Political Physics: Are You Kid-AIG-ing Me?
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a blogumn by Monique King-Viehland
Click on comic to enlarge
Are you kidding me? How in the hell is it that American International Group (AIG) was allowed to give $165 million in bonuses!
AIG has received $173 billion in U.S. bailout funds, making it the largest single recipient. AIG reported this month that it had lost $61.7 billion for the fourth quarter of last year – the largest corporate loss in history. ??Also adding to the political complications for the Obama Administration is the revelation last week that billions of taxpayer dollars used to bailout AIG was actually funneled to Goldman Sachs and some of the some of the largest foreign banks in the world (e.g., banks, such as Societe Generale in France and Deutsche Bank of Germany, which got nearly $12 billion each). ??
In an interview on 60 Minutes, Federal Reserve Chairman Ben Bernanke said, “Of all the events and all of the things we’ve done in the last 18 months, the single one that makes me the angriest, that gives me the most angst, is the intervention with AIG.” Bernanke continued, “Here was a company that made all kinds of unconscionable bets and then, when those bets went wrong, we had a situation where the failure of that company would have brought down the financial system. I slammed the phone more than a few times on discussing AIG. I understand why the American people are angry.”
Angry? I am way beyond angry! And I am not alone!
According to the Seattle Times, “The disclosure that AIG, which has received $170 billion in federal assistance to remain afloat and avert a cascade of failures in the financial system, is paying bonuses to its executives is the latest in a series of episodes that Obama’s aides said seemed to be feeding a resurgence of public anger.“
According to Reuters, AIG’s chairman, Edward Liddy said in a letter to Treasurer Secretary Geithner that AIG was legally obligated to make 2008 employee retention payments but had agreed to revamp its system for future bonuses after the Obama administration objected. But that does not get our $165 million or the billions they gave to other folks back.
This is an outrage!
Given that the federal government currently owns nearly 80% of AIG, President Obama has asked Treasurer Secretary Geithner to use that “leverage” to pursue every legal avenue to block these bonuses and make the American taxpayers whole.
But in the same series of interviews and news conferences, Lawrence Summers, director of the President’s National Economic Council, said that there was little if anything the government could do to stop them.
But here is a question, given your financial situation going into 2007 and how much money the company has lost, why would you even be considering retention pay and bonuses to begin with?
AIG should never have been allowed to agree to retention pay and/or bonuses (especially for the very same financial geniuses who got them into their current financial situation to begin with). Because now, if those managers are not given the bonuses, they can sue AIG for breach of contract and that only means additional financial burden for AIG.
The fact is we might be out of $165 million, but I’ll be damned if this happens again!
As discussions continue around additional bailouts, stimulus funding, etc., President Obama needs to go beyond the rhetoric about fiscal transparency and responsibility and actually put some legislation, regulations, etc. in place to ensure that we do not have another situation like AIG.
According to a New York Times/CBS News Poll in February, 83% of respondents said the government should put a cap on the amount of compensation earned by executives of companies getting federal assistance. As the national debt hits the trillions and continues to climb, people watch neighbors lose their jobs and homes, governments start enacting furloughs, wage freezes and/or layoffs; people are not going to stand for all the love going to Wall Street when they are sending out money overseas and padding their pockets.
I know that last week was the U.S. stock market’s best week in more than three months. But it is way too early to celebrate.
The unemployment rate in my community is still more than 14%; foreclosures are still skyrocketing; and in May I start a 14-month stint where my pay is reduced by almost 10% because of furloughs. And no one I know is getting hundred-thousand-dollar bonuses.
The response to the AIG bonus situation and the how the Obama Administration will move to ensure these types of things do not happen in the future, are critical for the president.
This is the difference between the public’s opinion of success or failure.
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The government should quickly pass a law prohibiting breach of contract suits for failure to pay bonuses for any company receiving bail-out money.
I love this comment:
"Republican Sen. Charles Grassley of Iowa didn't appear to be joking, however, when he spoke with Cedar Rapids, Iowa, radio station WMT.
