Rolling US Economy Into The Shitbin Thread

From Dandy Don's link, the plan by Rep. Gary Peters (D-Mich.) seems perfectly workable.

Anyone who is familiar with how targeted tax loopholes are created for individuals and specific corporations will recognize the tactic. You pass a tax law that doesn't name the company or person, but describes the beneficiary in such a narrow way that only one company qualifies, only in this case the law is punitive rather than beneficial and taxes the AIG bonuses at 100%.

Congress does it all the time. Perfectly legal. They should do it.

But, again, it only points out how fucked the AIG bailout is that such a bill would be necessary.

basically i'm just worried that the quality of customer service and care i currently experience from my bank may somehow change

Are there any prominent economists questioning the bailout of AIG?

Anyone who is familiar with how targeted tax loopholes are created for individuals and specific corporations will recognize the tactic. You pass a tax law that doesn't name the company or person, but describes the beneficiary in such a narrow way that only one company qualifies, only in this case the law is punitive rather than beneficial and taxes the AIG bonuses at 100%.

Congress does it all the time. Perfectly legal. They should do it.

It is not "perfectly legal" to enact a tax that is de facto designed to be punitive against a specific party.

lol Rep. Gary Peters is an alumnus of my fraternity...

Cuomo has some more fun:

Bailed-out insurance giant American International Group gave retention bonuses of $1 million or more to 73 employees in the latest round of payments, New York Atty. Gen. Andrew Cuomo said today.

And 11 of the people who received million-dollar bonuses no longer work for the company -- even though the payments were specifically aimed at retaining them, Cuomo said.

The new bombshells about AIG’s bonuses are in a letter Cuomo sent to House Financial Services Committee Chairman Barney Frank (D-Mass.).

"These payments were all made to individuals in the subsidiary whose performance led to crushing losses and the near-failure of AIG," Cuomo said in the letter. "Thus, last week, AIG made more than 73 millionaires in the unit which lost so much money that it brought the firm to its knees, forcing a taxpayer bailout.

"Something is deeply wrong with this outcome."

AIG, now 80%-owned by the government after a series of bailouts that began last September, nonetheless paid out more than $160 million in retention bonuses beginning late last week -- despite congressional and White House protests. The company said its hands were tied because the payments had been guaranteed in employment contracts predating the bailout.

Cuomo, who has subpoenaed AIG to provide names of all bonus recipients, said he had obtained copies of the contracts.

"The contracts shockingly contain a provision that required most individuals’ bonuses to be 100% of their 2007 bonuses," Cuomo told Frank. "Thus, in the spring of last year, AIG chose to lock in bonuses for 2008 at 2007 levels despite obvious signs that 2008 performance would be disastrous in comparison to the year before. My office has thus begun to closely examine the circumstances under which the plan was created."

http://www.thestencil.com/archives/images/nerd.jpg

(l-r): Gary Peters, Drugs A. Money

AIG chose to lock in bonuses for 2008 at 2007 levels despite obvious signs that 2008 performance would be disastrous

See that's what I call thinking ahead in business! And they say they don't deserve bonuses...

also should read

AIG employees who would be receiving bonuses chose to lock in bonuses for 2008 at 2007 levels despite obvious signs that 2008 performance would be disastrous

Hurting2, you may wish it were not legal, but it is legal. This same formula has been used time and time again in federal tax law.

it seems to me that the REAL scandal here is that no-one @ Treasury or the Fed caught onto these bonuses until they'd already been paid out. my assumption is that no-one in either department even thought to ask at all: which would be perfectly in keeping with Bushco's explicit philosophy, but a little eye-raising after Obama took over (esp. after all of the noise concerning the bonuses paid by other TARP recipients earlier this year). if this is indeed true, then perhaps something could have been done HAD either Treasury or the Fed known about these bonuses from the get-go.

Hurting2, you may wish it were not legal, but it is legal. This same formula has been used time and time again in federal tax law.

