Obama to Geithner: Get That Bonus Money Back

It sounds like Obama has told Tim Geithner to go back to Edward Liddy and explain that $100 million bonuses are unacceptable.

I’m glad that Obama did this (after seeing the outrage in Congress no doubt). I’m still astounded that Geithner needed to be told. And I’m still suspicious that Geithner was responding to threats from AIG that no one is much talking about. 

Obama’s statement here has a hint of something I’d like to see more of: he suggests that the appropriate response to AIG’s audacious demand for its bonuses is the same kind of regulation over big finance schemes like AIG that FDIC has over banks.

Still, it was only a suggestion.

It seems that this AIG demand ought to elicit the kind of response that drives reform over all the weasels in Congress trying to prevent it. "Well, that’s the last straw," I wish Obama had said, "If that’s how you respond to hundreds of billions in help from the federal government, we’re going to regulate you so heavily you’ll be begging to give your bonuses away in a matter of months."

There are still a lot of obstructionists in Congress who don’t want their gravy train to get clipped. This is the moment when Obama should be mobilizing the outrage of such events to roll over those obstructionists.

Of course, that’s not going to happen so long as there are so many obstructionists in Obama’s inner circle. 

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96 replies
  1. AlbertFall says:

    Per Glenzilla, quite appropriately:

    Sanctity of contract to pay AIG bonus is one thing.

    Sanctity of union contract that carmakers are trying to renegotiate is something else.

    Seems to me that renegotiating a bonus is no different from seeking union givebacks.

    • emptywheel says:

      Problem is everyone and their mother is assuming they’re not voiding the contract because of the contract itself, even though AIG tells us themselves that one of the factors (see linked post) is business factors, not contractual factors.

      Until we start dealing with that we’re going to continue to be paying AIG whatever it wants whenevr it wants.

      • Hugh says:

        All of this much vaunted transparency is a joke. Everything about AIG, why it has needed so much money, whom it went to, why it paid off obligations that weren’t in default, how much of the action was in naked CDSs, whether banks receiving money got it for instruments they held or as agents for hedge funds which had accounts with them, and why Goldman Sachs’ fingerprints are all over everything AIG (Paulson, Blankfein, Liddy, the bonds, the payouts, etc.)?

      • dakine01 says:

        It seems to me that there should be a law, similar to the ones that should say “If a business if too big to fail it is too big and should be broken up” that a corollary law is “if an individual is considered indispensible and the firm cannot operate without them, that individual should immediately be fired as no one should be considered indispensible”

  2. GregOPauls says:

    Tim Geithner bad man.
    he saves bear stearns and aig but lets lehman brothers go under. anyone ask why.
    Could it be because he has buddies in bear stearns? Did he do work with them? Another questionable move with the new regime.

      • Hugh says:

        I think Bears Stern went belly up… selling for $0.00 on the futures market?

        It was sold to JPMorgan with the government giving JPM a big guarantee on BS assets.

    • alibe50 says:

      Tim Geithner, former Goldman Sachs guy. AIG bailout $$$$ went to Goldman Sachs. SURPRISE! One of the largest contributors, if not the largest, to the 0bama campaign was from……Goldman Sachs, SURPRISE!!!
      Just a coincidence, SURPRISE! I don’t blame anyone. Corruption is so passe! Let us move forward. Don’t dwell on the past. I love being a fool.

      • MarkH says:

        Tim Geithner, former Goldman Sachs guy. … I love being a fool.

        Geithner didn’t work at GS, so maybe you are a fool. Well, at least you’re happy.

    • MarkH says:

      Tim Geithner bad man.
      he saves bear stearns and aig but lets lehman brothers go under. anyone ask why.
      Could it be because he has buddies in bear stearns? Did he do work with them? Another questionable move with the new regime.

      Geithner wasn’t in charge when Lehman Bros. went down. Not his fault!
      Geithner never worked at Bear Stearns…had no ‘buddies’ there.
      Lehman didn’t go down during Obama’s administration. Bush’s fault!

