Great work (4.00 / 5)

Aslo, on Saturday the 14th Treasury (Geithner?) says it approved the bonuses.

[A]dministration officials conceded that almost all of the most recent round of bonuses, totaling $165 million, had been paid last Friday, one day before the Treasury publicly acknowledged that it had reluctantly approved the payouts. The officials said that people who received the bonuses would probably be able to keep them.

http://www.nytimes.com/2009/03...

What did Geithner know and when did he know it? Still unclear.

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by: david mizner @ Tue Mar 17, 2009 at 13:00:17 PM CDT

Need someone in the wings (4.00 / 1)

who is qualified and willing to step into the role.  Otherwise, this is all a lot of hot air.  

Right now, I'd be willing to accept more compromised candidates in the subordinate roles at Treasury simply to have someone in those seats.

So tell me who's replacing Geithner.  

Saxby Chambliss  

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by: bosdcla14 @ Tue Mar 17, 2009 at 13:04:38 PM CDT

I'm sure they could find someone (4.00 / 4)

All he needs to do is to appeal to their patriotism and ego.

But a move would make sense only if the new person comes from outside the Rubin-Wall Street school. And that, remember--Geither's ties to Rubin and Godlman Sachs--is a big part of the problem here.

Brad Miller:

One thing Miller is sure of is that Goldman Sachs, the alma mater of Bush Treasury Secretary Hank Paulson, "had a lot of influence over" the decision to rescue AIG's counterparties (among which Goldman was No. 1).

"I don't want to sound like a right-wing conspiracy theorist who thinks the Trilateral Commission controls the world, but it seems [Goldman] had a lot of influence over this," he said, citing the Obama administration's decision to waive ethics rules to bring in a former Goldman lobbyist as Geithner's chief aide.

http://tpmdc.talkingpointsmemo...

Obama seems to have cast his lot with the Rubinites. Unless he changes course and reaches out to a different kind of economist, more of the same, with disastrous results.

Steve Clemons:

As best I can tell Obama is stacking his team with those who George Soros disdainfully calls "market fundamentalists."

Liaquat Ahmed metaphorically profiles the Rubin-led financial ideologues in his Depression-focused new book, The Lords of Finance: The Bankers Who Broke the World.

http://www.thewashingtonnote.c...

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by: david mizner @ Tue Mar 17, 2009 at 13:37:22 PM CDT

[ Parent ]

isn't it also way past time for the Justice Dept to be investigating all the firms involved? (4.00 / 3)

and to ask why Geithner, Summers, Bernanke, Obama, and all the rest are continuing to reward these firms with trillions -- and continuing not to restrict or regulate any of it in any way?

... A century ago, when powerful trusts distorted the market system, we had AGs who relentlessly tracked and busted them. ...

The environment from the top of the chain-derivatives gang leaders-to the bottom of the chain-subprime, no-doc loan officers-became "criminogenic," Black says. The only real response? Aggressive prosecution of "elites" at all stages in this twisted mess. Black says sentences should not be the light, six-month slaps that white-collar criminals usually get, or the Madoff-style penthouse arrest.

As staggering as the Madoff meltdown was, it had a refreshing side-the funds were frozen. In the bailout, on the other hand, the government often seems to be completing the scam by quietly passing the proceeds to counterparties.
...

-- What Cooked the World's Economy? -- http://www.villagevoice.com/co...

Of course, we'd need at least one person in the administration who thought these firms should be punished --- instead of telling them over and over we'll continue to reward them with trillions, and keep them alive no matter what.

Everyone in the administration sees these firms (and their employees) as entities that should be kept alive, rewarded, and protected -- at all costs.

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by: amberglow @ Tue Mar 17, 2009 at 13:05:41 PM CDT

and why direct Geithner to "pursue every legal means" -- but not Holder & DOJ? (0.00 / 0)

that alone should tell everyone that they really had zero interest in pursuing any legal means.

