AIG Lynch Mob
Of all people, Barack Obama is the unlikeliest to be stirring up a lynch mob, but there is no other way to describe his stoking of public anger over the AIG bonuses.
“In the last six months, A.I.G. has received substantial sums from the U.S. Treasury,” Mr. Obama took the podium to say yesterday. “How do they justify this outrage to the taxpayers who are keeping the company afloat?” He railed against “recklessness and greed.”
Undoing unconscionable bonuses in the company that keeps getting huge taxpayer bailouts is a fair exercise of government power, but demonizing a relative handful of people who were part of a huge systemic failure is out of character for a president who is a peacemaker by instinct and an economic optimist by necessity.
The growing anger is leading to a mob mentality. “A tidal wave of public outrage over bonus payments swamped American International Group yesterday,” the Washington Post reports.
“Hired guards stood watch outside the suburban Connecticut offices of AIG Financial Products, the division whose exotic derivatives brought the insurance giant to the brink of collapse last year. Inside, death threats and angry letters flooded e-mail inboxes. Irate callers lit up the phone lines. Senior managers submitted their resignations. Some employees didn’t show up at all.”
It’s disheartening to see Obama leading a pack of tinhorn politicians and media mouths when he should be confirming his stand against unfairness but emphasizing the positive steps he is taking for national recovery, as he did with his announcement yesterday of a “substantial program” to get credit flowing to small businesses.
A New York Times editorial notes that “the bonuses are something of a distraction. Seen by themselves, the payments are huge, but they are less than one-tenth of 1 percent of the money already committed to the A.I.G. bailout.”
37 Responses to “AIG Lynch Mob”
Here is what I think will happen next:
1. George Soros (or somebody like him) will hire the traders leaving AIG amidst the public outrage.
2. Those traders will trade against the AIG book that they've left behind.
3. Money will be funneled from the US Govt. to AIG and then the counterparties – Soros
4. The money sent to AIG to bail them out thus far will look trivial in comparison to the future losses.
I call BS. Obama said what we are all thinking, and its about time a high profile public example was made. “Mad as hell and we're not going to take it anymore” is sorta the sentiment here. They F— Up royally, beg us to bail their incompetent asses out, then reward themselves handsomely on the taxpayers nickle. To hell with that.
Slamfu- his job is to think it at the appropriate time and act on it. He could have addressed the bonus issue in negotiating the bailout money but he chose not to (see my comment in another thread about Chris Dodd's amendment which specifically exempted these bonuses from being abrogated). It's a little late to express outrage and in doing so he points out his own incompetence and potentially even collusion with corruption.
This article is amazing. Obama should tone it down? Really?
Obama charged AIG with “recklessness and greed.” I call it wire Fraud and bribery. Follow the money and bust them.
Where's Patrick Fitzgerald when you need him?
CS, so he didn't account for the slimy behavior of the companies in the bailout negotiations? They are acting like totally selfish bastards and he's calling them on it. You do someone a favor you don't expect them to defecate all over you for it. My issue has nothing to do with the negotiations. You are defending AIG because the $100 Billion favor we gave them wasn't worded in such a way as to prevent them from siphoning off money in a totally crass fashion. Hey, we didn't make it illegal for them to bend over the american taxpayer so shame on us. Our fault, we are so stupid. The board of AIG are a bunch of wonderful guys free from all obligations of decency and respect for the HUGE favor done them.
Slamfu, read the Dodd amendment. It specifically exempted those contracts from any limitations. We not only 'didn't make it illegal', we made it illegal for them to NOT pay the bonuses.
My opinion is that common decency would have dictated the foregoing of the bonuses, but that doesn't change the legal construct of a contract. And my whole point is that Dodd is now revealing that he and the administration knew all of this but chose to word the bailout bill in such a way as to force the payment of the bonuses and then the administration starts directing public outrage at the company for doing what the bill made it impossible for them not to do.
If Dodd really did warn the administration about the outrage that would ensue, apparently it was in the form of “Hey, I have to give these guys the ability to pay out their bonuses, so how are we all going to cover our a$$es when people find out about it?”