'I would suggest the first thing that would make me feel a little better toward them [AIG executives] is if they follow the Japanese example and come before the American people and take that deep bow and say, 'I am sorry,' and then either do one of two things: resign or go commit suicide,' he said.
'And in the case of the Japanese, they usually commit suicide.'
The government should quickly pass a law prohibiting breach of contract suits for failure to pay bonuses for any company receiving bail-out money.
I love this comment:
"Republican Sen. Charles Grassley of Iowa didn't appear to be joking, however, when he spoke with Cedar Rapids, Iowa, radio station WMT.
'I would suggest the first thing that would make me feel a little better toward them [AIG executives] is if they follow the Japanese example and come before the American people and take that deep bow and say, 'I am sorry,' and then either do one of two things: resign or go commit suicide,' he said.
'And in the case of the Japanese, they usually commit suicide.'
it's gross. i really don't know how these people can sleep at night.
it's gross. i really don't know how these people can sleep at night.
UGH! i heard that on the news this a.m. and could NOT believe the gall. i mean telling people to kill themselves is a little, uh, much!
I don't think it's much at all, considering what AIG has done to the economy and continues to do.
But his comment is not so much saying, "Go kill yourself," as saying that if these scumbags showed the least bit of honor by apologizing and getting the hell out (however they decide to do so) they could save some face and not be worthy of utter contempt.
That having been said… put me in front of those AIG bastards and I'll tell them that to their faces.
UGH! i heard that on the news this a.m. and could NOT believe the gall. i mean telling people to kill themselves is a little, uh, much!
I don't think it's much at all, considering what AIG has done to the economy and continues to do.
But his comment is not so much saying, "Go kill yourself," as saying that if these scumbags showed the least bit of honor by apologizing and getting the hell out (however they decide to do so) they could save some face and not be worthy of utter contempt.
That having been said… put me in front of those AIG bastards and I'll tell them that to their faces.
FALLOUT GROWS: Those who voted for the stimulus supported the clause to protect the AIG's bonuses. Obama's Own Stimulus Bill Protects the AIG Bonuses He Now Condemns —
<a href="http://www.butasforme.com/2009/03/17/obamas-stimulus-bill-explicitly-grants-aig-the-legal-right-to-hand-out-bonuses/” target=”_blank”>http://www.butasforme.com/2009/03/17/obamas-stimu…
FALLOUT GROWS: Those who voted for the stimulus supported the clause to protect the AIG's bonuses. Obama's Own Stimulus Bill Protects the AIG Bonuses He Now Condemns —
Though, I don't think the AIG execs should commit suicide, I do think that their names should be published. It takes a lot of frickin gall to enforce a contract that's obvs not in the company's or the nation's best interest and I wonder how many of them would be willing to face up to public scorn in order to get their 13 pieces of gold. The only way that AIG can get out of paying those bonuses is if the execs agree not to take them, and exposing them might be the one move that can make that happen. This is why the death of print media is so bad right now. If newspapers were fully-staffed and on top of their game, they could get the names of those execs in no time.
I don't think it's fair to blame the president for this debacle — it sounds to me like these contracts might have negotiated on the sly and perhaps before the stimulus package was even on the table — but I do think that it's in the administration's best interest to comb through the companies that are receiving stimulus checks and out any of them that have contracts like this, then promptly pass legislation against it. As it is, I don't think they want another one of these situations to pop up.
M, I think this also sets up a discussion for oversight. The sad thing is that we have less resources but actually need more people to be watching these companies and making sure that they don't pull further shady moves.
Whether it's fair to blame the president or not is unclear. It's fair to blame at least somebody in Washington a lot and probably a lot of Congress a little for not reading revised provisions more closely, since the original provision that Chris Dodd created did not allow for the exemption that AIG is acting under. (Anyone who hasn't checked out the CNN article referenced in Doug's "But As For Me" link, here it is: http://www.butasforme.com/2009/03/17/obamas-stimu… )
The question is, which of these Washington scumbags is responsible? When it comes down to, the politicians are always involved–and that's right and left, Republican and Democrat, none are without blame.