― Aimless, Tuesday, March 17, 2009 4:07 PM (5 hours ago) Bookmark

Um, examples? Fudging a loophole to benefit a specific party (while dubious) is NOT the same thing as fudging tax law to create a penalty, and a 100% tax would never hold.

Since this idea is taking firm hold in Congress, we may have a chance to test our differing assertions irl. The exact tax rate percentage will, of course, be subject to the discretion of the lawmakers.

Since a rate as high as 95% has been levied in the past, I can't see that such a rate would be liable to argument as unconstitutional. A rate of 100%, while amounting to confiscation, might well be upheld, provided it was narrowly targeted to only a part of a taxpayer's income. I don't imagine a final bill would include a rate that high.

“We’re the owner of that company,” House Financial Services Committee Chairman Barney Frank told reporters yesterday about the government’s stake in AIG. “I think the time has come to exercise our ownership rights.”

The Tipping Point?

I have been wondering about this. Certainly the whole question of pre-set bonuses is enough.

Well, some things never change:

http://www.latimes.com/media/alternatethumbnails/photo/2009-03/45645334-18105943.jpg

Edward M. Liddy told a House committee that he had asked employees who received bonuses of more than $100,000 to return half the money.

As Eddie Murphy used to bellow, "HALF?"

Because taking $500,000 you in no way earned or deserved is so much less objectionable than getting $1,000,000 you in no way earned or deserved.

Democrats’ Tacit Approval of AIG Bonuses May Undercut Outrage

outrage mongering is flush with awesomeness

yeah but there's some flim-flammery going on with the framing of that story. actual sequence of events:

a.) aig writes contracts including retention bonuses
b.) aig collapses, bush administration takes part ownership, installs liddy
c.) in discussions with treasury department in november, aig limits some pay and bonuses, but says some others will be contractually required
d.) in december, a democratic legislator challenges that assertion, to little avail
e.) in february, in putting together the stimulus bill, democrats write in new limits on executive pay for companies receiving bailout money -- limits not imposed during the first round of TARP by the bush administration
f.) some democratic lawmakers even suggest going so far as to make the limits retroactive to bonuses promised in existing contracts; after legal concerns from the white house, the existing contracts are instead exempted from the new limits

the stimulus bill did not create any new protections for existing bonuses. all it did was leave in place what was already there, following the policy established by the bush treasury department in setting up TARP. you can argue they could have and should have gone further, which is fine (and which some democratic lawmakers wanted to -- if any republicans advocated that, i don't know who); but you can't say the stimulus bill in any way caused the bonus payments. at most, it missed an opportunity to stop them, by leaving the bush bailout approach in place.

you can't say the stimulus bill in any way caused the bonus payments. at most, it missed an opportunity to stop them, by leaving the bush bailout approach in place.

I think this is the criticism, tho (admittedly, I haven't heard all of it). Most of what we're seeing, as I said upthread, is just a bizzare dance of feigned umbrage and outrage.

Actually, it could be a pretty shrewd move by the Obama Admin., on two fronts: (a) if they really believe AIG is too big to fail, then they couldn't stop the bonuses, but they then ride a populist outrage to some after-the-fact solution (e.g., public pressure to return the bonuses; these tax plans) and (b) the public outcry against the bonuses might open support for more decisive action by the Administration (e.g., "We tried solving the problem your way -- by leaving these companies alone as much as possible -- and look where it got us; Now, we'll attack the root problems," followed by some brief nationalization or other plan). To do this, tho, Obama has to avoid absorbing too much political damage from this bonus fiasco. Not sure if any of this makes sense. It might not. I'm overtired again.

at most, it missed an opportunity to stop them, by leaving the bush bailout approach in place.

This is more or less the headline of the article, a framing device if there ever was one.

well the dishonest thing is making it like this was some special protection for these bonuses. what was new about the law was the limits it did place, not the limits it didn't, or the exemptions it offered to the new limits. you can make up a hypothetically infinite list of all the things it didn't limit. the way this is being spun is, the democrats wrote a law just to protect these bonuses. when actually the democrats wrote a law to put new limits executive pay. you can fault them for not going far enough, but that's a lot different than pretending they wrote some special giveaway package into the stimulus.