And I think taking steps to a)shame them into compliance consistent with actually having a conscience and b) Threatening to cut off funds if they don't should be enacted now as opposed to later.
This is already about round three though, since we've already had similar outrages over the TARP money. So when exactly do we start holding the politicians accountable for how they give away our (kids') money?
Fine, then lets rip Dodd a new one as well. Tie to to Obama and we can whale on him too, I really, honestly don't care. And please link me the dodd amendment.
November 2010.
The surrealism of this debate continues to amaze. One person says Obama is a coward for not getting outraged earlier. Another says he's leading a lynch mob by getting too outraged.
Here's the real problem: AIG's credit default swap business was left unregulated for 8 years. The bonuses are outrageous, of course. But they are a drop in the bucket and are mostly symbolic in terms of the damage done.
We need to undo 30 years of corrupt deregulatory practice on Wall Street. And, yes, both parties contributed to this sleaze, including the self-serving notion that Wall Street would “regulate itself.”
Much better than drawing and quartering AIG executives (much as I'd pay to watch it) would be a reinstatement of the Glass-Steagall boundary between commercial and investment banking. And the strict application of antitrust laws to prevent the formation of financial services companies that are “too big to fail.”
Community banks and credit unions are doing quite well right now. All of banking should operate on that model. It's time to break up the mega-banks, foster competition at the local level, and prevent the conflicts of interest between investment banks, commercial banks and rating companies.
Inciting to riot eh?
..lol…
The difference between what Rush Limbaugh and Barack Obama are doing is a matter of patriotism pure and simple. Obama is inciting anger against those people who contributed to our fiscal national security crises…ie enemies of State. Rush LImbaugh is inciting anger against those people most dedicated to restoring national security: the Obama Administration and Congressional democrats. In other words he is engaging in abetting the dissolution of America.
I guess riots are OK depending on what the intent is behind them.
Elrod- I agree with most of the policy prescriptions you list. That's actually why the populist rhetoric irritates me so much- because it's a political distraction that serves the interests of those who aren't willing to do the hard work of creating good policy.
Well I agree elrod, its kinda silly to quibble over $165 million when we are talking about trillions overall, but it still galls no? If they are willing to be that egregious about their use of the bailout money what are they doing that's not out in the open? My biggest fear is we are handing money out and these guys, who have proven that they will take huge risks for short term gains, are going to see this money not as a chance to fix things, but merely another chance to skim profits on an unprecedented scale.
We need to watch every dollar and use any means, including public humiliation if thats possible, to bring them around to acting like responsible leaders instead of children trying to worm their way into the cookie jar.
Want that money? get it from Chris Dodd:
http://www.foxbusiness.com/story/markets/indust…
<snip>
While the Senate constructed the $787 billion stimulus last month, Dodd unexpectedly added an executive-compensation restriction to the bill. That amendment provides an “exception for contractually obligated bonuses agreed on before Feb. 11, 2009,” which exempts the very AIG bonuses Dodd and others are seeking to tax. The amendment is in the final version and is law.
———————
Sen. Dodd was AIG’s largest single recipient of campaign donations during the 2008 election cycle
Oh something else of interest for those that missed it, Jack Tapper and Press Secretary Gibbs:
March 16, 2009 4:03 PM
TAPPER: You guys first found about these bonuses last week?
GIBBS: I think that's true, based on what I read in the newspaper.
TAPPER: But you gave money to AIG two or three weeks ago?
GIBBS: Um-hmm.
TAPPER: How could you not know that they have these millions — hundreds of millions dollars…
GIBBS: Well, again, there's — there's — according to the news reports, there's existing contracts, some of which the — or of which the president has asked the secretary to examine going forward. I think you also heard the president speak today about having a resolution authority that gives the government and taxpayers far more flexibility in dealing with the disposition of AIG in a way that gives taxpayers protection and flexibility — disposition that we don't currently have, but steps that we would like to see taken in order to deal with AIG as a whole.
TAPPER: Why didn't you attach it to the $30 billion you gave a couple weeks ago?