Though, I don't think the AIG execs should commit suicide, I do think that their names should be published. It takes a lot of frickin gall to enforce a contract that's obvs not in the company's or the nation's best interest and I wonder how many of them would be willing to face up to public scorn in order to get their 13 pieces of gold. The only way that AIG can get out of paying those bonuses is if the execs agree not to take them, and exposing them might be the one move that can make that happen. This is why the death of print media is so bad right now. If newspapers were fully-staffed and on top of their game, they could get the names of those execs in no time.
I don't think it's fair to blame the president for this debacle — it sounds to me like these contracts might have negotiated on the sly and perhaps before the stimulus package was even on the table — but I do think that it's in the administration's best interest to comb through the companies that are receiving stimulus checks and out any of them that have contracts like this, then promptly pass legislation against it. As it is, I don't think they want another one of these situations to pop up.
M, I think this also sets up a discussion for oversight. The sad thing is that we have less resources but actually need more people to be watching these companies and making sure that they don't pull further shady moves.
Whether it's fair to blame the president or not is unclear. It's fair to blame at least somebody in Washington a lot and probably a lot of Congress a little for not reading revised provisions more closely, since the original provision that Chris Dodd created did not allow for the exemption that AIG is acting under. (Anyone who hasn't checked out the CNN article referenced in Doug's "But As For Me" link, here it is: http://www.butasforme.com/2009/03/17/obamas-stimu… )
The question is, which of these Washington scumbags is responsible? When it comes down to, the politicians are always involved–and that's right and left, Republican and Democrat, none are without blame.
I know they can't legally not give the bonuses. However if we are 80% owner of AIG can we fire them if they refuse to give it up?
I also read that Congress is working on a bill to put a 95% tax on the bonuses.
I think this speaks to the moral character of Wall Street more then anything else.
I know they can't legally not give the bonuses. However if we are 80% owner of AIG can we fire them if they refuse to give it up?
I also read that Congress is working on a bill to put a 95% tax on the bonuses.
I think this speaks to the moral character of Wall Street more then anything else.
I love this. And they should make it impossible to deduct against.
The sad thing is, the situation speaks to the poor moral character of our country as a whole. The greed is everywhere. People buying houses that they can not possibly afford by putting 0% down and trying to slide through on low variable rates to start, or even falsifying information, are as responsible as the predatory banks who took advantage of them.
Now, before people flame me here, I'm not saying all foreclosures are a result of this, not by a long shot. But this was the case with many of the first round of foreclosures, before the economy tanked. Then, when everything went down the tubes, good people started losing their jobs, forcing them into foreclosure, too.
This is only one example. What about everyday folks running up huge credit card debt they can never payoff
Don't forget Washington. Barney Frank defended Fannie Mae and Freddie Mac before and during their meltdowns. He even led opposition to put them under tighter oversight as far back as 2003 ( http://online.wsj.com/article/SB12209179618701252… ). I love this quote from the New York Times:
''These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''
A former lover of Frank's with whom he is still close was a Fannie Mae executive.
Wall Street, Washington, everyday Americans, we're all to blame. We need to remember to point those fingers at everyone, including ourselves.
I love this. And they should make it impossible to deduct against.
The sad thing is, the situation speaks to the poor moral character of our country as a whole. The greed is everywhere. People buying houses that they can not possibly afford by putting 0% down and trying to slide through on low variable rates to start, or even falsifying information, are as responsible as the predatory banks who took advantage of them.
Now, before people flame me here, I'm not saying all foreclosures are a result of this, not by a long shot. But this was the case with many of the first round of foreclosures, before the economy tanked. Then, when everything went down the tubes, good people started losing their jobs, forcing them into foreclosure, too.
