With the average American family’s wealth down 18% due to the collapsed credit bubble, AIG’s payment of tens of millions in executive bonuses finally struck a nerve of an otherwise self-absorbed, complacent US public. The outrage was heard loud and clear on Capitol Hill and at the White House, resulting in political pressure on AIG to give up its accomplices. Wouldn’t you know its the usual suspects:
American International Group Inc. used more than $90 billion in federal aid to pay out foreign and domestic banks, some of whom had received their own multibillion-dollar U.S. government bailouts.
The embattled insurer’sdisclosure on Sunday came amid outrage on Capitol Hill over its payment of tens of millions in executive bonuses, and followed demands from lawmakers that the names of trading partners who indirectly benefited from federal aid to AIG be made public.
“The ability of AIG to meet its obligations is important to the stability of the U.S. financial system and to getting credit flowing to households and businesses,” Federal Reserve spokeswoman Michelle Smith said.
That plays fine in the big city, but out here on Main Street people are waking up and just don’t believe the billions paid to AIG have anything to do with thestability of the U.S. financial system. Some are even aware thatgetting more credit flowing to households and businesses is the problem, not the solution. But it was never about the credit flows or even the bonuses; it was about Goldman Sachs and the banks all along:
Some of the biggest recipients of the AIG money were Goldman Sachs at $12.9 billion, and three European banks — France’s Societe Generale at $11.9 billion, Germany’s Deutsche Bank at $11.8 billion, and Britain’sBarclays PLC at $8.5 billion. Merrill Lynch, which also is undergoing federal scrutiny of its bonus plans, received $6.8 billion as of Dec. 31.
The money went to banks to cover their losses on complex mortgage investments, as well as for collateral needed for other transactions.
Other banks receiving between $1 billion and $3 billion from AIG’s securities lending unit include Citigroup Inc., Switzerland’s UBS AG and Morgan Stanley.
Goldman Sachs has always played Uncle Sam like a cheap flute, so back when Goldman’s man in Treasury was Goldman’s CEO, and Goldman’s counter party AIG was set to go belly up, Paulson instead set up AIG as a conduit to transfer cash from Main Street to Goldman’s partners.
That $13B slid so loosely through the pipe that Paulson probably took bids from the other beneficiaries or made who knows what deals. The other big banks piled on, and all their counter parties partied. You can bet all the bonuses were saved as the double choke hold of higher taxation and inflation clamped down even tighter on a public already bled within an inch of bankruptcy.
Conspiratorial you say? Well, this all occurred while your sorry Uncle paid twice as much for its Goldman Sachs shares as Warren Buffet did on the open market. That’s right, Goldman’s CEO bought his own company with the public purse and just coincidentally paid twice the market price. Coincidence theorists, please wake up!
Due solely to the public outrage, the White House is hopping mad over the bonus bailout in drag and vows to try to stop it — not to stop it, but to try!
President Obama on Monday vowed to try to stop the faltering insurance giant American International Group from paying out hundreds of millions of dollars in bonuses to executives, as the administration scrambled to avert a populist backlash against banks and Wall Street that could complicate Mr. Obama’s economic recovery agenda.
It’s that economic recovery and the associated bleeding of the stuck taxpayer that’s the true agenda. The rest is all shadowy noise. There were plenty of harsh words to sooth the cuts of a deeply wounded public, but it’s all hype and bullcrap. You can see this one coming from a mile away:
Lawrence Summers, director of the White House National Economic Council, called the payments “outrageous” in an interview on ABC’s “This Week” program yesterday.
“There are a lot of terrible things that have happened in the last 18 months, but what’s happened at AIG is the most outrageous,” Summers said yesterday on CBS’s “Face the Nation.”
But when it comes down to brass tacks, no one demands the bonus to be paid back, and that especially means Summers:
Even so, the administration can’t abrogate existing contractual obligations without shaking confidence in the legal system, Summers said.
“The easy thing would be to just say, you know, ‘Off with their heads,’ and violate the contracts,” he said. “But you have to think about the consequences of breaking contracts for the overall system of law.”
That moral compass is pointed in the wrong direction Larry — all confidence in the legal system has been shaken out principally due to the shakedown of taxpayers. We all suffer the the consequences of a badly broken legal and political system. Never before have so few fleeced so much from so many.
Even Elliot Spitzer has “come back from the dead” to call BS on this AIG bonus diversion (guess the banksters didn’t kill him dead enough?).
The SEC has blatantly manipulated the stock market with an arbitrary ban on short selling, letting naked short sellers off with a mere slap, and the worst credit offenders got billions. In the greatest looting in history, Goldman itself already got bailed out to the tune of $25B, yet the nation’s cities are giving the finger to their employees, pensioners, and the unions who represent them:
In the first ruling of its kind, a bankruptcy judge held the city of Vallejo, Calif. has the authority to void its existing union contracts in its effort to reorganize, holding public workers do not enjoy the same protections Congress gave union workers at private companies.