GIBBS: Again, Jake, the…
TAPPER: You're looking to retroactively attached it to the new $30 billion.
GIBBS: Well, they're looking through contracts to see what can be done to wrest these bonuses from their recipients.
TAPPER: I'm sorry, just — I don't understand, so maybe I'm just not understanding, but President Obama said in early February, right when he gave his speech on executive compensation, “these kinds of compensation packages in the midst of this economic crisis isn't just bad taste, it's bad strategy, and I will not tolerate it as president. We're going to be demanding some restraint in exchange for federal aid.” Since that time, he gave tens of billions of dollars in federal aid to AIG without demanding restraint.
GIBBS: Well again, Jake, we've got existing relationships, contracts, as I just mentioned, that were negotiated a year ago, assistance that was granted outside of the legal authority prior to the creation of the troubled asset relief program. The president has asked the administration to go back and look at what remedies are possible to block those bonuses.
TAPPER: But why didn't he do that before?
GIBBS: Well, again, the excessive compensation rules that you'd noted, and I think somebody asked this at the background briefing that we had, obviously are prospective based on some limitations that we have in looking backwards. The president has asked Secretary Geithner and members of the administration to exhaust all legal remedies in looking backwards to see what steps could be taken to block these bonuses.
TAPPER: No, but since — and I'm sorry to belabor this point — but since President Obama gave the speech, you guys gave more money to AIG. Why wasn't it attached…
GIBBS: Again, this is…
TAPPER: … to the new money?
GIBBS: Because it's, again, it's part of the…
TAPPER: Part of the old contracts.
GIBBS: Right. It's part of…
TAPPER: But you're looking to now retroactively see if you can attach something to that old money.
GIBBS: That's what we're looking at.
TAPPER: But why didn't you do it at the time, if you're looking to retroactively do it.
GIBBS: The administration is taking the steps today to go back and see what can be done…to claw those bonuses back.
The political end of this is important, but it's the wrong end of this mess to look at.
Unregulated or not, doesn't the fact that laws were broken matter?
The current argument here is who wrote slanted bills for special interests. Fine, don't re-elect them. It may feel good, but it solves nothing.
AIG sold securities with AAA ratings that were gotten illegally, that's fraud, and it's the only way effect real change.
Besides, if bonuses come from illegal activity, then those contracts are broken, and bonuses are confiscated.
I'm just saying the outage Obama “is stirring up” needs no help. Americans believe we are a country of laws, not illegal influence. Kick out all the politicians you want, it won't matter if the underlying premise of our government is ignored.
For what it's worth, even the Daily Kos has caught onn to Dodd's duplicity:
http://www.dailykos.com/storyonly/2009/3/10/120…
Read some of the comments, even the Left has has enough.
I wish I believed Obama really cared about this. I think he is looking for a way to appear to be on the side of “the people” while essentially letting the bonuses go through anyways without proposing some sort of legislation to retrieve the money. I hope I'm pleasantly surprised.
“…but demonizing a relative handful of people who were part of a huge systemic failure is out of character for a president who is a peacemaker by instinct and an economic optimist by necessity.”
It's the straw that broke the camel's back, if you ask me. Even men of peace can only take so much. To continue the analogy…. There comes a point in time that if another country threatens and attacks you then you stand up for yourself and the country you're sworn to protect.
In this case Obama is showing he is serious about these outrageous bonuses that you and I are paying for.
If AIG were a private enterprise they could pay their janitors a trillion dollars a month for all I care. But AIG is a failed enterprise and is only being kept aloft by the federal government and taxpayers.
Maybe many people don't care that their tax dollars are going to pay people with multiple homes, yachts, and the need never to work again (except for amassing more money). But I think my tax dollars should go to roads, schools, scientific research, and help those Americans who work two jobs at minimum wage and can't afford one house much less multiple homes.
What has this country come to if we are unwilling to have compassion on poorest who are losing their homes, but we are willing to bail out the richest so they can continue to live their lavish lifestyles? If these AIG executives were successful people running a private company, then they deserve all the money they get. But these AIG executives are failures and I don't want my tax dollars (and the tax dolars of future generations) going to them. They have enough money already.