This is only one example. What about everyday folks running up huge credit card debt they can never payoff
Don't forget Washington. Barney Frank defended Fannie Mae and Freddie Mac before and during their meltdowns. He even led opposition to put them under tighter oversight as far back as 2003 ( http://online.wsj.com/article/SB12209179618701252… ). I love this quote from the New York Times:
''These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''
A former lover of Frank's with whom he is still close was a Fannie Mae executive.
Wall Street, Washington, everyday Americans, we're all to blame. We need to remember to point those fingers at everyone, including ourselves.
WALL STREET HAS MORAL CHARACTER?!?!?!?!?!?!?!?!
WALL STREET HAS MORAL CHARACTER?!?!?!?!?!?!?!?!
Part 1: The whole scenario is such a mess, it's difficult to get one's brain around it. I know the contracts aren't public, but I thought that I'd be able to find more details on them, but alas. I'm guessing that the contracts involve not *only* the promise to pay bonuses, but an obligation on the part of those executives to stay on until they essentially work themselves out of their jobs. That is, it's unclear to me whether or not those folks had the option to *quit* or of the contracts bound them legally to stay. You could argue that they shouldn't accept the full amount, but if you signed a contract that prevented you from leaving, and staying meant that you expected a certain level of pay, what would be acceptable compromise? Then again, I'm just guessing about some of the facts.
Part 2: Aside from the fact that it seems outrageous for AIG execs to accept the money, it's IN the legislation to honor bonus contracts that were set before February 2009. (Perhaps they'd known that had they read it.) So it sucks, but it's legal. (And mean legal-obligatory, not legal-acceptable.) Taxing the bonuses received to get the money back to the government is unconstitutional. I think the situation is simply "done" – and we need to let it go, learn the "don't do this" lesson from it, and move on. (why are other posts longer, but it wouldn't let me….?)
It's irksome enough that the exception to honor bonus contracts that is in the stimulus packages at all–even more so that it was not in the initial draft and some bastard slipped it in after the face. Whether the rest of Capital Hill and the President agreed to its addition or whether they missed it points to how much we should be angry at them… or question their thoroughness.
The constitutionality question is interesting. Since the tax would have to be applied to the individuals and they did not receive the bail out (directly), I would assume you're right. However, I don't presume that the situation is simply done, as there may be other remedies directed at AIG which may be legal–and should be passed into law to prevent other companies from acting likewise.
Part 1: The whole scenario is such a mess, it's difficult to get one's brain around it. I know the contracts aren't public, but I thought that I'd be able to find more details on them, but alas. I'm guessing that the contracts involve not *only* the promise to pay bonuses, but an obligation on the part of those executives to stay on until they essentially work themselves out of their jobs. That is, it's unclear to me whether or not those folks had the option to *quit* or of the contracts bound them legally to stay. You could argue that they shouldn't accept the full amount, but if you signed a contract that prevented you from leaving, and staying meant that you expected a certain level of pay, what would be acceptable compromise? Then again, I'm just guessing about some of the facts.
Part 2: Aside from the fact that it seems outrageous for AIG execs to accept the money, it's IN the legislation to honor bonus contracts that were set before February 2009. (Perhaps they'd known that had they read it.) So it sucks, but it's legal. (And mean legal-obligatory, not legal-acceptable.) Taxing the bonuses received to get the money back to the government is unconstitutional. I think the situation is simply "done" – and we need to let it go, learn the "don't do this" lesson from it, and move on. (why are other posts longer, but it wouldn't let me….?)
It's irksome enough that the exception to honor bonus contracts that is in the stimulus packages at all–even more so that it was not in the initial draft and some bastard slipped it in after the face. Whether the rest of Capital Hill and the President agreed to its addition or whether they missed it points to how much we should be angry at them… or question their thoroughness.
The constitutionality question is interesting. Since the tax would have to be applied to the individuals and they did not receive the bail out (directly), I would assume you're right. However, I don't presume that the situation is simply done, as there may be other remedies directed at AIG which may be legal–and should be passed into law to prevent other companies from acting likewise.
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