  3. TheraP says:

    I’m hoping the tax-payer outrage will be such that it will enable a big push for way more regulation across the board. As they say: Never Let a Crisis Go to Waste!

    Strike while the iron is hot!

  4. brendanx says:

    The fact that Obama is asking only underscores the problem.

    And the President of the United States complaining that Wall Street kleptocracy is due to “values” and “greed” is like the head of the FAA blaming a plane crash on gravity.

    • Crosstimbers says:

      That would be worth doing if Reagan Revolution had convinced a whole generation that Newton was treasonous and there’s no need to consider gravity in aircraft design.

        • Crosstimbers says:

          LOL. Actually, a lot of aircraft accident investigations do conclude that gravity did it. The NTSB calls it “pilot error” and professional pilots conclude “it was a bad day to fly.”

  5. GregOPauls says:

    Geithner decided not to bail them out.
    In March 2008, he arranged the rescue and sale of Bear Stearns in the same year, he played a role in both the decision to bail out AIG as well as the decision not to save Lehman Brothers from bankruptcy.

  6. FrankProbst says:

    Obama’s statement here has a hint of something I’d like to see more of: he suggests that the appropriate response to AIG’s audacious demand for its bonuses is the same kind of regulation over big finance schemes like AIG that FDIC has over banks.

    Still, it was only a suggestion.

    I’m more in the mood for airstrikes.

  7. FrankProbst says:

    Greenwald has a great suggestion: Why can’t Congress just pass a law giving AIG immunity from violating their contracts?

    • ncaleb says:

      It would be unconstitutional. “Shall not impair the obligation of contracts.” Plus, they would strip a plaintiff of a remedy, essentially making it an ex post facto law… though I’m unsure whether there is a distinction between law and equity.

    • DeadLast says:

      There is a great solution currently in place: bankruptcy of AIG. From someone who worked for a big bankruptcy financial-advisory practice, if a firm is forced into bankruptcy (Ch. 11), it continues to operate. However, all payments made in the past year that were not customary and usual can be called back. AIG would have to take the stand essentially and argue that it is customary for bankrupt firms to pay thier executives large bonuses when the house is on fire. Then, we can go into all of the other bankruptcies where AIG argued the opposite. The oligarchy business class will be shamed forever. Because they have no moral currency, which is what is needed right now in the world. AIG is financially and morally bankrupt. then we can sort through the mess as Americans determining which contracts make “financial sense” and which don’t. The good debts get paid, the bad ones get exposed to god and everyone. Fuck ‘em.

      But the best part is all the bad money that was fraudulently paid to all these other banks, Deutsche, BofA/Merrill, SocieteGenerale, so on and so on — as long as it was paid in the past 12 months and was not “usual and customary” business practices. All that money comes back to AIG. and since we own 80% in preferred stock, we get to do with all those documents whatever we want. We could even start selling insurance fairly. The national health plan’s insurance company is already in place, it is publically owned, it has distribution throughout the USA, and it tells, Allstate, Kaiser, Cigna, WellPointe, Aetna, Geico and every other fuck-wad company what to do. So if we own it, lets turn the corporations into our slaves instead of it being the other way around.  This is what they are afraid of and why they are trying to steal all the money before we wake up.

      Yes, Virginia, there is a constitution and it is ready to rock and roll.

      In the meantime, if you hated AIG, check this out (hint – it is worse): Rental Car Company Bailouts http://www.butasforme.com/2009…..out-money/

  8. ncaleb says:

    Though I find myself echoing sentiments of populist rage, I do see a silver lining for the future. The more dumb ass things that these companies do, the better off we’ll be in the long-term. Obama is already communicating this event as a sign of the need for better regulatory measures. Plus, Geithner is such a reviled figure that he takes all the administration’s heat for anything that ever goes wrong. As soon as it starts translating into a drop in poll numbers for Obama, he can axe Geithner.