The way it is being spun is that Democrats gave tacit approval to the AIG bonus system. That system was already available to anyone voting or wanting to change the stimulus plan. As the article notes, Schumer says he "supported a provision on the Senate floor that would have prevented these types of bonuses, but he was not on the conference committee that negotiated the final language.” Grassley's charge is that there was no transparency and that in the end, it's Democrats who control everything.

I have no idea what Dodd's spokesman is referring to in the article I linked--maybe that's the spin you are referring to. Are there other articles out there that reflect that? I have no idea, I only read papers in the early morning.

there's a right-wing spin going on that more less makes it sound -- without quite coming out and saying it -- like the bonuses were specially inserted into the stimulus bill.

there was something of a battle between dodd and treasury over this & it picked up again when an anonymous administration official told the new york times a day or two ago that it was dodd's amendment that required that the bonuses be paid. here's from february -

Obama, Dodd clash on executive pay

it seems dodd added the provision to the bill which passed & then the administration objected, so dodd had it changed in conference? i think? dodd was on cnn today explaining that he did this & pointing out that he wouldn't have changed his own amendment if it were up to him, obviously. all complicated by the fact that the day before he'd told cnn he had nothing to do with it. kind of a mess.

Thanks, Dodd.

http://gawker.com/5174458/chris-dodd-ok-i-allowed-the-aig-bonuses

Oh, and looky here: retention bonuses for Fannie Mae people.

http://finance.yahoo.com/news/Fannie-plans-bonuses-of-up-to-apf-14679491.html

yes, the linked article was written by elliot lol spitzer -- read it anyway

Thanks, Dodd.

http://gawker.com/5174458/chris-dodd-ok-i-allowed-the-aig-bonuses

― The Contemptible (Dandy Don Weiner), Thursday, March 19, 2009 3:26 AM (1 hour ago) Bookmark

it's pretty clear dodd's not the guy behind that, it's geithner. and that post (ok, it's gawker, but still) has exactly the spin i was talking about: that somehow these bonuses are because of the stimulus bill. the bonuses were already going to be paid. what the amendment did was leave existing contracts in place. not this contract specifically, contracts in general. this totally bogus idea is being spun that somehow the bonuses were put into the stimulus bill by the white house. i guarantee you that's how people are hearing it, and of course it's how republicans would love them to hear it.

i would think that going in less than a month from "obama's a socialist" to "obama's a wall street crony" should give pundit blowhards some kind of whiplash, but i think maybe they can turn their heads all the way around.

as for spitzer, i was thinking today that that's exactly the kind of wall street head-cracker obama needs. too bad he's out of commission.

i would think that going in less than a month from "obama's a socialist" to "obama's a wall street crony" should give pundit blowhards some kind of whiplash, but i think maybe they can turn their heads all the way around.

The GOP will happily use whatever meme is available, but I'm not sure it will be "Obama's a Wall Street crony." They've already been pushing a different meme: "Obama's incompetent" (there are other articles advancing this same argument; I just happened to find Dick Morris' 03.17.09 column first).

http://online.wsj.com/article/SB123741741674677723.html#mod=todays_us_page_one

WASHINGTON -- A provision in President Barack Obama's stimulus law might have forestalled payment of $165 million in bonuses to employees of American International Group Inc., but was altered before final passage at the request of the Obama administration, Senate Banking Committee Chairman Christopher Dodd said Wednesday night.

Mr. Dodd, a Connecticut Democrat, introduced a provision into the stimulus that capped executive pay, among other things. But the final language specifically excluded bonuses included in contracts signed before the bill's passage -- a broad category that included the AIG bonuses. At the time, few objected to that move, which was designed to ensure the measure was constitutional.

"I did not want to make any changes to my original Senate-passed amendment but I did so at the request of Administration officials, who gave us no indication that this was in any way related to AIG," Mr. Dodd said in a statement. "Let me be clear -- I was completely unaware of these AIG bonuses until I learned of them last week."

