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Another Round of AIG Bonuses

03 Wednesday Feb 2010

Posted by Craig in economy, Financial Crisis, Politics, Uncategorized

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AIG, bonuses, Financial Products division

Under the word “chutzpah” in the dictionary, it should say “also see AIG.”

“American International Group plans Wednesday to pay another round of employee bonuses, worth about $100 million, said several people familiar with the matter, a year after similar payments at the bailed-out insurance giant infuriated many Americans and inflamed Washington.”

Yes, Washington was “inflamed.” And they did what? Bluster, as usual.

“This week’s retention payments go to those employees at the company’s Financial Products division who agreed recently to accept 10 to 20 percent less money than AIG had initially promised them two years ago.”

How very generous of them. Especially taking into account that the Financial Products division is the “unit which traded in the derivatives that imploded in September 2008, leading to the biggest government bailout in history.” That would be the implosion that left the taxpayers on the hook for over $180 billion. These are the people AIG needs to retain? They don’t need to be re-tained, in fact some of them should be de-tained. Like in the crossbar hotel.

It gets better:

“The agreement calls for employees who still work for the financial products unit to accept 10 percent cutbacks, while employees who have left the company must take 20 percent cuts…But some people have not agreed to the cutbacks and are insisting on the entire amounts. People with knowledge of the negotiations said that a vast majority of those still employed at A.I.G. had accepted the cuts, but only about a third of the former employees had done so.”

Some are even going to court:

“Andrew Goodstadt, a New York lawyer who represents more than a dozen current and former Financial Products employees, said he hoped the deal would be a step toward normalcy. “My clients are looking forward to getting paid their contractual entitlements,” he said, “and resolving this matter once and for all.”

Yes Mr. Goodstadt, your honorable clients who just want AIG to make good on its agreement with them. How about what they agreed to do after the last round of obscene  bonuses hit the fan:

“At the height of the controversy last spring, employees at the firm signaled they would return a total of $45 million by the end of 2009. A government audit in the fall showed that only about $19 million was returned.”

So by my calculations counselor, your clients still owe us $26 million. Cash only please, no checks.

The "Gang of Eight" on the Senate Banking Committee

02 Tuesday Feb 2010

Posted by Craig in Congress, Democrats, economy, Obama, Republicans, Uncategorized, Wall Street

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Ben Bernanke, Bob Corker, Chris Dodd, Chuck Schumer, Jack Reed, Judd Gregg, Mark Warner, Michael CrapoJamie Dimon, Obama, openness, Richard Shelby, Senate Banking Committee, Timothy Geithner, transparency

Since the “Gang of Six” in the Senate Finance Committee worked out so well, and produced such outstanding results (sarc) in writing health care reform legislation, why not just repeat the process in the Senate Banking Committee as they tackle reforming the financial industry? More openness and transparency from our elected officials in Washington:

“For two months, four pairs of Senate Banking Committee members — each with one Democrat and one Republican — have been meeting behind closed doors to reach a bipartisan compromise on regulatory reform.”

Here are the 8 senators involved, along with the amounts each has taken from financial industry PACs:

Chris Dodd, (D-CT) $3,124,237
Richard Shelby (R-AL) $2,171,369
Mark Warner (D-VA) $330,800
Bob Corker (R-TN) $426,750
Jack Reed (D-RI) $1,554,449
Judd Gregg (R-NH) $709,941
Chuck Schumer (D-NY) $1,629,295
Micheal Crapo (R-ID) $1,237,955

That’s a grand total of $11,184,796. And these are the people who are going to reform the financial system? That’ll be the day. But as good as things are for this new “Gang of Eight.” they’re about to get better:

“…the president’s new proposals have already provoked a sharp increase in the volume and energy of the lobbying on regulatory reform, with more chief executives stepping over their government relations staff to request personal meetings with lawmakers. The big banks, the lobbyists say, have become increasingly alarmed that the legislative process may move in unexpected directions outside their control.”

Well, we certainly have to put a stop to that. Can’t have anything going on that the banksters can’t “control,” can we? Speaking of banksters:

“...Jamie Dimon, chief executive of JPMorgan Chase had lunch with Mr. Obama last Tuesday, and then met separately on Friday with the Federal Reserve chairman Ben Bernanke and the Treasury secretary, Timothy Geithner.”

No doubt to discuss who they like in Sunday’s Super Bowl.

Reduce the Deficit in a Recession? Hello 1937

30 Saturday Jan 2010

Posted by Craig in economy, Obama

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1937, bi-partisan commission, Obama, reduce deficit, Roosevelt Recession, spending freeze, State of the Union address

From Bloomberg:

“President Barack Obama said reducing the federal budget deficit is “critical” to ensuring future growth as the U.S. economy recovers from the recession...Obama in his address today highlighted some of the measures he proposed in his Jan. 27 State of the Union address, including a three-year freeze on spending (see Deficit Peacocks) for some domestic programs (but certainly not the sacred cow MIC) and creation of bipartisan commission to draft deficit-reduction recommendations for Congress to consider.”

.