  9. BillE says:

    12 – I thought you couldn’t do that after the fact. Ohhh FISA. HMMMMM That means you can’t do that if it takes money out of the pockets of the rich and powerful. Then that just wouldn’t do.

  10. orionATL says:

    taken together, many of president obama’s actions, from major appointments to national security decisions, to decisions on the economy,

    sugest a weak president.

    where an executive order can be signed that gets done.

    but where forceful presentation of one’s agenda (assuming this president has one) would be important,

    the president makes no forceful presentation.

    how much of this is due to a conflict-avoiding personality?

    how much is due to the prez’s lack of executive experience?

    how much due to not really knowing well the m.o.’s of “the players” in d.c.?

    how much is due to the present weakness of the democratic party in the media and the congress?

    to me it looks like needed change is going to occur at a slow pace over a long time, if at all.

  11. earlofhuntingdon says:

    Big institutions like governments and Wall Street banks, Asian conglomerates and their Detroit counterparts, evaluate priorities in a funny way. They distinguish the real from the public by gauging whether the middle and lower dogs yelp the same message as the top dogs. If not, it means “for public consumption only”. If they do, it means “this is for real”.

    That’s how it works in the federal government. A full monty is when junior, middle and senior staff, lawyers, agency heads and cabinet members send the same message rather than the usual conflicting nod-n-wink that, “That was for the electorate; this is how we do things.”

    Let’s see whether Team Obama gets with the program or just nods and winks. AIG, too, will not renegotiate anything until it finds that out.

  12. earlofhuntingdon says:

    One way to send the message that Obama means it is for Congress to tax hedge fund “managers” at the same rate as the pizza delivery guy. Now, their gross income is taxed at capital gains rates, half or less what they would pay if their incomes were “wages”. Their risks are all on other people, which means they aren’t investing their own money. Their “reward” should be taxed like any UAW, bank clerk or nurse’s salary.

  13. earlofhuntingdon says:

    Another way to test it is if every “legal angle” means every political angle, too. Otherwise, it’s just moving in circles and passing the Kleenex.

  14. conniptionfit says:

    Any kind of bonuses are unacceptable. They should be bloody grateful that they aren’t in jail awaiting trial! And I for one am urging exactly that course. There must be applicable fraud statutes…

  15. rapier says:

    I don’t think Obama means this but what is needed is a criminal investigation. Against AIG and also C, BAC, JPM and the rest.

    A fraud runs through it. The financial industry that is.

    I don’t think he has the will, the balls or even the inclination to do after the industry. Not only will it possibly destroy his presidency and the Democratic party, now the party of bailouts for fatcats, if you can believe it, but having the criminals and fraudsters in the drivers seat in America is going to have long term ulra negative consequences for us.

    We are still relying upon the kindness of strangers pouring money into the US. To the extent we are ruled by con men or our leaders are beholden to them or under their thumb it will mean that sooner rather than later the US is going down.

    • PJEvans says:

      IRS invesitgation.
      To see if they reported this income correctly … for the last five years.
      I understand that bonuses are taxed differently from regular income. If the amount is written into the contract, and is paid regardless of performance of the company or the recipient, then is it really a bonus, or is it compensation?

  16. Blub says:

    ok.. so US regulatory action blocks contracted bonus payments in the UK. UK persons sue AIG in US court. AIG is effectively broke in the US and in a type of receivorship under quasi-public control. US claims regulatory immunity. I don’t see what the big deal is.. the Brits kinda did the same thing to the hapless Icelanders, so we do it to ‘em….

    • MarkH says:

      ok.. so US regulatory action blocks contracted bonus payments in the UK. UK persons sue AIG in US court. AIG is effectively broke in the US and in a type of receivorship under quasi-public control. US claims regulatory immunity. I don’t see what the big deal is.. the Brits kinda did the same thing to the hapless Icelanders, so we do it to ‘em….