The current argument here is who wrote slanted bills for special interests. Fine, don't re-elect them. It may feel good, but it solves nothing.
Actually the political part is one of the few parts we have any control over. Talking about it is the first step in order to make sure they don't get re-elected (or that the Obama administration gets the message that they can't just talk about these reforms, they have to act.)
And I get what you keep saying about the ratings agencies, Hemm, but honestly I can't imagine that there's anyone who would know how to prosecute them. That actually is a case where I think we have to learn how to provide better oversight going forward, rather than looking to punish the current group. But even on that front it's discouraging- read this about the recommendations that were made to the SEC last summer, and how little of it so far is being put into place (so that the results have no teeth.)
Let me be the first to say, on record here at TMV that I personally have done more for the solvency of this nation in the form of editorial writing for free than all of the executives at AIG combined. For free mind you.
Therefore, I am requesting the taxpayers (ie the 80% shareholders of AIG) hold a vote to award me a bonus for my own contributions to our national security. You can place a direct deposit in my bank account by April 1st. I think you know who I am by now. As a taxpayer, I would also like to request that the 80% shareholders' representatives (proxys ie: Congress) move to dismiss all previous upper level management at AIG without a dime of bonuses or severence pay for gross misconduct while on the job. New management may be interviewed and hired as qualified to not screw up like the first batch. Emphasis placed on those with the most community service listed in their resume's….as a personality-profile safegaurd, or “greed-screen” if you like..; )
How the liberals here avoid the elephant in the room of DEMOCRAT Dodd amendment and DEMOCRAT Obama disengenuous outrage proves the Echo Chamber mindset beyond the shadow of a doubt.
Liberals….AIG could not have even thought of bonuses had not Dodd given them the permission!!!!!!
Haha, CO. It's not like the GOP is any better though- they didn't provide any oversight at the time that was going down either, and now we have Grassley telling the execs to commit Hari-Kari (sp?)
What a circus sideshow.
Reminds me of that old phrase, “Government is not the solution, it is the problem…”
Simple solution:
Publish the pictures of the executives with their name and the amount of bonus they received on the front page of the major US & British papers.
CS
So, let's kill this crop of lobby-infested legislators. Too bad Phil Graham is no longer in the house, he certainly helped deregulate WS. Drop Dodd, pelosie, whoever you want, Make the Republicans pre-eminent again. Then the left can point to the new bad guys, the next tom delay et al, Great. Done.
Except the system is still rigged. The middle class is still hosed. and America continues to slip deeper into debt. If a nation of laws ceases to prosecute those in high office and high public trust, then what country is this? Without prosecution, the Dodds and Grahams of our system will “fix” the WS problem with a set of regulations that lets another loophole here and loophole there. All this just leaves you helpless and hopeless, right where they want you.
Well, it's funny that PWT stated the old saw about government being the problem. I don't agree with that (though Reagan's line was great political humor) but I think government becomes a problem when the people don't hold it accountable.
On that note, I guess my view is the flip side of one that Jim S. often states (that people who believe that government is the problem can't be trusted to run the government, because they aren't motivated to make it succeed.) My flip on that is that people who believe that govenment is the solution can't be trusted to run the government either because they give the big government politicians the benefit of the doubt and fail to oversee or vote them out when appropriate. That actually is a worse problem in my view because it ends up enabling the corrupt people in the corporate world to form these unholy alliances with the corrupt people in the political world.
I'm honestly not opposed to prosecution where it is warranted and possible, Hemm- I just don't think that's the case here. You say that the ratings analysts have admitted that they never even examined the products- but do you really think someone's going to admit that under oath? And beyond that, although it's pretty plain to see the machinations that went on- creating products that were so complex that no one knew what they heck they were examining or buying or selling- the bottom line is that the way to have dealt with that would have been to keep the risk on the people who were creating and pushing the securities, and prevent the moral hazard of playing hot potato with toxic assets. We also shouldn't allow people to reap profit on the front end, which also creates moral hazard and passes the risk down the line. So I don't agree that we couldn't address the problem going forward- there are clearly solutions if our politicians have the will to enact them (see my link earlier about the recommendations to the SEC- will we demand that our politicians take these seriously, or will we settle for people paying lip service to the idea of reform while actually changing nothing about the underlying problems?)