Ah yes, the old bi-partisan deficit-reduction commission. The place of refuge for the gutless politician who doesn’t want to go on the record with a controversial vote. D.C. CYA at it’s best.

Also President Obama, the old adage is that those who do not learn the lessons of history are doomed to repeat them. 1937 for example.

That was the year FDR listened to the fiscal hawks of his day and decided to cut spending and balance the federal budget, assuming that the worst of the Great Depression was over. The result? Unemployment rose again, the economic growth of the previous 3 years was reversed, and the country slid back into what became known as the “Roosevelt Recession.” The dreaded double-dip.

"Deficit Peacocks"

30 Saturday Jan 2010

Posted by Craig in economy

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Center for American Progress, deficit hawks, deficit peacocks, New York Times, Paul Krugman

In his op-ed in Thursday’s New York Times Paul Krugman refers to Michael Linden’s piece at the Center for American Progress which makes the distinction between what he calls “deficit hawks” and “deficit peacocks.” Linden describes the hawks as, “those who believe that the long-term deficits pose serious risks, but that short-term deficits are necessary and wise during a recession” and “those who believe that deficits are always risky and should be avoided at all costs.”

The two have this is common:

“Both kinds of hawks are genuine in their concern over our nation’s finances and are sincerely committed to working toward a more sustainable federal budget.”

Then he turns to the “peacocks:”

“Deficit peacocks like to preen and call attention to themselves, but are not sincerely interested in taking the difficult but necessary steps toward a balanced budget. Peacocks prefer scoring political points to solving problems.”

Unfortunately, this category takes in the lion’s share of our elected officials in Washington–on both sides of the aisle–whose top priority is their own re-election, and who see those “difficult but necessary steps” as an impediment to that. After all, difficult choices are not often popular choices.

Linden then lists 4 ways to distinguish the hawks from the peacocks. Peacocks:

“1. Never mention revenues.
Increasing revenues is going to have to be part of the solution for meeting the fiscal challenge. Any suggestion that we can solve this problem solely by cutting spending reveals an utter misunderstanding or ignorance of the budget numbers. Balancing the budget without raising any additional revenue 10 years from now would require cutting every program in the entire budget by more than 25 percent, including all defense spending, Social Security and Medicare benefits, air-traffic-control funding, veterans’ benefits, aid to schools, job training programs, agriculture subsidies, highway maintenance, and everything else.

2. Offer easy answers.
We face a very large budget gap over the coming decade, and the scale of the problem is such that no one solution is going to solve it all. It is going to take a mix of increased revenues, spending reductions, and improved government efficiency to get our fiscal house in order. Those who claim that we could get the budget back to sustainability if we only cut out earmarks, or say that the solution is to simply freeze discretionary spending, are just peddling fiscal snake oil.”

(Note: this article is dated January 20, prior to President Obama’s State of the Union address)

“There are no easy answers to our budgetary challenges. We have an aging population, rising health care costs, and a tax code full of loopholes, exceptions, and targeted subsidies. It is going to take more than simple solutions to meet these challenges. If you hear the words, “all we have to do to balance the budget is…” then you know whoever spoke them hasn’t fully grasped the scope of the problem.

3. Support policies that make the long-term deficit problem worse.
Congress voted repeatedly over the past eight years to make huge tax cuts and create new spending programs without offsetting any of those costs. Many of the very same members of Congress who voted for those policies are now loudly urging the president to clean up the mess that they themselves made.

4. (Sorry, Sen. McCain, but facts is facts.) Think our budget woes appeared suddenly in January 2009.
More than 50 % of 2009’s huge deficit can be directly attributed to policies enacted by the previous administration, and that is not counting the 20 percent that was due to the economic disaster that began and gathered its momentum on President Bush’s watch. President Obama’s efforts to rescue the economy, on the other hand, are responsible for only 16 percent…The Bush-era tax cuts alone will add more than $5 trillion to the budget deficit over the next 10 years.”

Linden concludes:

“There are people from all parts of the political spectrum who strongly and sincerely believe that our current budget path is unsustainable and are committed to taking concrete steps to put the country on a better path. But there are also many who are only interested in scoring political points or in getting in the way of progress on this issue. Sometimes it can be difficult to distinguish between the two. Now, all you need to do to tell the former from the latter is apply any of these four handy tests.”

Geithner, Paulson, and Bernanke at the Oversight Committee Hearings

29 Friday Jan 2010

Posted by Craig in Congress, economy

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Bear Stearns, Ben Bernanke, Dan Burton, Goldman Sachs, Hank Paulson, House Committee on Oversight and Government Reform, Neil Barofsky, New York Federal Reserve, Timothy Geithner

Putting different pieces of testimony from yesterday’s hearings before the House Committee on Oversight and Government Reform, it’s easy to see how the New York Federal Reserve’s “backdoor bailout” of Goldman Sachs and other large banks, via insurance giant AIG, became such a convoluted mess–nobody knew anything about it. Least of all the people who were allegedly in charge– Larry, Moe, and Curly former Treasury Secretary Hank Paulson, Fed chairman Ben Bernanke, and then head of the New York Fed and present Treasury Secretary Timothy Geithner.