      You don’t do anything which could have a disastrous result. It’s important to know the ramifications BEFORE doing something like that.

      OTOH, at some point government has to decide whether it’s really alright to have a company (or companies) so large they can essentially blackmail government because they’re too large to be allowed to fail.

  17. alibe50 says:

    I have a sneaky feeling this AIG bonus brouhaha is a contrived thing to get the “people” all enraged so 0bama or Geithner will understand the outrage and “do something” to stop the bonuses and show how effective 0bama or Geithner are. And how great they are in protecting us from the big bad AIG. Is this another dog and pony show for our benefit? It is too convienent for them to solve “this problem”. Am I too cynical? Or, can one ever be cynical enough? One can’t keep up!
    I just found out that the bonus money is old news but recently hyped. The bonus news was reported in Jan of this year. The question is why now? Why is 0bama and Geithner LYING about “not being able to prevent the bonuses”. It is such a huge lie. I know we are to be taken as fools, but REALLY!
    We must all just laugh at the idea that 0bama and the gnome Geithner can’t do a thing. Pathetic liars, the two Lilliputians are. Mock the bastards.

  18. puppethead says:

    Geithner is one of them, he’s not looking out for our interests. The founder of Citi Group wanted Geithner to run it, but the current guy became CEO instead.

    It’s about time Obama jerked Geithner’s leash to correct his behavior, between Geithner and Summers it’s been all about giving the banker barons what they want and not fixing the problem. And then Sunday we had White House chief economist Romer using Bushisms to describe things: “economic war” and “fundamentals are strong”. Gah.

    Obama has a shit economic team.

    • ShotoJamf says:

      “It’s about time Obama jerked Geithner’s leash to correct his behavior.”

      I don’t think jerking the chain will work. He needs to fire him. Today.

    • MarkH says:

      Obama has a shit economic team.

      Coming from a person with a puppet head I really can’t take it seriously.

  19. rkilowatt says:

    Tim Geithner is a walking definition of Conflicts-of-Interest.
    How can anyone threaten to put his lifelong friends in prison?

    Any other sanctions are just flyspecks, even million-dollar fines. Is it effective merely to shake a finger at criminals?

    Obama hardly demonstrates qualities of leadership. He does demonstrate misunderstanding [neglects the Constitution to belittle Burris’ quals for office; touts “bi-partisanship” as panacea for disparate problems] and out-of-touch with the not-wealthy [failure to acknowledge and apply justice to the financial rape of $-commoners].

    History gives poor odds to the strategy of going-on-hoping. Waiting for Godot is tempting fate. Am I observing the results of his “advisors” wisdom? Did his “advisors” select him?

    Dear Leader—Throw me some bigger crumbs…like freedom from financial tyrants, judicial tyrants, corporate-elephant tyrants, police-state tyrants…your huddled masses are yearning to breathe free. [Hat-tip to Emma Lazarus and Statue of Liberty]

    • Minnesotachuck says:

      Tim Geithner is a walking definition of Conflicts-of-Interest.
      How can anyone threaten to put his lifelong friends in prison?

      Not to mention Larry Summers. And Rahm Emmanuel. And . . . .

  20. Minnesotachuck says:

    Obama’s statement here has a hint of something I’d like to see more of: he suggests that the appropriate response to AIG’s audacious demand for its bonuses is the same kind of regulation over big finance schemes like AIG that FDIC has over banks.

    Still, it was only a suggestion.

    I would like to see a lot more assertiveness from Obama.

  21. john2 says:

    I get the feeling that Obama needs to practice tougher negotiating skills with his own Treasury appointments. Because their craptacular handling of the economic crisis is starting to look like it’s going to do to his presidency what their stewardship has done to the economy.

  22. kevinp says:

    Hahahaha,

    Those evil Frenchmen will bring down the whole global financial system if you don’t pay them their bonuses!

    But Timmy, we can fight back with freedom fries and liberty toast!