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by: amberglow @ Tue Mar 17, 2009 at 13:32:25 PM CDT

[ Parent ]

Geithner must go, but who replaces him? (0.00 / 0)

and who fills the rest of the treasure positions that have yet to be filled?  

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by: Unbozo @ Tue Mar 17, 2009 at 13:06:53 PM CDT

Much worse than this (4.00 / 3)

Chris, this is great but Geitherner's role is even more direct than what you say:

About $165 million in retention payments started to go out Friday to employees at Financial Products, after numerous discussions with the Treasury Department and the Federal Reserve.

Attorneys working for the Fed had been examining the matter for months and determined that the retention payments couldn't be touched because AIG would face costly lawsuits and be subject to penalties from states and foreign governments. Administration officials said over the weekend that they agreed with that assessment. [...]

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.

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by: Mark Matson @ Tue Mar 17, 2009 at 13:15:45 PM CDT

AIG lied about Connecticut wage law, for just one lie of many -- the administration is buying all their lies and repeating them back to us -- (4.00 / 1)

it's sick.

http://www.prospect.org/csnc/b... -- AIG'S ACTUAL CLAIM: CONNECTICUT MADE US DO IT. --

... I just read the white paper that AIG provided to back up its claim, in its letter to Secretary Geithner, that its hands were tied when it came to paying bonuses.

I found it sort of amazing that the white paper didn't cite a single passage from any of the contracts to show that they couldn't be abrogated, or the consequences of non-payment. I would assume a multimillion dollar employment contract would have some language about the conditions for the bonuses, and how disputes over refusal to pay are settled. I'm not saying that the binding language isn't there in the contracts, just odd that they wouldn't quote or cite it if it was.

Indeed, the only really specific legal claim, and the only case law cited in the white paper, was that non-payment might violate the Connecticut Wage Law. (That's the thing that's posted on the bulletin board in the AIG break room, I presume.) The white paper cites a case (Schoonmaker v Brunoli) in which carpenters weren't paid on a UConn construction project.

The Connecticut Wage Law apparently provides for up to double damages, so because a carpenter got $44,000 in damages when he wasn't paid $22,000 that he was owed, therefore we're to believe, some judge in Hartford might declare that AIG owed its executives not $165 million, but $330 million! It's a brutal and unyielding master, the fearsome Connecticut Wage Law, and apparently neither the outrage of the president and millions of Americans, nor the cleverness of Wall Street lawyers can beat it.

But out of curiosity, I typed the phrase "Connecticut Wage Law" into Google, and the first entry was the "Connecticut Employment Law Blog," written, assuming we can trust identity on the Internet, by a Connecticut employment lawyer. And the most recent entry, from December: "BREAKING: Conn. Supreme Court Rules That Bonuses Based on Subjective Factors Are Not Wages." The lawyer/blogger says that the court held that if bonuses "are not linked to the 'ascertainable efforts of a particular employee' the bonuses are NOT wages," and therefore not subject to the law. ...

If the Connecticut Wage Law is all AIG has to back up its claim, it seems like a very shaky foundation.

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by: amberglow @ Tue Mar 17, 2009 at 13:28:25 PM CDT

[ Parent ]

Great summary, but I take issue with your take on summers (4.00 / 1)

especially this:

Larry Summers provided Geithner with assistance in this matter, but overall the blame almost entirely rests on Geithner himself.

summers is a behind the scenes operator ... imo, he is geithner's cheney.  

on a macro level, he is very responsible for the lack of government regulations, which he hypocritically decried with his outrage for tv act on sunday, that led to this mess.  on a more micro level, he fought against legislation that would have taken away these sorts of bonuses ... likely fought against retroactive provisions on the bonuses that apparently dodd was supposedly in favor of ... and then assured congress to "leave it to me, i'll take care of it" while he in fact did not.  this is the way that summers operates: taking the teeth out of legislation so that it effectively has no enforcement powers and plenty of loopholes while assuring congress that he's got a better idea that somehow never comes to fruition ... which congress very willingly accedes to.  he also apparently has effectively boxed out Volcker from having any say in these matters becoz he knows that volcker is not wall street centric.  

