Tag: AIG

Has Treasury Secretary, Timothy Geithner, done a good job so far?  Kinda, I wouldn’t give him a gold star or anything.  In fact, I’d say he’s done a mediocre job.  Did he know about the whole bonus thing at AIG?  And what about how the situation that went down with Lehman Brothers?  Bottom line, is the GOP push to have Geithner removed legit?  I say no.

If you’re anything like me and I suspect like most of us, you know about the scandal surrounding AIG’s bonus payouts to the same company employees in their London operation that were at the center of the Credit Default Swap scheming that triggered the current global financial meltdown, but also like me you’re probably no economist nor expert in financial matters and are having a difficult time wrapping your head around what, exactly is going on, how we got here, and why our economy seems to be collapsing.

Sharona Coutts is a law graduate and an honors graduate from Columbia Journalism School’s investigative seminar and now writes for ProPublica, an independent, non-profit newsroom in Manhattan that produces investigative journalism and describes themslves as “producing journalism that shines a light on exploitation of the weak by the strong and on the failures of those with power to vindicate the trust placed in them”.

Sharona has put together a very good Q&A piece that helps in understanding what exactly is going on with AIG. She has also produced a very good related piece: Timeline: AIG and Their Bonuses that she quotes in the Q&A article reproduced here.

AIG’s Bonus Blow-Up: The Essential Q&A

by Sharona Coutts, ProPublica – March 18, 2009 5:12 pm EDT

Monday marked six months to the day since AIG’s first bailout, but it wasn’t until news of executive bonuses over the weekend that public fury truly focused on the hemorrhaging insurer.

President Obama told Americans he was “choked up with anger” over bonus payments to executives at AIG’s Financial Products office whose bad bets pushed the company to the brink of collapse. The administration is worried about public anger turning against it, not just the company.

In some respects, the sudden anger is mystifying. After all, there’s nothing new about the bonuses except that a portion of them – $165 million – were actually paid on Friday. Contracts instigating the bonuses were made a year ago, and they’ve regularly been in the news in recent months.

And the amount involved is dwarfed by the tens of billions that flowed to banks and hedge funds.

AIG’s plan to pay bonuses have been public knowledge for more than a year. Why is this blowing up now?

It’s still not too late to take our economy back, but we can’t depend on Obama to do it, we’re going to have to take it back ourselves.  Starting on March 19th.

The Village Voice:

Credit derivatives are breaking and will continue to break the world’s financial system and cause an unending crisis of liquidity and gummed-up credit.  Warren Buffett branded derivatives “financial weapons of mass destruction.”  Felix Rohatyn, the investment banker who organized the bailout of New York a generation ago, called them “financial hydrogen bombs.”

Corporate elites have been waging class warfare against us for decades.  They’ve riddled us with Bankruptcy Bill bullets, napalmed us with NAFTA, massacred our labor unions, turned our healthcare system into the Bataan Death March, and now they’re dropping financial hydrogen bombs on us.  

According to The Village Voice, one of their deadliest and most lethal weapons has been the AIG Financial Products office in London, where a large proportion of those radioactive credit derivatives were written.

AIG had placed this unit outside American borders, which meant that it would not have to abide by American insurance reserve requirements. The president of AIGFP, a tyrannical super-salesman named Joseph Cassano, was an executive at Drexel Burnham Lambert, the now-defunct brokerage that became the pivot of the junk-bond scandal that led to the jailing of Michael Milken, David Levine, and Ivan Boesky.

During the peak years of derivatives trading, the 400 or so employees of the London unit reportedly averaged earnings in excess of a million dollars a year. They sold “protection”-this Runyonesque term was favored-worth more than three times the value of parent company AIG.

Those talented people are demanding the bonuses they’ve earned for that bang up job they’ve done hydrogen bombing everything in sight into radioactive rubble.  As Emptywheel warns, if we don’t give them their bonuses, they’ve threatened to trigger a default event that will cost the US government hundreds of billions of dollars.  

The topic below was originally posted at the Intrepid Liberal Journal.

Arguably America’s greatest trial lawyer, Clarence Darrow, famously once said,

“First and last, it’s a question of money. Those men who own the earth make the laws to protect what they have. They fix up a sort of fence or pen around what they have, and they fix the law so the fellow on the outside cannot get in. The laws are really organized for the protection of the men who rule the world. They were never organized or enforced to do justice. We have no system for doing justice, not the slightest in the world.”

Reading this morning’s headlines about A.I.G. utilizing nearly $165 million of their $170 billion tax payer financed bailout for bonuses, reminded me of Darrow’s insight. The excuse being offered after all is that a “contract is a contract” and A.I.G. must fulfill their obligations.

Isn’t it curious how contracts are deemed sacrosanct for Wall Street beneficiaries but not blue-collar members of unions in the auto industry? Unions are expected to get “realistic” and ” renegotiate” their contracts but moneyed elites are allowed to carry on as before. Anyone who has the temerity to point out the contradiction is “unreasonable,” “angry,” “extreme,” or heaven forbid, one of those “crazy left wing bloggers.”

In “The Big Dither” Paul Krugman warns:

There’s a growing sense of frustration, even panic, over Mr. Obama’s failure to match his words with deeds. The reality is that when it comes to dealing with the banks, the Obama administration is dithering. Policy is stuck in a holding pattern.

Here’s how the pattern works: first, administration officials, usually speaking off the record, float a plan for rescuing the banks in the press. This trial balloon is quickly shot down by informed commentators.  Then, a few weeks later, the administration floats a new plan. This plan is, however, just a thinly disguised version of the previous plan, a fact quickly realized by all concerned. And the cycle starts again.

Welcome to Monty Python’s Flying Bank Bailout Circus.  Everything is under control.  Nudge, nudge.  Wink, wink . . .    

Say no more, say no more.