    What a bunch of hooey

  23. freepatriot says:

    o/t

    I pulled some strings, used a few of norm coleman’s doner’s credit card numbers to pay a few bribes, and I got Arizona and Michigan in the big dance

    now I’m gettin threats from mid-major conference schools

    what more do I gotta do ???

  24. DeadLast says:

    The one thing Obama could do that would stop the bonuses in their tracks would be to fire Timothy Mouse Geihtner.

    Then, if Barak had some real balls, he would appoint someone like Ralph Nader or Patrick Fizgerald to be Secretary of Treasury. The people in the world that stillyearns for freedom would be amazed. But I forget, we are still stuck in this indentured nightmare.

    • Praedor says:

      Geithner is Obama’s bud through and through. Obama IS a neoliberal market worshipper. He would just as soon cut Geithner (or Summers or Rubin) loose as chop off one of his own balls.

      He’s corrupt. As corrupt as Bush, as corrupt as Cheney. Fully owned and operated by BIS.

      • MarkH says:

        Obama IS a neoliberal market worshipper. He would just as soon cut Geithner (or Summers or Rubin) loose as chop off one of his own balls.

        He’s corrupt. As corrupt as Bush, as corrupt as Cheney. Fully owned and operated by BIS.

        Evidence? So far all you’ve got is that you don’t like the way things are going.

        God the freepers and trolls are out bashing Obama something horrible. It’s one of those anus horribiluses things.

    • PJEvans says:

      No, you want someone with serious economist-type skills. I was pushing for Krugman or Roubini, myself.

  25. Mary says:

    Good LORD!

    Surely Obama’s not suggesting that Geithner look back?

    Doesn’t the world end or something similar when that happens? Isn’t Geithner supposed to be sending around Panetta-esque, reassuring emails, saying that people who participated in the ‘enhanced profit-taking’ proceduers don’t have to worry about being investigated or brought to account?

    • oregondave says:

      Surely Obama’s not suggesting that Geithner look back?

      Doesn’t the world end or something similar when that happens?

      I believe becoming a pillar of salt becomes your Lot in wife life.

  26. Praedor says:

    Obama has to do more than blather nice words we all want to hear. He has to DO. Otherwise, we really are looking at a one-termer here. He’s close as it is anyways, what with his continuation, with enthusiasm, the very worst of the Bush Junta: illegal detentions (he still claims the “President can detain anyone for any reason…terra, blah blah” and he is fighting tooth-and-nail to use “State Secrets” to hide all manner of illegality on Bush’s and his part from any legal scrutiny whatsoever).

    AIG must NOT pay bonuses. Period. End of story. NO corporation/bank that has received tax payer bailout money can be allowed to pay bonuses. Period. End of story. NADA!

    Also, I want Bank of America immediately seized and liquidated. That bastard CEO of BoA is claiming that they don’t need nor want any more bailout money…when all along they have been getting bailout money with the full support of Obama, et al, via subterfuge through AIG’s bailout! Of COURSE they don’t need any more explicit bailout money, they are getting all they need in secrecy via AIG! Money laundering plain and simple – and via a means without strings attached.

    I want blood.

    • Minnesotachuck says:

      Obama has to do more than blather nice words we all want to hear. He has to DO.

      I just dropped a message in a bottle down the well called http://www.change.gov telling him in polite terms that he’s got only a few months to get off his ass and do that. And he’s already burned through almost two of them. And by the way get some econ advisers like Krugman, Roubini and Kevin Phillips, people who foresaw this clusterfuck coming, to replace the clowns he hired from the same tribe of foxes that upended our chicken coop economy in the first place.

    • MarkH says:

      AIG must NOT pay bonuses. Period. End of story. NO corporation/bank that has received tax payer bailout money can be allowed to pay bonuses. Period. End of story. NADA!

      Also, I want Bank of America immediately seized and liquidated.

      I’ll bet you want a pony too.

