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Dangling from the AIG Noose - Our Slow and Painful Strangulation
As Americans are shaking their fists in the air over the payout of AIG bonuses, the Obama Administration took the nauseating position that it was unable to prevent the payment of bonuses and is unwilling to assume the legal risk of taking the money back. Wall Street plays hard ball and flips the bird at the President of the United States. While the arrogance is astonishing, one must ask if there is more to this story than meets the eye. There are no rogue actors in this deal.
Lawrence Summers, Economic Advisor to the President, said that we should all be concerned about breaking the contracts because of the implications on the overall system of law. Promises were made to be broken, Larry. Companies violate contracts every day of the week if it is the right thing to do for the business or if they need to find a way to crawl out of an obligation.
The question is what would it cost to fight the potential lawsuits that could result? In this case, if Treasury lawyers look carefully at the contracts, there are likely clauses that give the company the option to refuse a payout of bonuses if there was, for example, fraud, criminal activity, gross negligence, or actions that could be considered outside the scope of employment. Let's not forget the option to counterclaim in order to force concessions and settlement from AIG employees. After all, they were responsible for devastating the global economy. Just a thought, but maybe we could hang our hat on one of these concepts and flip the bird right back at AIG.
With all of this brilliance in Washington, how come Andrew Cuomo, the Attorney General of New York was the one to launch a subpoena questioning the payouts? If the global economy wasn't hanging by the AIG noose, my guess is there would be a tidy criminal case to pursue.
Where are these contracts, anyway? They should be put in the public domain so every lawyer in America can give an opinion about their meaning and validity. They can be redacted to protect the privacy of the individuals involved. I'll bet within two hours there would be an endless number of ideas on how to challenge the contracts. The rule of law works both ways and, no offense to the lawyers at Treasury, but they are not contentious litigators.
Then there is the theory that there is no way to "extract" the money back. Well, wire transfers can be reversed. In fact, the issuer almost always has the right to reverse a wire transfer within a certain number of days, especially if a mistake has been made. Someone please tell me this was a mistake! They should reverse the transfers and figure out the legal strategy later. The funds can always be released at a later date.
Are we to believe that AIG set up these payments without a single discussion with our fearless leaders at Treasury, The Federal Reserve Bank or the White House, until it was too late? No one even considered looking at the bonus issues prior to last week? I'll bet there was significant confidential dialogue at these agencies prior to the payout of bonuses and a decision was made that a strict interpretation of the law should trump all ethical considerations.
The fear that employees would leave AIG in droves if bonuses were not paid is just plain fantasy. According to a letter written by AIG to Tim Geithner, the relevant unit's books contain many transactions that are "difficult to understand and manage" as one reason "replacing key traders and risk managers would not be practical on a large scale." Where are they going to go? Who is going to give them a good recommendation after raping the global economy? Who would hire them? Come now, stop feeding us this Pablum.
If it is revealed that discussions on this issue took place with the watchers of AIG prior to the payout of bonuses, the incomprehensible lack of judgment on the part of administration officials would be nothing short of breathtaking. Discussions, analysis and decision making could have gotten delegated at a time when Treasury is overwhelmed, understaffed, and exhausted. However, while the big wigs were out making speeches and discussing the nuances of policy, the dark side found a way to prevail.
Let's roll up our sleeves and start thinking out of the box. We need brains and a baseball bat mentality here. We need meaningful leadership that is not afraid to stand up and say, "I'm mad as hell and I'm not going to take it anymore."
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investigate hank paulson and goldman sachs 20
billion robbery from his AIG plan
we just need banks not goldman
The bonuses are obscene, but even more obscene is the taxpayer bailout of AIG. What we've now discovered is the majority of the money given to AIG is being funneled back to the investment banks. Those institutions are now getting direct and indirect capital infusions from the American taxpayer.
As for the Fed I watched Bernanke say on 60 Minutes that yes they are merely creating money. If that's the only way out of this mess, why not let the FDIC step in and close the doors of those institutions? Why do we need a private banking system? Why can't the current system be replaced by a federal banking system? It's our dollars anyway.
All excellent points. I also think that we need to replace all of the people on the compensation committee of the BOD.
The premise that the contracts are engraved in stone is stupid! NO CONTRACT IS!! Weren't the employees at the big three told that their contracts must be renegotiated due to current circumstances?
I agree that there is definitely much more to this story than we are getting. Something very hinky is afoot. The idea that this money was promised via contract, and thus MUST be paid no matter what just don't fly.