After the recent furor relating to the AIG payments, lawmakers returned to make a forensic examination of the provision seeking to assign blame for what some called a secret agreement to spare the tottering insurance giant, which has received more than $170 billion in federal aid. The provision and its genesis consumed Capital Hill Wednesday.

"The president goes out and says this is not acceptable and then some backroom deal gets cut to let these things get paid out anyway," said Sen. Ron Wyden, (D., Ore.), author of an earlier, alternative pay amendment, told the Associated Press.

The Obama administration had not tried to hide its concern about the moves to clamp down on executive compensation. Both Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers lobbied Mr. Dodd to make changes.

Administration officials said the Treasury didn't suggest any language or say how the amendment should be changed. They said they noted legal issues that could likely lead to challenges, but was the end of their involvement. The official said Mr. Dodd and Congress made the final changes on their own.

At issue were competing provisions in the stimulus bill that capped executive compensation for recipients of bailout funds. One, drafted by Sens. Wyden and Olympia J. Snowe (R, Maine), would have capped bonuses at $100,000, retroactive to 2008. Companies awarding bonuses above that level would face the choice of returning those funds to the Treasury or having them taxed at 35%.s.

Well, then. Geithner's behind it except when Administration officials say that Treasure didn't suggest any language. And Wyden joins the...Republican spin machine?

As for Republicans pushing a meme that bonuses for AIG were put into the stimulus bill by the White House...you got a link for that Tipsy?

I've always been consistent with "Obama's a Wall Street crony."

Well, he certainly got a lot of money from Wall Street during his campaign. And he gets a lot of advice from Wall Street insiders. But it seems to me that there's a certain amount of institutional intelligence that makes those relationships vital.

I've always been consistent with "Obama's a Wall Street crony."

Is this your feeling about all nationally-viable Democrats and Republicans (those people with a realistic chance of being elected President)? If not, who do you think isn't a Wall Street crony?

I'm not trying to be snarky. But I suspect you may be holding Obama up to a standard that can't be met by any Presidential candidate that has a real chance to win (which is fine, too).

are we actually in the midst of a scandal now??? Awezome!

Short answer, Daniel: mostly. Is Feingold 'nationally viable'? (I think so.)

srsly, after it became clear TARP I was a scam, they couldn't have been vigilant/smart enough about II to prevent this (or at least sound alarms) before the fact if they wanted to? What's with the Kay Corleone naivete, ppl?

i think geithners gotta go, i cant think of a single thing hes done right since he started

but today's NYT says he's trying really hard!

ilx isnt really the place for it but concern over aig bonuses is the absolute stupidest thing ever all time

lol

As for Republicans pushing a meme that bonuses for AIG were put into the stimulus bill by the White House...you got a link for that Tipsy?

ask and ye shall etc.:

Not a single House Republican voted for this bill and only three Republicans in the Senate did. Obama owns it.

Either Obama did not know the provision was in there, which validates the Republican point that no one read this bill. Or he did, and signed it anyway. Either way, it’s a disaster of his making.

We should lay responsibility for the AIG bonuses where it belongs — directly at the president’s feet.

yes because you see it's the president's fault for not being tough enough in the no limits on executive compensation that most republicans opposed in the first place. it's a total through-the-looking-glass argument. and it makes glenn greenwald's head explode:

The controversy of the AIG bonsues -- which, strictly as a quantitative matter, is rather trival in the scheme of things -- illustrates how warped our political discourse is. Here is the hierarchy of positions regarding executive compensation limits back in February:
Chris Dodd -- advocated full-scale, no-exceptions limits on executive compensation for bailed-out companies
Obama administration -- supported limits but advocated exceptions for already-existing employment contracts
GOP leaders -- opposed all executive compensation limits as Socialist tyranny
Yet everything is exactly backwards in this controversy. The Obama administration has been trying to blame Dodd for the carve-out that allowed the AIG bonus payments, a carve-out that came into being because Geithner/Summers demanded it and becuase they opposed the limits Dodd wanted as too onerous. Yet now, the GOP -- which opposed limits of any kind -- wants to blame the Obama administration and Dodd because the limits weren't stringent enough to stop the AIG bonus payments. And the media is playing along perfectly, having clearly decided that the person who led the way in fighting for absolute limits -- Dodd -- is the real villain responsible for the AIG bonsues.