  27. Blub says:

    also, even if those contracts do turn out to be airtight, the Federal government could, as majority shareholder, depose the board and cause a directive to be issued as follows: all employees who do not voluntarily relinquish their excessive bonus payments and submit to whatever other measures we deem appropriate will be dismissed without recommendation or reference, or if that’s not possible, demoted to the lowest pay grade. At will employment can be a biatch.

    • freepatriot says:

      just tell AIG to GO FUCK THEMSELVES

      take the bailout money back, let AIG die

      and then let AIG try to find a sympathetic jury amongst America’s taxpayers

      I’d love to see the opening statement for that trial

      these assholes crashed the world economy, drove you into poverty, and caused world wide starvation and panic, and they are asking you the jury to award them millions of dollars for their efforts

      the Defense rests …

      has anybody splained it to these AIG executives like that yet ???

      we could also mention the possibility of pitchforks and torches, and explain exactly what happens during a “Tar and Feathering” party

      and while we’re at it, somebody should explain the word “Defenestration” to congress, especially some repuglitards

      • MarkH says:

        just tell AIG to GO FUCK THEMSELVES

        take the bailout money back, let AIG die

        and then let AIG try to find a sympathetic jury amongst America’s taxpayers

        I’d love to see the opening statement for that trial

        these assholes crashed the world economy, drove you into poverty, and caused world wide starvation and panic, and they are asking you the jury to award them millions of dollars for their efforts

        the Defense rests …

        You’d get kicked out of court by any decent judge and then disbarred.

        The more people kick AIG the more I’m thinking Geithner is right to support them and their cruddy CDSs. I don’t know why, but when the ‘other side’ wants them dead the more I start thinking they’re the good guys (hard as that may be to see at the moment).

  28. Praedor says:

    I have to say I am entering the Limbowel camp of hoping Obama fails (but for different reasons than Limbowel). I want Obama to fail because it otherwise means business as usual, with all the same old market worshipping, Ayn Randians still in full control with extra helpings of gutted Social Security, defunded Medicare, TAXED HEALTH INSURANCE FROM YOUR EMPLOYER(!!!), business tax cuts, etc.

    What the FUCK is different? I want him to fail if this is what he stands for. I want the entire system as it is currently constituted to fail and that means anyone that does anything to keep propping it up needs to fail too.

  29. freepatriot says:

    it was a bad day to fly

    cuz that gravity thingy can get up to 50 or 60 miles per hour, even more on a bad day

    /notquitefamiliarwiththeprocess

  30. PPDCUS says:

    The 60 Minutes Bernanke snow job on top of AIG’s bonus revelations confirmed my thoughts when reading Simon Johnson’s post last week on Dimon’s speech.
    http://baselinescenario.com/20…..#more-2869

    This is the administration’s economic inflection point. We know that AIG’s 2008 memo to Treasury was extortion, pure and simple. So how does one respond to a crime? Call in the Feds and bust the criminals? Or pay the extortion money with no questions asked and kiss the Don’s hand? Of course, it’s always easier to pay the extortion when it’s with other people’s money.

    Urging Geithner to interdict AIG’s bonuses is a move designed for one purpose — to remedy an embarrassing PR situation rather than to hold these sociopaths accountable for their actions.

    The D.C. doctors and Wall Street parasites have transported the real economy patient back in time when bleeding was the standard treatment. For all their assertions to the contrary, their actions show that neither doctors nor parasites see the host patient as essential for their own survival. Through that looking glass, we see the Fed announcing that it intends to purchase treasury securities to inject more liquidity into the debt markets.

    Like the lookout on the Titanic exclaimed too late, “Asteroid, dead ahead!”

  31. Hmmm says:

    I’m a little fuzzy here on some of the basics, and that makes it hard to evaluate some of the inventive ideas folks have been posting over the past few days.

