Meh Culpa

Get Your Populist Rage Here: AIG to pay $165 million in bonuses

(UPDATE below)

Under Geithner and Summers, the government claims helplessness, but I don’t think they are helpless.  And they had to know this was coming.  The government–meaning we taxpayers, y’all–owns 80% of AIG, so how could they not know?  It was back in the day that these bonuses were set up for the same guys who played with swaps and derivatives and left AIG  teetering on the brink of disaster. The company was essentially bankrupt.

But that’s not all.  According to the NYT:

A.I.G. had set up a special bonus pool for the financial products unit early in 2008, before the company’s near collapse, when problems stemming from the mortgage crisis were becoming clear and there were concerns that some of the best-informed derivatives specialists might leave. It locked in a total amount, $450 million, for the financial products unit and prepared to pay it in a series of installments, to encourage people to stay.

After this, two more bonuses are to be paid in July and September to the tune of $220.4 million.  AIG’s CEO, Edward M. Liddy, has written to Geithner saying the salaries of these execs in the Financial Products Division have been trimmed to $1, but who the heck cares?  AIG was brutally mismanaged and this sort of payoff, this heinous payoff, is part and parcel of that folly. Of course,  Liddy argues that AIG is contractually obligated, and furthermore without bonuses these “talented” execs who caused the problem would walk.

I say: let ’em go.  Liddy’s position is morally bankrupt and pretty stupid.  There are more talented execs where those came from.  MBAs are everywhere, dontcha know.  Look in the unemployment lines.

I also say the government should take over AIG–because taxpayers aren’t getting their money’s worth when shareholders aren’t wiped out,* execs earn hundred of millions in bonuses and get to keep their jobs.

When will we ever see a return on OUR investment?

Like, never.

We’re going to be asked to give up portions of so-called entitlement programs, such as Social Security, which income is the only thing between many elderly women and bone-scraping, marrow-sucking poverty. In early January Obama said he wants to overhaul both Medicare and Social Security.  So we get Universal health care, but not really?  How does that work exactly?  Whence comes the money?

Don’t get me wrong, I think health care is a human right.  We citizens have made a contract with our government** in which we give up some rights (say, by paying taxes) and by doing so receive something in return from our government. The old theories considered that receiving social order was enough, but they imply that everyone acquires equal benefit, or as Hobbes would say: the “right to all things.” (Ha.)  If health care is a right, I don’t think government is working as well for everyone in the United States as it is in other industrialized nations.  Last year, about 75 million people in the US didn’t have enough insurance or they didn’t have any at all.  Imagine what that statistic is now that so many people are unemployed.  (<—- Scary, but elegant graphic.  Makes me want to move.)

So, yeah.  I don’t think AIG has a right to exist as an autonomous entity any longer. I think the leviathan has gorged itself aplenty and should be absorbed by the government. We have more important ways to spend our money–by taking care of our own.

UPDATE: Robert Reich on AIG, an excerpt:

The bonuses are part of employee contracts negotiated before the bailouts. And, in any event, Liddy explained, AIG needs to be able to retain talent.

AIG’s arguments are absurd on their face. Had AIG gone into chapter 11 bankruptcy or been liquidated, as it would have without government aid, no bonuses would ever be paid (they would have had a lower priority under bankruptcy law that AIG’s debts to other creditors); indeed, AIG’s executives would have long ago been on the street. And any mention of the word “talent” in the same sentence as “AIG” or “credit default swaps” would be laughable if laughing weren’t already so expensive.

This sordid story of government helplessness in the face of massive taxpayer commitments illustrates better than anything to date why the government should take over any institution that’s “too big to fail” and which has cost taxpayers dearly. Such institutions are no longer within the capitalist system because they are no longer accountable to the market. To whom should they be accountable? As long as taxpayers effectively own a large portion of them, they should be accountable to the government.

But if our very own Secretary of the Treasury doesn’t even learn of the bonuses until months after AIG has decided to pay them, and cannot make stick his decision that they should not be paid, AIG is not even accountable to the government. That means AIG’s executives — using $170 billion of our money, so far — are accountable to no one.

* Funny how that works.  In a normal capitalist world, shareholders would lose their investment when the company goes under.
** Remember John Locke and Jean-Jacques Rousseau?

March 15, 2009 Posted by | bailout(s), Economy, Executive branch, Obama administration, politics, recession, social theories, Treasury, unemployment | , , , , , , , , , , , , , , , , , , , , , , , , | 8 Comments

Reminder to self

Watching bipartisanship get a drubbing by the Republicans this week didn’t surprise me. I was hoping after the Inauguration that they’d settle down and play nice, but I wasn’t surprised when despite their promises (i.e., McCain’s to Obama), the party devolved into the same old harpy that’s plagued us since the era of Gingrich and the Contract on America (a pun).  I was reminded of something, though.  When I was almost of voting age, my dad–a reactionary Republican if ever there was one–explained to me how he came to his voting decisions:  he considered what would benefit him personally and voted for that.