“Henry Paulson, who was Treasury secretary at the time, told the House of Representatives Oversight and Governmental Affairs Committee that he had no role in the negotiations that settled the banks’ insurance-like contracts, called credit default swaps, with AIG for 100 cents on the dollar..”

Geithner: “I had no role in making decisions regarding what to disclose about the specific financial terms.. and payments to AIG’s counterparties.” To which Rep. Dan Burton replied:

“U.S. Federal Reserve Chairman Ben Bernanke said on Wednesday he was not directly involved in negotiations with the counterparties of insurance giant AIG, having delegated the duties to the New York Fed.”

“It stretches credulity for us to believe that you had no role in this and didn’t know anything about it when your attorneys and people that worked for you were sending emails all around the place and you were the head of the Fed and you didn’t know anything about it. It just doesn’t make any sense to me and I think a lot of my colleagues feel the same way.”

One thing is clear, though. Despite the Three Stooges being completely in the dark, Government Goldman Sachs made out like bandits in the entire sordid affair. I’m sure it’s strictly coincidental that:

“Paulson is an ex-Goldman chief executive, Geithner’s chief of staff previously worked for Goldman, and Dan Jester, a Treasury point man in the AIG bailout, is a Goldman alum.”

That surely had nothing to do with this:

“An unredacted document obtained by the Huffington Post list the damage in detail. Goldman Sachs alone, for instance, got $14 billion in government money for assets worth $6 billion at the time — a de facto $8 billion subsidy, courtesy of taxpayers.”

But yet Geithner testified yesterday that, “In the end, the prices paid for the securities were their fair market value.” Fair to who, Tim?

Geithner also testified that time was of the essence in bailing out AIG, that there was no time to negotiate terms which might be more favorable to the Fed. But yet:

“Neil Barofsky, the special inspector general tracking the use of taxpayer bailout funds…disclosed this week that he’s opened investigations into the Fed’s candor about the matter, recalled that Paulson, Bernanke and Geithner leaned weeks earlier on failing investment bank Bear Stearns to accept $2 a share to turn over its assets to banking goliath J.P. Morgan Chase.”

I guess there aren’t enough Bear Stearns friends in high places.

Fannie and Freddie Get a Blank Check for Christmas

29 Tuesday Dec 2009

Posted by Craig in economy, Obama, Politics

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blank check, Christmas Eve, executive bonuses, Fannie Mae, Freddie Mac, Geithner, plutocracy, Treasury Department

I hope everyone had a great Christmas and that Santa brought you everything you wanted. He certainly was very good to Fannie and Freddie. Only in their case, Santa is the American taxpayer, you and me. One thing is clear, the plutocracy never sleeps, or takes a holiday. How about this for a Christmas Eve news dump?

“The Obama administration pledged on Thursday to back beleaguered mortgage finance giants Fannie Mae and Freddie Mac no matter how big their losses may be in the next three years.”

This brought to you courtesy of the accounting firm of Change, Openness, and Transparency:

“Under a law put in place before the government seized the two mortgage agencies in September 2008, Treasury Secretary Timothy Geithner had until the end of this year to increase the limit without asking Congress for approval…The administration waited until financial markets had closed on Christmas Eve to make the announcement…”

The previous cap on money poured down the Fannie and Freddie black hole was a combined $400 billion, $200 billion each, of which only(?) $111 billion has been used so far. So why change it to “unlimited?” Here’s an explanation:

“If the Treasury is removing the cap, they obviously expect the losses to skyrocket (even though they deny this publicly). This could be happening because the Treasury already knows how much Fannie and Freddie are going to declare as losses this quarter.”

Santa (again, that’s you and me) was also very good to Fannie and Freddie executives:

“But even as the administration was making this open-ended financial commitment, Fannie Mae and Freddie Mac disclosed that they had received approval from their federal regulator to pay $42 million in Wall Street-style compensation packages to 12 top executives for 2009…The compensation packages, including up to $6 million each to Fannie Mae and Freddie Mac’s chief executives, come amid an ongoing public debate about lavish payments to executives at banks and other financial firms that have received taxpayer aid. But while many firms on Wall Street have repaid the assistance, there is no prospect that Fannie Mae and Freddie Mac will do so.”

That’s $6 million each for CEOs whose companies have lost a combined $200 billion. Nice work if you can get it, and you can get it if you happen to have the Treasury Secretary on speed dial.

The Agonist sums up the entire cluster____ about as well as I’ve seen it:

“We are getting very used to watching the federal government operate with only the sketchiest information on what it is doing. Most everything seems to be done behind doors and in secrecy. That’s what makes this brief announcement about Fannie Mae and Freddie Mac so troublesome. When the federal government starts talking about unlimited guaranties to cover future losses, our biggest worry ought to be that whatever large number we can contemplate is included under the word “unlimited”, the government has an even larger number in mind.”

Government of the wealthy and powerful, by the wealthy and powerful, and for the wealthy and powerful. Some things never “change.”

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