Municipal bankruptcy is so rare that no judge had yet ruled on whether Congressional reforms in the 1990s that required companies to provide worker protections before attempting to dissolve union contracts also applied to public workers’ union contracts
U.S. Bankruptcy Judge Michael McManus held March 13 that when Congress enacted 11 U.S.C. sec. 1113 to limit companies from outright rejection of union contracts it limited it to Chapter 11 bankruptcies. By failing to extend the limits to Chapter 9, which covers municipal bankruptcy, McManus said cities have broader latitude to break existing union pacts, In re City of Vallejo, 08-26813-A-9 (E. Dist. Calif.)
“This will have a huge effect nationwide if it is upheld,” said Kelly Woodruff, of Farella, Braun & Martel in San Francisco, representing the firefighters and electrical workers unions. Woodruff said the unions would certainly appeal if the city ultimately voids the existing contracts with the two unions. “And I think we have a good chance of success,” she said.
“My understanding is that a lot of cities are watching this and particularly this motion,” said Woodruff. “If the city of Vallejo succeeds in using bankruptcy to void union contracts I am sure others will follow,” she said.
But through it all, Larry bravely upholds the “sanctity of law” for banker billionaires who have ruined our country and economy and put us on the bitter road to a long, deep depression all in pursuit greater piles of wealth.
Great Job! And Larry, if you can’t get the money back, give the job to someone who can, like Laura Wilson:
The plaint that credit default swap-promulgating AIG is contractually obligated to pay out millions in bonuses to the same pitted brass that led the company, the industry, and the entire economy off a cliff is a bunch of horse hooey.
I sure would like to see those AIG contracts – I’ll bet I can poke a hole in the specious supposition that the company really, really wants to do the right thing, but its little hands are tied. Since the public bailout of AIG, we all have an ownership interest in where the money is going, and are entitled to ask probing questions.
I know contracts inside and out, at the real-world, down and dirty level, not the black-box, ivory tower, theoretical stratum that gets adjusted as the tectonic plates of business deals crash into each other.
Any attorney who advises that these bonuses are appropriate ought to have his or her head checked.
And if Laura can’t do it, maybe our self-aggrandizing New York State Attorney Andy can:
The attorney general Andrew M. Cuomo of New York said Monday afternoon that he had not received the information he was seeking about the American International Group’s $165 million in bonuses and would issue subpoenas for the data soon.
The payments to A.I.G.’s financial products unit, which was responsible for billions of dollars in losses at the insurance giant, were sent out on Friday, Mr. Cuomo said. The attorney general had demanded that A.I.G. hand over the information by 4 p.m. on Monday.
“I believe in transparency and disclosure,” Mr. Cuomo said on a conference call. “We believe taxpayers have a right to know.”
Well, I believe you have hoodwinked us before, Andy. But this time, the lime light is so bright you can trust Andy to lean pretty hard to shine the light of day on the shadow bank called AIG. As for the shadow government called Goldman Sachs, it’s all about planning — planning on the the wealth conduit disguised as an economic stimulus, the public bailout of private excesses. This is now Obama’s main objective, and the only threat to the AIG bonus is the threat it presents to that agenda:
The sharp presidential rebuke of A.I.G. is part of the White House effort to distance itself from abuses that could feed potentially disruptive public anger. Mr. Obama’s aides are worried that such anger could make it more difficult to win Congressional approval for the additional bailout packages that Mr. Obama has signaled may be necessary to stabilize the banking system. Already there have been moves in Congress to limit compensation for executives at banks and Wall Street firms that are receiving government help to survive.
It will take more than strong words and sharp rebukes, uttered only after the dam broke, to repay the US taxpayer. You’ll know Obama is serious about the issue when he begins to enforce existing law. Instead, he goes yikkitty yacking about how unfortunate this all is, and the government debates the uptick rule and whether hedge funds should be regulated more. It boggles the mind!
In the end AIG will likely pay the $165M in bonuses, so long as the Golden Goose isn’t scathed. To ameliorate public opinion, Obama and Cuomo will publicly block the payout with much hype and hoopla and several months later, with too many in the bread lines to notice some back water judge or back door payout will open and the bonuses will fall out.
Until then, the government will go on shooting at the wrong target, shooting at the shadow, at AIG, knowing full well that it was Goldman Sachs all along. It was Goldman’s man in Treasury who sunk the fix and let the payouts flow. Now Goldman would gladly flip double or nothing all day for $165M against $13B, and the remaining $105B forever.
So far the plan is working. Instead of the blood of banks that’s spilled on the Street, it’s Joe and Jane citizen again getting stuck for the crimes and mistakes of mighty Goldman Sachs:
If you can’t be good, it helps to be lucky. But don’t expect any of the companies to write thank-you notes to the US taxpayer any time soon, or for Goldman Sachs to think any less of its lofty self.
That’s right, it won’t think any less of its lofty self, or any more of lowly you and me, the US taxpayer.