My voting rationale is the antithesis of my dad’s. I vote for what I believe is right for the American people and for the country as a whole. I vote against war because, as a general principle, I don’t believe in war. I believe in direct, not indirect, self-defense.  I vote for choice because even if I don’t like the choice, I’ll defend a woman’s right to choose. If she wants to have a baby, that’s her choice regardless of whether I think it’s a bad choice.  (Case in point,  Nadya Suleman.  I thought she should have stopped by the first disabled child, but she had the right to choose to carry to what passed for term.  She also has a right to live with the consequences of her choices. Unfortunately, her children will have to live with those consequences, too.)

Had I been in Congress last fall, I probably would have voted against TARP because it rewarded the wealthy and the powerful at the expense of the regular people getting screwed.  From my point of view, helping distressed homeowners was the only reason to vote for TARP at all.  Although some people blamed those homeowners for not living up to their responsibilities, not all buyers understood what they were getting into. Many consumers didn’t have the education or they were defrauded by unscrupulous lenders like Countrywide or they simply lost their jobs.  (The actual rate of unemployment was 9.2% in April 2008.)

I also agree with Joseph Stiglitz that banks are in denial about their insolvency, that they created the problems that put Wall Street & Co. in this dire situation.  I believe that the insolvent banks should be nationalized–not as an act of vengeance, but ultimately for pragmatism’s sake–and that the bankers who are still running the show should be dismissed because they keep doing the same old things that don’t work.   Since he’s part of the same system, I probably would have suggested another Treasury Secretary than Geithner, too.  (But who would in her right mind would want that job?)

I was so relieved when Obama was elected that I suppose I relaxed more than I should have.   I even started winnowing my subscriptions to various and sundry progressive organizations. The Reminder to Self truly arose the other day when I discovered the administration will need continuous nudges about the things I believe in.  If I want torture ended, then I need to agitate against torture.   If I think Obama should stick to his campaign promise to get us out of Iraq, then I need to keep reminding him of that.  If I think Israel seems to be calling too many shots in our foreign policy, then I need to argue for an equal playing field in the Middle East.  And on it goes.

I care about so many issues.  I simply can’t tackle them all.  😐

February 14, 2009 Posted by | bailout(s), banks, Economy, Foreign policy, Iraq War, Israel, Middle East, Obama, Obama administration, recession, torture, Treasury, US Constitution | , , , , , , , , , , , , | 4 Comments

I’m not an economist and I don’t play one on TV

I’m just a mathematically challenged American, yet I,–yes, I!–have a plan for the banks.  And for that matter, the automobile industry.

I can remember way back  when the Former Husband was attending grad school for his MBA (*cough*in the 1980’s*cough*), the so-called logic of egregious salaries was gaining sway,  greed was all  good, and ethics were [possibly] questionable.*  Here we are, about 20 years later and  gone are the days when anyone can argue that executives are paid such vast sums because they’re the ones with the expertise, and if you want to keep them on the job, you need to  compensate them with astronomical salaries, bonuses, perquisites and parachutes.

Uhhh, hellooo?!


Here’s the Plan: I think we should fire all the overpaid executives at the top.   C’mon, who needs retention?  When those narcissistic fools drove their companies into the ground, they planted all of us taxpayers as well.  Then too,  the automobile moguls drove a stake into the Big Three’s collective heart, the one pumping with the lifeblood of its distressed employees.   You know, the folks who had some of that $28 an hour lifeblood siphoned to keep the bottom line from bottoming out.  If any other American employee had done such a masterful job,  he  (or she) would have been pink-slipped as soon as the ink on the annual report dried red.  Hey, not even HP’s former CEO, Carly Fiorina, was spared when she failed to produce after the merger with Compaq, so neither Wall Street nor Detroit should off the hook.  Besides, the corporate cultures could use a little fresh air.  The thing is,  you can’t open the windows without throwing out all the upper level execs.

What, we can’t do that?

Sure, we can. They aren’t the only people in the world who know how to run a business, whether it be money business or car business.  Import ’em if you have to.

Next, do away with creative accounting. Let’s see those balance sheets balance without any fancy tricks. If they don’t,  then nationalize the insolvent banks.  (I’m sure Geithner and Bernanke already know which are which. They’re just not telling.) If shareholders have to take a hit, then so be it.  Shareholders know  going in that they’re taking a risk.  We shouldn’t change the rules of the game just for them.

Merge Chrysler and General Motors.   Sell off everything  that can’t make a profit, but keep GM’s parts business for all the used cars.  That’s a market that won’t go away.  Sell a line of Light Weight Classics that make 60 mpg for starters.  (If China can do it now, why can’t we?)   Bring in new design teams and Green Teams.  Let there be independent quality control.  Educate the workers, and along with them, repair techs, in greening the fleets.  Now that’s an investment.

(If I have any other ideas, I’ll let y’all know…  :D)

* I think the Former Husband’s class was asked a rhetorical question that went something like this: “If you had the chance to steal $40,000 (or $100,00) and get away with it, would you?” When the fundage increased, ethics decreased by an equal margin.  It was a long time ago, but I’m pretty sure no one said they would resist temptation.

February 13, 2009 Posted by | automakers, bailout(s), banks, Chrysler, Economy, Federal Reserve, GM, recession, Treasury | , , , , , , , , , , | Leave a comment

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