And I really think that eventually, when we have more of the story, it will turn out that AIG is NOT the main villain here. I am convinced that there are politicians with 'blood' all over their hands...
Entirely correct, Sheila. Thank you for calling a ...(ahem)... a ...(ahem)...
These criminals would =like= for you to believe that "they have the world's economy by the short-hairs and therefore they are untouchable." But I do not agree, and I submit, neither should anyone.
And let me just stick to the most basic reason of all: there are plaintiffs. You, for example, and me. And, oh yeah, about 305 million of our closest and dearest friends, and that's just in this country.
Speaking not only to AIG but to a number of "well-known very large banks," I think that we can confidently say: (1) "you do NOT, in fact, represent 'everyone else in your chosen industry,' " and (2) "you're busted."
Issue trillions of dollars' worth of worthless paper under false pretenses? Go to jail.
Issue "AAA" ratings on that worthless paper? Go directly to jail.
Gamble with your investor's money (and even "cast lots for the clothing" of the US Government while they're giving you billions in public money? Do not pass "GO." Do not collect $200.
It isn't rocket-science, really. It's not even "the end of the world as we know it."
LONE RANGER: "Tonto! We're surrounded by injuns!"
TONTO: "Waddaya mean 'we', paleface?"
Geithner and Summers must go!
No more rule by bankers for bankers!
The financial panic was 6 months ago, I bet 95% of AIGs positions have been unwound already. If not there's plenty of unemployed quants and traders more than happy to work for a couple hundred thousand or so. It still beats the hell out of flipping burgers. Contracts entered into under fraudulent circumstances are not binding. This whole thing is Bull Sh*t but the worst is yet to come. Geithner's TALF is an even bigger more outrageous wealth transfer machine.
Write angry emails and call your congressman/woman. Let's flood Washington with rage. Geithner must go! No more government by banksters by banksters!
"I bet 95% of AIGs positions have been unwound already"
Can you show us the data underlying your conclusions? I doubt it.
"Contracts entered into under fraudulent circumstances are not binding."
There were no fraudulent circumstances. AIG didn't cheat their employees and the employees didn't cheat AIG. Got something better?
"Write angry emails and call your congressman/woman. Let's flood Washington with rage."
If you give up your day job, it will work even better!
The real explanation for the failure to stop the AIG bonuses is that members of the kleptocratic class working in the Obama administration and others in charge of AIG agree that the feelings of self entitlement that other members of the class working at AIG hold are valid. They allowed the bonuses because they wanted to do so not because they could not oppose them.
2008 was not when the worlds economy collapsed. In reality it had gone South several years ago, may be as many as 10 years ago. The profits made by businesses in 2007, 2006 and quite a few more years back were illusory created by over-valuation of assets and under-valuation of liabilities. This being so, bonuses calculated on years prior to 2008 were based on fraud and should be reclaimed.
I tried to insert a hyper link in my previous post on not blaming Senator Dodd but it does not seem to have worked so here is the text of the urlhttp://www.salon.com/opinion/greenwald/2009/03/17/dodd/index.html
Humans are largely controlled by their beliefs. It was the beliefs held by the masters of the universe at AIG that led them to making the bad trades that brought the company down and most likely they still have these beliefs which will make it impossible for them to commit themselves to unwinding the same trading positions. To want to retain these people is insane to pay them money to stay is even more crazy.
Read Glen Greenwald's post on the dishonest blame Dodd campaign from treasury officials . Senator Dodd attempted to insert limits on executive remuneration in the bailout bills but was overruled by the Obama White House. Obama is as much a servant of the kleptocratic class as was George W Bush.
At the top of the campaign contribution list from AIG is Sen. Chris Dodd and former Sen Barack Obama, now POTUS is in second place.
I totally agree, to say there is no way round these contracts is BS. At worst renege and let them sue - good luck.
And yes, i'm in business and deal with contracts all the time.
I want to know why the contracts of bankers are sacred but the contracts of auto workers are not. Didn't our government refuse to provide money to the auto makers unless the workers accepted pay cuts? We are not talking about bonuses here, we are talking about cuts to their actual paychecks, which NO ONE has suggested that the bankers should have to suffer through. If we are talking pure legality here, a contract is a contract... then why didn't it matter then, but now it does?
Ms. Tendy?
Hit. Nail. Squarely. On. Head.
Sanity anyone?
TS
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