrogated, but those are before, not after the fact.
However, there may be a way. Read on.
AIG has $500 billion of credit default swaps on the books. If half must be honored, that would be $250 billion. The government has already given them $180 billion, so they might need another $70 billion or so. How is such insanity possible
Remember that CDS contracts are merely unregulated insurance and therefore do not come under the normal requirements for holding reserves against future claims. AIG is primarily a casualty insurer, and that is their mentality.
Determining the appropriate level of reserves for casualty contracts is at least 50% subjective. Experience data exists and is utilized, but no one knows from year to year what level of claims will have to be paid (unlike life insurance where predictability is very high).
AIG should set up reserves for future claims, and additions to their reserves each year reduce current earnings. Since past experience suggested claims on CDS contracts were infrequent, apparently they held small reserves even though they had immense potential liabilities on $500 billion of exposure.
At Aetna, when we had low claim years, we tended to tuck a little more into reserves for casualty contracts, figuring that if claims stayed low over time the reserves could gradually be released to earnings. In other words, we sacrificed short term earnings for long term financial stability. This was a prudent judgment call.
All my career I was involved with incentive compensation plans. One thing I can say with 100% certainty is that when a comp plan has a formula for determining bonuses, and you give the people affected control over the variables in the formula, they will act in ways to max their bonuses. At AIG, the formulas had bonuses driven by earnings, and why would you want to decrease earnings by adding a lot to reserves if it would cost you in bonus dollars? Especially when bonuses could be in millions of dollars.
Given that reserves for CDS contracts involve a lot of judgment and are unregulated, you can see what happened. The guys in charge could argue that “experience” told them that minimal reserves were all that was needed.
Was that prudent? Of course not. But was it fraud? Possibly, if their auditors advised a higher level. And if the auditors did, and they ignored it to their own personal gain, then a basis exists for getting back not only this year’s bonuses, but perhaps past ones as well.
AIG was the envy of the industry for its phenomenal results which seemed unbelievable. Most people attributed it to the genius of Hank Greenberg. Everyone called him a genius and a hard-nosed SOB. Smartest guy in the room.
But they said that about ENRON and Jeff Skilling too. Sometimes these too clever people step over the line. Did AIG? I don’t know. But the place to look is the minutes of the meetings where reserves were established and the auditors’ comments thereon.
March 18th, 2009 at 12:10 am
A brief discussion of the plan to tax bonuses:
http://money.cnn.com/news/newsfeeds/articles/djf500/200903171531DOWJONESDJONLINE000624_FORTUNE5.htm
March 18th, 2009 at 12:14 am
w./ this: “Wall Street IS the US Government”
one would have to look no further than 44’s Cabinet/Top Admin. officials, to see the fact of the matter..
March 18th, 2009 at 5:20 am
I think Keith Olbermann put it best: Today we call it a bailout. Tomorrow we call it Why Daddy Went To Jail.
March 19th, 2009 at 12:52 pm
Quiet Voice in the Tempest
It is completely outrageous that struggling as we are, anticipating hard times ahead, our money is being spent as a reward for those who helped cause our economic crisis. It is outrageous that money that we could be using to replace that which was lost from our retirement accounts or college savings accounts, is being given to a bunch of “Wall Streeters”. Money that could have been used to help us pay our mortgages, or get caught up on our credit card bills, is going support the millionaire playboy lives of some failing bankers. Million dollar rewards going to further support the “Trump” like lifestyles of those who have failed our country.
If only that were the case, but it’s not.
My fellow main-streeters, soccer-moms and soccer-dads, Senators, Congressmen and Congresswomen, let’s all take a step back from the precipice we are about to leap off and take a deep cleansing breath.
The bonuses being paid out at AIG are not merit bonuses. These bonuses are not being paid out for going above and beyond reasonable expectations. These are retention bonuses. These bonuses were offered to keep the folks there who understand these highly complex financial instruments. AIG went to these people and pretty much said “We know you are going to try and run, but if you stay, and help us undo this mess, and do it well, we’ll pay you extra for doing so”. And they did. They did what was asked of them, and now we are telling them, tough luck. We don’t want to pay you, because we are jealous of the fact that you are making so much while we struggle.
Let’s put ourselves this same scenario. You’re a pretty successful stone mason, working as a subcontractor for the wall building division of a large construction company. You are asked to build an incredible complex and complicated wall, and every day, for the next year, you struggle and toil to do so.
On the last day, as your cleaning up your tools, looking forward to finding a new contract with a new company, your old boss comes up to you and says “We told you to build the wall in the wrong place, and if we don’t carefully take it down, it could cause the whole city to be flooded. We need to have the wall taken apart piece by piece, so the stones aren’t ruined. The whole company is going to go under because of this mistake, and we need to save the stones so we can sell them. We know you’ll want to move to another city to be safe but, you built the wall, so you are the best person to take it apart. We’d like to offer you a new contract for another six months. It will include a $25,000 bonus for staying and doing a good job.” So you think about it. You feel bad for the guy, agree to stay on under the new terms and sign the contract.
You work hard for the next six months, and painstakingly undo everything you worked hard to build. After receiving you last paycheck, bonus included (thank you very much), the brother of the owner of the failed company comes up to you and says that he provided financing, out of his pocket, to keep the company afloat for the last two months. He wants you to give him your $25,000 bonus, because, after all, it is really his money, right?
Wrong. You agreed to stay. You did the work as requested. It’s not your fault the company went under because the wall building division told you to build the wall in the wrong place. Heck you even did a great job building it, and taking it down! And now, not only is this guy after you for the bonus you earned, but the whole city is up in arms about the bonus, threatening both you and your family.
Now our elected representatives are considering going after these AIG employees because we all wish, during these hard times that we were the ones getting retention bonuses.
Are we willing to accept the precedent that will be set by this action? What comes next? What happens when the company you work for starts complaining to your congressman that they don’t like the terms of the employment contract you bargained for and they agreed to? What if they want him to propose a new bill undoing the whole thing? There a big powerful company and your just a weak individual.
Laws are set in place to protect the minority from the majority, to protect them from mob rule. Since when do Americans threaten to kill their neighbors because they are doing better for themselves than we are? Where are our leaders? Are they not supposed to stand up to the masses and do the right thing, no matter how unpopular it is? Is this the new change that we were promised? Decisions made based on fear, jealousy and uncertainty, a country run by mob rule?
Benjamin Franklin once said: “They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety.”
This is a slippery slope we are about to go down. Before doing so, maybe we better take a step back an take that deep cleansing breath.