Rolling US Economy Into The Shitbin Thread

it is bs. there was a further response in that tpm story by numerous lawyers refuting that whole argument as ridiculous.

The case for paying out bonuses at AIG (and also, isn't this a "retention bonus pool" and not an incentive bonus program at AIG...does it matter, etc.)

http://www.nytimes.com/2009/03/17/business/17sorkin.html?hp

A response: http://idlewords.com/2009/03/andrew_ross_sorkin_explains.htm

yeah that sorkin article is really something else, what a maroon

So did the government write AIG a check without putting anything in writing saying they could take the money back if they had reason? If not then they must have seen it coming and this whole greedy CEOs fool government scandal is some big time political posturing.

Take a look at this:

http://craphound.com/images/newwayforward.jpeg
http://www.anewwayforward.org/demonstrations/

An attempt to protest to nationalize the banking system. Do people really think this is a good idea, or is this the AIG street team?

You know, if we nationalize these banks, we'd essentially be cutting out the middle man for the power mongers. Rather than paying high priced lawyers to design virtually indestructible legal defenses for their culture of loot and plunder, they can simple rewrite the laws themselves. If you want any idea what that kind of money is worth in Washington, just take a look at all these bailouts passing irregardless of vocal opposition from both the left and the right. They already own Washington D.C. After nationalizing they won't need any more bailouts cos it will discreetly be tacked on to the yearly budget.

Things are going to suck, they already suck big time. The only real solution for most of the people in the world would be to let these banks fail. Which isn't going to happen because the elite bankers and the congressmen are addicted to the idea of passing shit back and forth forever. These bailouts are already evidence that the people voting for these bills are on the bankers payroll. You must be incredibly naive to think that giving these swindlers more power is good for anyone other than them.

Headline of the week?

Senator suggests AIG execs should kill themselves

http://news.yahoo.com/s/ap/20090317/ap_on_go_co/grassley_aig

sweet!

looks like the Admin belatedly realized they have a PR disaster on their hands. Usual craven sluck.

If Obama could have prevented this but didn't, that's a big f---g screw-up, I'll grant you that.

There is nothing fair about AIG paying out these bonuses, and I don't buy the economic reasoning either (SLIPPERY SLOPE! WAAAAHHH!). Nonetheless, the Constitution does have this little thing called the Contracts Clause.

rescind the bailout, pure and simple.

So we should make a bad decision for the entire world economy in order to avoid paying some embarrassing bonuses?

I wonder if this (^^^^) entirely correct thinking is what led to the bizzare kabuki theater we're now seeing (conciously let the money go to AIG, knowing bonuses will be paid; feign shock at the payment of bonuses; much sound and fury; ultimately allow bonuses to be paid with less political damage to the Administration).

(Correct thinking is that we can't let world economy crater because of indefensible bonuses being paid).

And I do say that with the caveat that we need to exercise some caution when the "world economy will collapse otherwise" card is being played -- definite risk of crying wolf.

"bad decision for the entire world economy"

fuck that Kool-Aid.

the bizzare kabuki theater

As good a summary as any. Whathisname who currently runs AIG goes before a Congressional panel tomorrow and I'd be willing to bet all sorts of contrition and face-saving announcements will be the order of the day.

I hope, for his sake, he doesn't fly to the Hr'g in a private jet.

No one's outlined yet what legal options the administration has, and whether, in effect, AIG committed anything ILLEGAL.

Nader:

As one solid small town banker in Indiana put it recently: "If these big companies are too big to fail, then they're too big."

http://www.counterpunch.org/nader03092009.html

Alfred -- not quite an answer but the second half of this WaPo story is of interest:

At the Federal Reserve Bank of New York, which has directly overseen AIG since its federal takeover in September, officials have studied the possibility of rescinding or delaying the bonuses. They even brought in outside lawyers for advice. The conclusion: If the bonuses weren't paid, the AIG staffers would be able to sue the company and probably would win, not just what they were owed but also punitive damages that would make the ultimate cost perhaps two to three times as high as the bonuses themselves.

Moreover, Fed officials also hope to keep current employees with the company. The senior executives whose decisions caused the company's collapse are long gone. Most of those left behind are trying to unwind complicated derivative contracts. Completing that process correctly is essential to preserving as much value as possible for taxpayers, officials at both the government and AIG have argued. If it is mishandled, it could expose taxpayers to billions of dollars in additional losses.

Law professors agreed with the Fed's assessment but said AIG employees could still agree to reduce their own bonuses.

And the outrage expressed by the president and lawmakers was designed to put pressure on these officers to do just that, the legal experts said.

Jonathan Macey, a professor at Yale Law School, said it was unlikely that any AIG employees would end up suing the company for changing compensation contracts, mainly because their names would be revealed publicly in a lawsuit and they would then be excoriated.

Macey added that the government is caught in a difficult position, squeezed between public outrage over the bonuses and the need to keep AIG Financial Products going so the company can restructure and the government can recoup some of its money.

"What's good for AIG is definitely not good for the country," Macey said. "But now that the government is invested, it may have to do what's good for AIG."

That's a lot clearer than the NYT story this morning. Thanks.

It's also a lot more rational than "Oh no, this would mean that no one would ever trust contracts again!"

I can't believe AIG is doing this they took all the money we gave them to keep doing what they were doing and they're still doing it!

also, kabuki theater OTMFM

US Government is just trying to help the economy and these big bag rich CEOs are ruining everything. USgov = underdog to media. I wonder how long after they formally nationalize the banks you need a federal ID to enter one, get searched on the way in, have your body temperature/pupil dilation scanned while waiting in line, have to undergo background check before accessing your savings account, etc. etc.

probably only a couple hours!!!

it might even happen on the same day!!!

my bank already does that (the rectal probe is optional). but you do get a lollipop.

hahahahaha

http://dealbreaker.com/2009/03/aig-employee-i-have-a-horrible.php

also, how to get the AIG bonuses back

http://latimesblogs.latimes.com/money_co/2009/03/aig-bonuses-som.html

"bad decision for the entire world economy"

fuck that Kool-Aid.

― Dr Morbius, Tuesday, March 17, 2009 4:12 PM (1 hour ago) Bookmark

from the start, with aig in particular, there's been a fair amount of bluster to the effect that, "if we go down, we're takin' the whole world with us!" it's obviously a scare tactic, but it also obviously has some basis. nobody i think really knows how much risk is entailed, but that's the problem. and after the collapse of lehman came to be seen as a mistake, nobody wanted to let the next thing go under. but they also haven't straight-up nationalized anything (even though aig is functionally in receivership). so we're still stuck in this limbo, and nobody on the obama team seems to be in a hurry to get out of it -- for some understandable reasons, but still, this aig bonus thing is just one more sign of why they need to make some real moves.

or could be a part of a real move

(hopefully)

well it sure gives an opening for them to move in and say, "that's it, we're completely nationalizing aig." i just don't see any appetite for that from geithner.

i'm torn between worrying about banks turning into the DMV, or banks turning into ultra-efficient high-tech privacy invaders

worry about banks turning into the next Oprah

i just don't see any appetite for that from geithner.

It might be a long process of conditioning the public before he nationalizes big companies. Nationalization is, to many, a dirty word, but the option is now "on the table," largely because a row of experts -- from both sides of the political divide -- say it may be needed. Geithner/Obama may just be laying the groundwork before taking action.

Simon Johnson (former IMF chief) uses the DMV analogy, too! OTOH, he supports short-term nationalization.

Interesting to me: NPR's Planet Money asks, "Who do we blame?" James Kwak, of the Baseline Scenario blog, answers: Alan Greenspan.

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.”