The White House is worried about backlash over AIG's payout of $450 million in to executives in its high flying Financial Services Group, and that's just a fraction of the $1.2 billion it will pay in bonuses company-wide after losing $100 billion last year.
And well they should be.
The $450 million goes directly to executives in AIG's out-of-control derivatives trading arm run by Joseph Cassano that wrote half a trillion dollars in credit default swaps. "Despite the fact that the company is hemorrhaging money and being kept alive with taxpayer cash, Cassano has been allowed to keep his windfall," says ABC News, who also report that even after being forced out of the company Cassano was paid $1 million a month for "consulting services" through the end of last year.
Meanwhile, twenty-one percent of Americans are scrambling to pay for basic healthcare, and are going without treatment for cancer and other serious illnesses.
Robert Reich says that the administration's failure to stop this is a sign that "our democracy is seriously broken," and it is. When the story was initially leaked by a "senior government official," this was the excuse for the administration's impotence in what can only be characterized as a grand theft:
The administration official said the Treasury Department did its own legal analysis and concluded that those contracts could not be broken.This is difficult to accept at face value -- there would be no AIG if the US government wasn't shoveling cash into it at a furious pace, and the idea we have no leverage in the situation is absurd. It becomes even more risible when Larry Summers jumps into the fray:
We are a country of law. There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system.
As Glenn Greenwald notes, this argument is patently absurd. We forced auto workers to break their contracts with the US automakers and accept wage cuts as a condition of receiving TARP funds. Yet when it came time to limit executive bonuses at bailed out banks, the American Recovery and Reinvestment Act only stipulated TARP recipients must limit bonuses in employment contracts written after February 11, 2009. Which meant that employment contracts AIG negotiated in the future would be the only ones affected -- current contracts with employees would not be touched. AIG was quick to note this in their white paper offering the legal justification for paying out these bonuses, which FDL obtained yesterday.
AIG didn't stop paying bonuses because we never asked them to.
Unlike the auto workers, nobody insisted that the AIG bankers who wrote half a trillion in credit default swaps take a pay cut as a condition of receiving TARP funds. But this was the deal with the auto makers. And as economist Peter Morrici notes, "The Obama Treasury, headed by Tim Geithner, is forcing the terms of that deal on the United Autoworkers."
Yesterday we found out that Geithner made a $27 billion dollar gift to AIG counterparties, paying off credit default swaps at 100% of their value. Gretchen Morgenson in the NYT asks why these insurance claims "were paid off in full, even though widespread defaults on the underlying debt have not occurred?" Geithner has now reached a "deal" whereby AIG executives get millions more in bonuses by March 15, then more in July, and then September, but AIG has to show that they've made progress "selling off business units and repaying the government."
American taxpayers now own 80% of AIG. They'll be paying back the government, and paying off the bonuses, with our money. There is no reason to be tiptoeing around these people.
Are Geithner and Summers are just too aligned with Wall Street interests to do what needs to be done?
The bottom line is -- nobody trusts them. Congress needs to use its subpoena power to get a hold of these AIG contracts and make their own analysis.
We'll be delivering our petition to Congress telling them to stop this from happening on Wednesday morning when Barney Frank's House Financial Services Committee holds a hearing on AIG at 10am ET. You can sign it here and leave your comments for Congress.
Jane Hamsher blogs at firedoglake.com
why these CEO's don't take anything seriously...... as it's the 'old boy network' as far as that's concern.. THEY KNOW THEIR BACKSIDES ARE COVERED.
surely, there must some economists out there-- who can do the job to sort this economy out.
More than the AIG bonuses I am concerned about wall street dumping it's toxic assets on taxpayers. See this story:
Now It's Official: Public Private Partnership to Overpay for Toxic Bank Assets
http://www.nakedcapitalism.com/2009/03/now-its-official-public-private.html
We have been saying from the first time the idea that Team Obama floated the idea of having a "public private partnership" buy toxic bank assets, that it was merely a very costly way to disguise overpayment.
(more at link)
"Yeah, it failed for Hoover and the Japanese, but this time will get it right.
We can't stop swap insurance and Shorting, since that leaves only 10% of the market of actual stock"
If we can just stabilize the "race horses" that the Swaps are betting, it will all work out"
It's pure bs. When we stop leveraged Insurance Swaps and Shorting, the money will flow back to actual Stock!
Till then the REAL economy of services, products and jobs, is dying from lack of investment.
http://www.huffingtonpost.com/users/profile/research?action=profile
For links and logic.
