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This page contains a single entry from the blog posted on March 21, 2009 8:28 PM. The previous post in this blog was Worst ending to a basketball game. The next post in this blog is Paulson stadium bonds will be subprime. Many more can be found on the main index page or by looking through the archives.

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Saturday, March 21, 2009

AIG bonus scandal worsens

It turns out they lied about the amounts.

It's time for the government to close out the 20% private shareholders of AIG, and replace all the executives of that awful company with uniformed government employees making no more than $165,000 a year. It's either that, or watch things just get uglier.

Comments (18)

Now I am really shocked!

There may be a few of these left, if you hurry.

STEVENS: ... You've got to get a mental attitude that these guys can't really hurt us. You know, they're not going shoot us. It's not Iraq. What the hell? The worst that can be done, the worst that can happen to us is we round up a bunch of legal fees and might lose and we might have to pay a fine, might have to serve a little time in jail.

You gotta check this out, too, for additional insight and review:
On the Edge of the Volcano

Some of Cockburn's exquisite gems:

"At first the White House put up Summers to argue that America is a nation of laws, among them the law of contract, as applied to AIG employees. Only a man who had to resign the presidency of Harvard after claiming that woman are in some ways stupider than men would be capable of such idiocy.

Obama is in the process of asking millions of Americans -- autoworkers, pensioners, veterans to accept annulment of contractual obligations to them by the US government. Suddenly they’re asked to respect retention contracts to AIG losers, many of whom have quit the company anyway.

The sight of Summers and AIG’s Edward Liddy solemnly invoking sanctity of contracts aroused particularly bitter hilarity in Louisiana.

As Rebecca Mowbray reports in Thursday’s Times Picayune in an excellent piece headlined, “Contract sanctity at AIG, but not Allstate?”:

“Liddy ran Allstate Corp. from when it was spun off from Sears, Roebuck & Co. in 1995 until the end of 2006. During that time, Allstate perfected the practice of getting tough with policyholders to delay and deny claims, as documented in the book by New Mexico attorney David Berardinelli, From Good Hands to Boxing Gloves: the Dark Side of Insurance.

“While that book dealt mainly with a strategy for tamping down car insurance claim payouts to increase profitability, many believe those same practices could be seen at work en masse after Hurricane Katrina in Louisiana, where thousands of policyholders filed suit against the Illinois company…

“Evidence emerged after Hurricane Katrina that Allstate shifted the burden of paying for wind damage covered by its homeowners policies onto taxpayers by overcharging the federal flood program.”

In the wake of Hurricane Katrina Liddy’s Allstate made haste to dump contractually obligated policies the firm had issued to thousands of Louisiana homeowners."

Just recharacterize the AIG executives (and the like) as lobbyists for their counterparties, both foreign and domestic. All the bailouts, most recently beginning with the GSE takeovers, treat the named -- and admittedly bankrupt -- beneficiaries as mere shells/conduits for others.

Think Jack Abramoff.

But for the delivery of the unearned gifts from the government these lobbyists would not get paid. It is a commission, to be the front men and arguably provide secrecy to their supposedly more savory clients.

Let someone like Patrick Fitzgerald "follow the facts." (And recover the booty to boot.)

The bonuses at AIG are just an interesting sideshow. Do not be distracted too much from the big issues. How much were the bonuses? about 200 million, give or take. How much money have taxapayers given to AIG? Something under 200 BILLION, give or take, so far. The BILLIONS of dollars are where the key policy issues are found. The BILLIONS are where the fraud and waste lurk. The BILLIONS are where the politicians earn their campaign contributions. the BILLIONS create the national debt that will never be paid off.

Joel: Thank you for pointing out the all too obvious to the torches & pitchfork crowd. The media, Congress and the administration are doing a first rate job of shifting the blame to where the real anger should be directed.
The billions of dollars in bailouts have been done with virtually no scrutiny or accountability.

Joel, you are right on the money. The outrage over these bonus payments are a distraction. It is the responsibility of those in Washington for the oversight of these payments. They are the ones who need to be held accountable. Granted, the AIG execs are a symbol of much that has gone wrong, but they are far from being the real bad guys in all of this.

The heavy-duty policy questions are important. For example, just how much might AIG owe on "credit default swaps?" Is AIG insolvent? Hopelessly insolvent? When AIG takes government money and pays it out, who gets the money? [The Wall Street Journal just had an article showing that some hedge funds are recipients. Why should taxpayers help hedge funds?] Should AIG be put into bankruptcy? What other dominoes would fall? Just how bad is the whole situation? Is the government being honest with us, or is the situation actually worse than is being revealed? What influences the government's decisions to give billions to certain "winners?"

Liddy was a director on the board of Goldman Sachs until last fall when he became chief executive at AIG.

There are articles on the internet indicating that Goldman Sachs may have had a lot to do with AIG's collapse.

Try Saturday's Los Angeles Times for one such article.


Gibby: "but they are far from being the real bad guys in all of this."

Sort of like Oliver North.

Follow the bail out money.. see who is profiting from these tax payer dollars... our elected reps..They don't care what we think...

http://www.newsweek.com/id/190363

In all the rage and hand wringing over these bonuses, we find the sanctity of contract law an impediment. None of these legal experts have mentioned what I find the most relevant legal principle which seems applicable - the equitable theory of unjust enrichment. Despite the contractual obligation, if it can be shown that the recipients produced little or nothing of value to the company for these bonuses, then they have been unjustly enriched and a suit in equity might recover the overpayments.

It is not a case of unjust enrichment; the bonuses were not performance-based. They were retention payments designed to keep employees on the job until a specified date.

Liddy is the person who acted improperly. As the CEO brought in after the government took over, his responsibility was to AIG's majority owner. That he did not stop or delay the payments is a dereliction of duty. Obama should have fired him immediately.

Any contract providing bonus payments in the absence of earnings/income from which to pay the bonus should be void as against public policy. Should a company be made insolvent by obligations to pay bonuses when it lacks sufficient capital (without bailout funds) to do so? Me thinks not, but who am I, just some schmuck with an opinion. Although I am a taxpayer and thus a putative plaintiff.

Joel: Thank you for pointing out the all too obvious to the torches & pitchfork crowd

Well, duh.

I think most people have a pretty good idea that the bonuses are just an indication that the bailout money is being mishandled. The fact that the administration can't seem to do anything about even this tiny part of the money they've given to just AIG makes it look like the rest of the money (to AIG and elsewhere) is just being dumped off at the doors of the bankers and investment houses like so many palettes of cash in Iraq.

So yeah, Joel, thanks for the obvious.

This is what we called in cahoots!

Lob
Lovebirds

Yes, Joel makes a point. But you all have studied history. Most major historical changes occur from a so-called minor incident, circumstance. I see the AIG bonuses as a beginning point for a historical change, but not like the Change that Obama calls for.


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