So, should Dodd, et. al., now also agree to commit seppuku?
CS
Moodys didn't, but check this out, but emails were exchanged with other companies – oops:
http://oversight.house.gov/story.asp?id=2250
Let me cut to the chase: _To follow the link to see the actual docs.
from the recipient of the emails. only an excerp included here:
“
This is the most amazing merno I have ever received in my buslness career' Frank Raiter testifying to congree.
Any request for loan leveltapes ts TOTALLY UNREASONABLÍII Most investors don't have it
and can't provide it. Neverthless we MUST produce a credit eslimate.
“
The evidence requires someone educated in the jargon, but there is a smoking gun IMO.
As far as how we do business today, it's built on a fudged rating system If the product is too complex, trust the rating of the security.
Anyway, just so you know i wasn't just on a rant that led to internet conspiracies.
Media Matters says the Dodd story is false:
http://mediamatters.org/items/200903170026?f=h_top
< a href="http://firedoglake.com/2009/03/17/treasury-attempts-to-blame-dodd-for-aig-bonuses/" rel="nofollow">Firedoglake – Treasury Attempts to “Blame Dodd” for AIG Bonuses
Who pushed back against Dodd, and told him to neuter the provision? The WSJ says Geithner and Summers:
The administration is concerned the rules will prompt a wave of banks to return the government's money and forgo future assistance, undermining the aid program's effectiveness. Both Treasury Secretary Timothy Geithner and Lawrence Summers, who heads the National Economic Council, had called Sen. Dodd and asked him to reconsider, these people said.
Looks like the bankers are trying to bail their buddies out.
Chris- When I saw your comment I was prepared to say “Oh jeez, don't tell me that Fox business just made up that summary of the Dodd amendment” but when I clicked on the MM link I'm scratching my head because they give the text which says exactly what Fox said it did.
Here's how they quote the amdendment:
The prohibition required under clause (i) shall not be construed to prohibit any bonus payment required to be paid pursuant to a written employment contract executed on or before February 11, 2009, as such valid employment contracts are determined by the Secretary [of the Treasury] or the designee of the Secretary.
And then inexplicably they go on to say that this was not a loophole to the restrictions placed on bonuses. WTH? Of course it's a loophole. The only thing I can figure is that they seem to be splitting hairs and saying it doesn't exempt those bonuses from all limits, just from the specific limits that were laid out in the prior part of the amendment.
But that's the point- he wrote this with a loophole. The reason for having the amendment to begin with was to create these caps or restrictions on compensation, and then he included this exemption. Saying that this wording didn't exempt the bonuses from any and all restriction doesn't matter, because the government would have no legal authority to abrogate the contracts otherwise.
OK, now I've read Glenn Greenwald's post and the one he links to by Jane Hamsher.
It appears that Dodd isn't the villian here, but MM still has it wrong when they claim that the amendment as it passed in the final bill doesn't represent a loophole. It is- but it seems that it was the Treasury and WH officials who insisted on putting that exemption in, over Dodd's protests (that explains the part of his quote I saw yesterday which didn't make sense- he claims that he warned the WH that this would provoke outrage, which didn't jive if he had been the one who had written that exemption in.)
CS
Dodd couldn't pull it as it was already passed in the Senate. The change was made in conference between house and senate as a “compromise.”
Ah, good point, Hemm. I guess now we know at least one thing that took place at this meeting.
Seeing the sausage being made sure is unappealing.
CStanley,
I found that MM link before I read the Greenwald post. I should have updated it. Sorry.
Anyways, it's disappointing to watch the White House try to cannibalize one of their own in the Senate. Perhaps they fear some future battle with Dodd over civil liberties?
[...] think that even though the majority of the country is forming an AIG lynch mob, Senator Chuck Grassley’s comment was the very worst mix of both ignorance and malice. Where [...]