so, again, that's the way that summers operates: working behind the scenes to make sure that voices that may conflict with his pro-wall street agenda never get heard and have any influence, and neutralizing opposing forces that he can't ignore by assuring them that he is on the same side as them and working on an effective remedy that somehow never comes.  then he goes on tv, feigns outrage about aig, the lack of regulations on wall street, babbles about the rule of law and then tosses his hands up in the air and says that there is nothing we can do about it now as if he is also a victim to it all while he has been deceitfully operating behind the scenes aiding and abetting the whole disaster that benefits the same wall street forces that his work has been serving his whole entire "public" career.  

no, BOTH summers and geithner MUST go IMO.

Z  

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by: Z @ Tue Mar 17, 2009 at 13:39:21 PM CDT

Bull (0.00 / 0)

Items 1 - 6 are when Bush/Bernanke/Paulson are in charge, not Geithner. This is deliberate smearing. Why are you behaving so badly? Item 6 isn't TARP money for AIG.

Then you go on to conflate "blocking" the distribution of the bonuses with getting the money back later. Two different concepts. It is very unclear whether or not the bonuses could have been blocked (see MUCH more reasonable reporting at TPM).

You and David are just throwing feces. It stinks.

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by: Semblance @ Tue Mar 17, 2009 at 13:44:52 PM CDT

Very good summary (0.00 / 0)

and on point.  My only issue is that when this whole stimulas bill came around the language in the bill included salary and bonus restrictions for top executives, Chris Dodd was actually the one who for some unknown reason changed to language to exclude and limits on bonus.  Given the fact that AIG was the highest contributor to Chris Dodd (over 100K), this smells very fishy and perhaps we are pointing the finger in the wrong direction.

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by: rmoltaban @ Tue Mar 17, 2009 at 13:47:03 PM CDT

I think dodd has been given a free pass too (4.00 / 1)

to the cynical eye it looks like he has been doing the kabuki tango with summers pulling back on legislation on the assurances that summers will take care of the matter internally which doesn't happen ... and then stepping forward to do it again only to acquiesce to the same assurances by summers ... then again don't happen.  Chris reports on the first two steps of the tango on his post entries on Jan. 15th and 16th, and as I wrote in an earlier post, when it was announced that dodd wrote in a provision to the tarp bill on 2-14, it was reported that pay/bonus restrictions would be retroactive which geithner and summers vehemently opposed (google: bankers face strict new pay cap wall street journal).  then on 2-15 it was announced that the provision would only go into effect from 2-17 forward - http://news.aol.com/article/co... .  if I read this accurately, and if the reporting is accurate, did summers get his way with dodd again?!!!!

and all the while a corporation in his home state benefits ...

dodd also had some sleazy involvement with two personal mortgage loans (http://www.huffingtonpost.com/2008/06/23/dodd-repeats-denial-of-mo_n_108725.html)

Z

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by: Z @ Tue Mar 17, 2009 at 14:10:25 PM CDT

[ Parent ]

the provisions were taken out when the bill went to conference (4.00 / 1)

So, I was wrong to lay this on Dodd.  For a less speculative view of what happened: http://firedoglake.com/2009/03...

some of the most important excerpts:

But the bill that passed the Senate actually made the compensation limits retroactive, according to the Wall Street Journal:

Who pushed back against Dodd, and told him to neuter the provision?

But Dodd's provision was weakened when the bill got to conference. According to those knowledgeable about what happened, it was due to pressure brought to bear by the Treasury out of concern that those with contracts that guaranteed them bonuses would litigate.