    – How many bonus recipients (individuals) are involved here?
    – Are they US taxpayers with resect to the bonus income?
    – What AIG tentacle would be paying them? US or UK entity?
    – Is AIG saying that the bonus recipients are currently identified by name in the CDSes and other obligations that AIG insures, and the replacement of some/all of the bonus recipients would trigger defaults on those instruments (thus ballooning AIG liabilities & immediate payables)?
    – If yes, then why can’t AIG management first change the terms of those instruments so as to no longer refer to the bonus recipients by name (thus removing the default-trigger), and then cancel the bonuses? Surely the counterparties have no stake in which particular person is handling the account inside AIG… or if they do, then why in the would would that be?

  32. prostratedragon says:

    Is AIG saying that the bonus recipients are currently identified by name in the CDSes and other obligations that AIG insures, and the replacement of some/all of the bonus recipients would trigger defaults on those instruments (thus ballooning AIG liabilities & immediate payables)?

    I too wonder if any of our legal eagles (beagles?) have an idea whether cancelling the bonuses is this huge CDS triggering event. That argument seems to be the last redoubt of those who insist that it has to be this way.

    • Hmmm says:

      Oh good, it’s not just me then. Guess I’m asking — even if that’s true — why the names can’t be taken out now, to defuse the trigger?

      • prostratedragon says:

        I think there’s a partial answer here from Black, Ferguson, Johnson, and Todd:

        Firstly, the US trustees in charge of the firm must immediately instruct the corporate treasurer to make no payments of any bonuses. They also need to order him to issue stop payment orders on any checks that fly out the door at the last minute, as with Merrill Lynch. Then the trustees need to split off the derivatives unit from the rest of the firm and separately incorporate it. This step leaves AIG’s other businesses free to operate as usual. If the recipients of the bonuses refuse to waive them, then the derivatives unit should at once be thrown into bankruptcy, terminating all obligations to pay them.

        Yep, that’s a trigger all right. But:

        We, like most independent analysts, are mystified by the determination of the Federal Reserve and Treasury to keep paying these off at 100% of their face value. But that’s an issue for tomorrow. Today the task is to stop a grotesque abuse before it is too late.

        I love this answer! They’re not saying we wouldn’t get our hair mussed, but the CDS avalanche blackmail threat is apparently much less serious to them than the various types of damage wreaked by letting AIG continue as it is, including the moral damage of having a bunch of thugs extorting the Treasury.

  33. bobschacht says:

    Glad to see that this thread is still active. One point I haven’t seen discussed much: Are CDSs and other derivatives still being bought and sold without end? If so, I think the bailout money is going down the drain, with no end in sight.

    I think the Gov’t should call an immediate halt to all CDS & derivative transactions, and then, with those transactions locked down, seize AIG and break it up. Then call in the biggest holders of CDS and bargain with them, one by one, a settlement that is free of CDS/derivative entanglement. And then open up CDS & derivative transactions again, but only in a highly regulated environment. ISTM that’s the only way to get a grip on this Hydra.

    Bob in HI

    • Hmmm says:

      Right – Absent the default-triggering hypothesis, why would AIG care about keeping all their freakish derivatives traders around? (NB, ‘freakish’ is meant to modify ‘derivatives’ and not ‘traders’…) Unless of course AIG plans to keep right on trading freakish derivatives. Not Good.

    • prostratedragon says:

      Are CDSs and other derivatives still being bought and sold without end?

      I seem to recall that they are. Some time this evening I’ll try to dig up a report on them from some US agency that shows recent increases in amounts outstanding. Not only do sellers of the things get premium payments, they get some fees up front.

  34. Hmmm says:

    BTW, irrespective of regulation, did ordinary fiduciary duty never bind upon any of these derivatives traders? Because I’m thinking never mind the bonuses, me laddies and lassies — why can’t the USG demand they all be fired for cause, and then individually sued into oblivion for breach of fiduciary duty?

    • MarkH says:

      did ordinary fiduciary duty never bind upon any of these derivatives traders? … why can’t the USG demand they all be fired for cause, and then individually sued into oblivion for breach of fiduciary duty?