the new limits on executive compensation, i mean. the NO limits is what republicans were advocating. anyway, sorry, that post is a mess. i'll boil it down.

the ridiculous blame-obama republican line is here:

http://corner.nationalreview.com/post/?q=ZDk3OGU4ZjgzY2Y0NWRiYThhNWE3MmQ0MTg0OWJiODc=

greenwald's response is here:

http://www.salon.com/opinion/greenwald/2009/03/19/gop/index.html

well, the amount of money in question is not very much compared to bailouts/stimulus bill etc., that's for sure. i get that people are extremely pissed off. i am, but then again i'm also annoyed by the demagoguery on both sides and in the media. you know? probably the execs who actually made the decisions that fucked everything up over at AIG financial products are long gone and walked away with millions, and now the people who are stuck there trying to clean it up are going to get the backlash. also regarding the congress trying to impose a 90% tax on these.. seems like a completely terrible idea.

i'm extremely disappointed in the two gawker articles on this that have directly accused dodd of some kind of quid pro quo with AIG, a serious charge for which there is zero evidence, and also seem to basically assume he is kind of a liar anyway - why, I'm not sure, other than the writers don't really give a shit.

the Repugs are beneath contempt on this, dog bites man, etc.

Most of these bonus recipients are FURRINERS, yes? Who did what?

Lamp, "stupider" than EARMARKS mania?

Dodd is one of 90+ liars in the Senate, yes.

the fact that dodd -- who by all accounts wanted tougher pay restrictions -- is being cast as the aig bagman here is just totally crazy. i know the story's kind of complicated, but a lot of the media coverage is just willfully obtuse. chris matthews was ranting about it last night and he just had no idea wtf he was talking about. (i know, big shock.) i expect some coordinated pushback today.

yes because you see it's the president's fault for not being tough enough in the no limits on executive compensation that most republicans opposed in the first place. it's a total through-the-looking-glass argument

I might be totally out to lunch on this, but -- what's the old saying? -- the cover up is always worse than the crime. If the Obama Admin. knew that its bailout money would be partially used to honor bonus provisions in AIG's executive contracts, so be it. Maybe the Admin. felt its hands were tied. But Obama then, like Captain Renault in Casablanca, acted "shocked, shocked" about the bonuses. If the Admin. knew beforehand, Obama's reaction seems disingenuous, and would really hurt one of Obama's strongest assets: his reputation for integrity, honesty and being straightforward.

Anyway, as I say, I might be totally out to lunch on this, but that's the scandal I'd worry about most.

it's unclear who knew exactly what about which bonuses, and kind of a red herring because the existence of some bonuses was talked about publicly as far back november. geithner obviously did try to stop these particular bonuses even before the issue blew up publicly, so whatever the administration's level of knowledge was, it's not like they're only reacting after the fact. there's no evidence that these particular bonuses were the the subject of concern that led to the retroactive limits being scrapped in the stimulus bill. i believe dodd when he says he didn't even know about these particular contracts, because i don't know why he would know about them. my sense is that it's a line item that sort of got lost in the mad shuffle, until liddy told geithner, "you know, those bonuses are coming up," and geithner said, "whoa, what?"

but mostly it's just the sheer level of ignorance of everything surrounding aig that's aggravating to me in all the discussion of this. it's like nobody's been paying attention to anything that's happened in the last 6 months. or if people don't hear about something for a week, the entire history of it goes completely out of their minds.

geithner obviously did try to stop these particular bonuses even before the issue blew up publicly

___________________________

my sense is that it's a line item that sort of got lost in the mad shuffle, until liddy told geithner, "you know, those bonuses are coming up," and geithner said, "whoa, what?"

Any links (a) for the first proposition or (b) that provide a basis for the second proposition?