It's impossible to know how many of those bonuses would have been covered by Dodd's original language without examining the individual contracts. What is certain, however, is that the loopholes regarding "retroactivity" which facilitated the payout of the bonuses that AIG cited in their white paper, was something that Treasury specifically lobbied for. For the "administration official" to blame Dodd in the pages of the New York Times for the payout of these bonuses, after the White House publicly fought him tooth and nail to weaken compensation limits, is completely disingenuous.
Z  

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by: Z @ Tue Mar 17, 2009 at 15:37:07 PM CDT

[ Parent ]

I'm Not So Sure (0.00 / 0)

I believe that Summers, Geithner, Bernanke, and even (formerly) Paulsen are people of good will working to achieve what is best for the collective good of the country, not for their Wall St. buddies.  I'd bet they are as pissed off at those buddies as the rest of us.

There are certainly signs now that we are bumping along the bottom of what so many had feared would be another Depression.  Housing starts, personal income, the stock market suggest we may be starting to turn the corner even before the stimulus has had time to work.

To throw out Geithner or Summers now over AIG bonuses that are really chickenshit in the larger scheme of things would be a tragedy.

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by: bob h @ Tue Mar 17, 2009 at 14:17:30 PM CDT

"AIG became a conduit to funnel the cash to its top trading partners" (4.00 / 1)

http://www.thestreet.com/story...  -- AIG Bailout Details Don't Tell the Full Story --

... The government's initial Troubled Asset Relief Program was scrapped because the Treasury and Federal Reserve could not figure out how to set prices for those assets. Paying too much would cause major losses for taxpayers, but paying too little could send financial firms with major exposure into bankruptcy.

The government abandoned its initial strategy of buying the toxic assets, but in its bailout of AIG it provided the insurer with cash it needed for what it called "severe valuation losses." It should come as no surprise that AIG became a conduit to funnel the cash to its top trading partners. After all, in announcing AIG's first bailout on Sept. 16, the Federal Reserve said it was extending an $85 billion loan to prevent "a disorderly failure" and "to assist AIG in meeting its obligations as they come due."   ...
It repeatedly justified those moves by saying that AIG's rescue was not meant to save the insurer, but the complex web of companies that were interlinked through the toxic credit-default swaps AIG issued. ...
it's not clear how valuation losses were determined, or whether some counterparties got better deals than others. Furthermore, AIG did not disclose its remaining exposure to the toxic CDS securities -- in other words, how much more money will be required to unwind all of the positions? ...

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by: amberglow @ Tue Mar 17, 2009 at 14:24:45 PM CDT

this conduit is another scheme they've concocted to conceal the truth (4.00 / 1)

Z

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by: Z @ Tue Mar 17, 2009 at 14:29:48 PM CDT

[ Parent ]

totally -- & meanwhile Obama talks of "tough choices" in the budget and reducing the deficit -- & a "toxic asset" bonanza for the very same banks/corps is coming next, too -- (0.00 / 0)

http://www.nytimes.com/2009/03... --

... "Because of the massive deficit we inherited and the enormous costs of this financial crisis, we have made some tough choices," choices that he said would rein in spending enough to cut the annual federal deficit in half by the end of his first term. ...

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by: amberglow @ Tue Mar 17, 2009 at 15:13:12 PM CDT

[ Parent ]

how's come we had 80% ownership in the company on 9-16-08 (4.00 / 2)

with $85B and then $67B later ... with more to come ... we still have 80% ownership?  We fucking damn well know that we will not be getting repaid that money.

all these little schemes they come up with to deceive us from realizing that they are handing our money over to to enrich and empower their wall street pals ... effectively conditionless ... in the form of tarp loans that will never be paid back and now the talf nonsense that gives our money to hedge funds for them to profit off of with no limits to their profits while we carry 95% of the risk.

these intricate schemes are concocted to conceal what they are doing: putting the risk on us and the upside to the wall street pals.