      What “cause” exactly?
      What “breach of fiduciary duty” exactly?

  35. jaxllc says:

    AIG = Allowing Irreversible Greed.
    AIG = All in Greed.
    AIG = Arn’t I Greedy.
    AIG = A$#holes, in general.

    This is sick. Why in the world are we helping these companies that keep sending millions to people who do not know how to run a company? They cry yet get paid millions on the “average joes” taxes. Furthermore, I fear this is just the tip of the iceberg. Look what Enterprise rent-a-car did to get bailout funds:

    http://www.butasforme.com/2009…..out-money/

    Not to make excuses for these people, but the bailouts are making crooks out of everyone that touches the money.

  36. jdmckay says:

    Yesterday’s NYT wrote of BO admin’s “concern” over “public backlash” from these bonuses. A couple quips…

    (BO Admin officials) worried that anger at financial institutions could also end up being directed at Congress and the White House and could complicate President Obama’s agenda.

    Lawrence H. Summers (…0) described it as “outrageous” on “This Week” on ABC — marks the latest effort by the White House to distance itself from abuses that could feed potentially disruptive public anger.

    “We’ve got enormous problems that need to be addressed,” David Axelrod, Mr. Obama’s senior adviser, said in an interview.

    Whole article is like that, and entire tenor… at least to me, seems more concerned w/”public perception” and attitude towards BO than any commitment to principle of any kind.

    So this statement (eg: BO wants bonuses blocked) sounds whole lot like an extension of political maneuverings to manage perception to me. If he/they had any commitment to giving “haircuts” to those who most deserved it, it would have been expressed in recovery/TARP (or lack thereof) programs much, much different that what BO/Geithner have implemented.

    AFAIC, entire BO communications apparatus did just that in period after election but before inauguration… eg. they flooded news/political programs w/”representatives” long on the tooth and very, very short on specifics. “The president believes this”, “the president believes that”… all image creating stuff w/very little since then of the right kind of substance.

    The Merril bonuses paid after BofA merger… just as bad as this one. BofA CEO’s congressional testimony that those things were paid before BofA took over turned out to be smoke and lies. Why wasn’t BO moved to action on that one?

    I’m very skeptical of this BO edict (block bonuses), it’s consistent w/his early PR management, and I expect little to come of it.

    • jdmckay says:

      Lawrence H. Summers (…0) described it as “outrageous” on “This Week” on ABC — marks the latest effort by the White House to distance itself from abuses that could feed potentially disruptive public anger.

      I should have mentioned (I didn’t see Summers interview, I’m relying on this article) that, after above Summers quote… “outrage” etc., he went on to say that…

      Even as Mr. Summers was denouncing A.I.G. for the bonuses, he suggested that there was little if anything the government could do to stop them, seconding the conclusion of Treasury Secretary Timothy F. Geithner.

      One can draw their own conculusion on BO’s sincerity in this matter.

  37. jdmckay says:

    Oh, and just for shits and giggle…

    Wall St. Pursues Pay Loopholes

    (…)
    In response to expected bonus restrictions, officials at Citigroup Inc., Morgan Stanley and other financial institutions that got government aid are discussing increasing base salaries for some executives and other top-producing employees, people familiar with the situation said…..

    The discussions are at an early stage, partly because the government hasn’t yet issued specific rules on the bonus payments that will be allowed at companies that received TARP aid. The talks also are proceeding cautiously because of the political volatility of pay, bonuses and perks on Wall Street, including outrage over American International Group Inc.’s promise to pay $450 million in bonuses to employees in the insurer’s financial-products unit.

    Sounds a lot like a workaround to ensure financial pipeline if “public outrage” dries up bonuses.

    Strikes me that if these fuckers had put 1/2 the effort in due diligence assuring soundness of their financial instruments as they put into ensuring they get paid no matter what kind of shit they sell… then we wouldn’t be discussing these bonuses nor a “financial meltdown” at all.

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