Kucinich For Treasury!
The only man around who has beat the banks.
It's a hard pill to swallow. And the current situation is fraught with, frankly, rookie mistakes. Like how didn't Geithner know about these contracts until last week.
Anyway, the bank bailouts are clearly not popular with the public. The question is, can we trust and believe?
Risky hedge funds are getting the money. Super-super wealthy individuals who gambled on risky financial schemes are being bailed out with taxpayer money. Bernie Madoff? Chump change. But at least we have a face there.
With the AIG bailout we don't see all the super-rich fat cats who are the prime winners with TARP and the bailouts. We need to see their faces. We need to see that this entire exercise is all about propping up the rich -- on the backs of workers, salary-slaves and small business owners.
This was not really about luckless over-their-heads home buyers. It's about a market geared to making paper wealth for the super-rich. But we were told it was about the greedy American consumer. It's worse than that. It's about the greedy uber-rich. Very simple. The little guy was just caught in an uber-rich financial hustle that went bad. The little guy suffers. The rich stay rich.
And Mss Hamsher is right the government had no problem changing the Air controllers contract many years ago, in fact firing them ; Or making the UAW change the agreement with the auto companies .So lets see if this government has any balls .
Greedy lying bank CEO's are more up their alley- sinsc they have all the power and control to ruin millions of people. Sad but true. Our southern politicians do all they can to break unions. Why ?
They want corporate America to have the very cheapest labor cost - Rather use illegals who demand less. The GOP record on that is clear. check it out. Dems have a record of sticking up for the average worker..All they can do is call names- like socialist- commie- terrorist pal or ' he's not like us - as Palen said.
If Palen or Gov Jindal get in power-and once more run our markets as they have since Reagan -
that will be a very sad day for the US.
Those on the left are a disappointment they need to be fighting for people instead of drumming up phantom outrage over AIG. They are frankly out of touch. You want to do something worthwhile fight to get Obama's budget pass instead of creating outrage from poeple towards the administration over AIG of all people.
Carol
Let's call it what it is: welfare fraud.
when a mother on assistance does it we call it welfare fraud, talking heads on tv shout righteous indignation and shame her and want to make her pay.
When a bunch of spoiled, puffed up, feckless white guys (yeah, there may well be the occasional person of color or woman, but wanna' bet how many of them are white guys?)do it, we use all those euphemisms. It's tax payer money, just give to them, despite their huge screwups.
It's WELFARE FRAUD.
Get the money back.
Fire Summers.
He's just taking care of his cronies.
Like Paulson.
They are not of Obama's character.
He trusted the wrong guys.
They are distracted by AIG bonus that does NOT affect average Americans. Efca and the Buget DOES. But they fall for it and rethuglicans have them distracted from the big issue. They are joining republicans to sow dissent among Obama and the American people and so when it comes time to pass the budget his approval rating will be down in the 30's. There is something seriously wrong with liberals they fail to use their brain when it matters end up defeating themselves
Carol
This guy worked under Lawrence Summers in the Clinton Administration. Summers played a major role in abolishing the Glass-Steagall Act http://www.associatedcontent.com/article/1042593/repeal_glasssteagallstiegel_act.html?cat=3
The Glass Steagal Act outlawed mortgage backed securities which prevented the economic meltdown from taking place.
Isn't it odd Obama would pick these guys? Has anyone ever looked at who Obama's largest contributors were? http://www.opensecrets.org/pres08/contrib.php?cycle=2008&cid=N00009638 (If you don't recognize the name, it's a lobbyist firm. Do a Google search on the name to confirm that).
Geithner also worked for the IMF. Does anyone have any clue what the IMF does to third world countries, ensuring they stay that way?
http://mrxfromplanetx.com/new-rulers-world
http://mrxfromplanetx.com/war-by-other-means
If Obama was that good, the media never would have covered him http://mrxfromplanetx.com/orwell-rolls-in-his-grave
The problem came when companies started eradicating pensions and opting instead for 401(k) plans. Why pay cash money when you can bolster your stock by pushing it into employee portfolios? Why care about the ability of a new home buyer to repay the loan you handed them when you're passing them off as securities like a game of hot potato? No, I do not trust Summers and Geithner, because they are not to be trusted. These people are no different from that sleazy sales rep. that we have all encountered, with the difference being that if you are dissatisfied with your product, it can usually be returned. Until long term vision replaces the highly lucrative drive for short term personal gains, be sure to keep your receipt.