Z

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by: Z @ Tue Mar 17, 2009 at 14:27:07 PM CDT

step 1: Banks get billions directly thru TARP and other Fed/Treasury programs. ... (4.00 / 1)

step 2: Banks get billions more thru this AIG scheme.

step 3: Banks get rewarded for every single modification of mortgages they do thru the "homeowner" plan.

step 4: Banks get $15 billion more thru the new small business plan --

... It also seeks to increase bank liquidity by injecting $15 billion into banks in order to thaw the credit market and boost lending to small businesses. ...

-- http://www.businessweek.com/sm...

step 5: Banks get overpaid billions more for all the "toxic assets" in the upcoming "plan".

etc ...

steps 1 thru 5: PROFIT.

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by: amberglow @ Tue Mar 17, 2009 at 15:21:34 PM CDT

[ Parent ]

billions more for Credit Card losses & Commercial Real Estate mortgages will be coming too, (0.00 / 0)

i bet.

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by: amberglow @ Tue Mar 17, 2009 at 15:23:20 PM CDT

[ Parent ]

timeline needs to include Paulson, Bernanke, & Goldman CEO Lloyd Blankfein -- (4.00 / 1)

Spitzer -- The Real AIG Scandal: It's not the bonuses. It's that AIG's counterparties are getting paid back in full.
-- http://www.slate.com/id/2213942/
--

... Why are AIG's counterparties getting paid back in full, to the tune of tens of billions of taxpayer dollars?

For the answer to this question, we need to go back to the very first decision to bail out AIG, made, we are told, by then-Treasury Secretary Henry Paulson, then-New York Fed official Timothy Geithner, Goldman Sachs CEO Lloyd Blankfein, and Fed Chairman Ben Bernanke last fall. Post-Lehman's collapse, they feared a systemic failure could be triggered by AIG's inability to pay the counterparties to all the sophisticated instruments AIG had sold. And who were AIG's trading partners? No shock here: Goldman, Bank of America, Merrill Lynch, UBS, JPMorgan Chase, Morgan Stanley, Deutsche Bank, Barclays, and on it goes. So now we know for sure what we already surmised: The AIG bailout has been a way to hide an enormous second round of cash to the same group that had received TARP money already.

It all appears, once again, to be the same insiders protecting themselves against sharing the pain and risk of their own bad adventure.  ...

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by: amberglow @ Tue Mar 17, 2009 at 16:03:21 PM CDT

culture of entitlement (0.00 / 0)

Obama, Geithner and his economic team believe that propping up the banks requires them to maintain the Wall Street culture of entitlement. Obama needs to fire Geithner and his economic team and send a clear message that the days of exorbitant bonuses and salaries to bankers and all Wall Street firms are over.

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by: amberwaves @ Tue Mar 17, 2009 at 20:38:20 PM CDT

It would be good to actually iterate the restrictions or conditional terms under which (0.00 / 0)

Fed Reserve money and TARP is given.

By brainstorm...I mean us not them.  Just how would one write either legislation or rules governing how these fincancial entities can or can not use public money or function.

Doing that is proactive not reactive....which is what we are doing now as one outrage after another surfaces.

There are 2 general ways to do this.  One is to wirte a long list of things that the money can't be spent on.. A variation some kind of hierarchical list of the priorities the money should be spent on....and other lower priorities are put aside..like retnetion bonuses...or other forms of financial self dealing...like buying up other firms or paying themselves and their counterparties 100% on the dollar. The goal could be to maximize impact on the immediate, productive, not financial economy.

OR

Just fire scads of them, bring in staid local, community bankers and pay them normal wages....to live in NY City (which as a NYer I can affrirms is tons more costly than the rest of the country)

If we can't figure out what should be some principles and priorites and some control, accountability and enforcement measures, we can blame Geithner....but it seems to me to be more helpful to actually come up with Rules and Terms.  That way there is some standard of judgement.  

"Incrementalism isn't a different path to the same place, it could be a different path to a different place"
Stoller

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by: debcoop @ Wed Mar 18, 2009 at 02:31:03 AM CDT