The Obfuscation Report

I know. I've heard all the rhetoric. It's too big to fail. It'll mess up the world economy.

I've got news for you folks, the world economy is already fucked.

It's time to stop the bailouts. Break up AIG and sell what you can to get back taxpayer money.

AIG executives who got these huge bonuses should be investigated for fraud.

Screw forcing them to "pay back" the bonuses. They should be doing jail time.

Secondly Obama needs to dump Tim Geithner and Larry Summers. These guys have been in bed with Wall Street too long.

The contracts that AIG executives have cited as justification for bonus payments insured that they would receive the money regardless of massive losses.

Rep. Barney Frank (D-Mass.), who read from the contracts in question at a hearing of a subcommittee of the House Financial Services Committee Wednesday, suggested AIG executives structured the contracts in such a way in anticipation of dramatic losses.

Frank, chairman of the committee, also said that if AIG CEO Edward Liddy did not provide the names of the recipients of the bonuses, he would subpoena them. He suggested the federal government file suit to reclaim the bonuses, arguing that they are illegitimate since the company performed so poorly.

"I looked at the contract that's being invoked as unassailable," said Frank, "and here's what it says:

The bonus pool for any compensation year, beginning with the 2008 compensation year, will be effected by the incurrence of any realized losses arising from any source subject to the limitations set forth in section 3.07.

And section 3.07 says,

Notwithstanding any other provision of the plan for any compensation year beginning with 2008, there shall be a 67.5 million dollar limit per year on the extent to which the pool can be reduced.

Frank went on to read a passage that insured that even if AIG lost tens of billions of dollars, those responsible would still be rewarded. "What it says is," said Frank, "if the losses in the year exceed 225 million dollars, then that loss above 225 million is irrelevant to reducing the bonus pool. Two hundred and twenty-five million turned out to be a rounding error in their losses."

Frank translated the language. "It means that if in fact they have a net loss for the year, they still get the bonuses. This is the problem. This is the problem with the contracts," he said. "So they give themselves contracts that effectively insulate them from losses."

The structure of the contracts, Frank said, suggests that AIG executives anticipated major losses, yet sought to protect their compensation.

Such contracts could be susceptible to a court challenge brought by the federal government as the owner of the company. "I do believe that it is time for us to assert our ownership rights under this arrangement," he said. "That may be a controversial lawsuit, but it's a better one than trying to interfere under our regulatory authority."

Anger at American International Group knows no party lines. But one top Republican isn't joining in. On Monday and Tuesday, Rush Limbaugh defended the insurance giant and their bonus payouts:

"A lynch mob is expanding: the peasants with their pitchforks surrounding the corporate headquarters of AIG, demanding heads. Death threats are pouring in. All of this being ginned up by the Obama administration."

When one of his own callers said he agreed with President Obama on this one, Limbaugh replied: "Let me ask you a question. ... You have a company -- let's take AIG out of this 'cause they're so emotionally charged. Let's say that the company being bailed out is the XYZ Widget Company. ... We need them to manufacture widgets and sell widgets and so forth. So why in the world -- or how do you get to the point where you're going to bail out the company, but you don't want the employees to get paid?"

The caller protested that the AIG employees were already getting paid plenty, and Limbaugh responded that the only thing stopping him from making just as much was himself:

LIMBAUGH: Do you know what? And I mean this from the bottom of my heart, Nathan -- the only person stopping you is you. There's 250 -- he hung up. Damn it, he hung up. Right?

Nathan, if you're -- there's $250,000 out there for you, Nathan. If you really want it, you really want to earn that kind of money, it's out there. Now, it's going to -- and don't -- I'm not being insulting -- it's going to take hard work.

Labels: Leader of The Republican Party

AIG STAFF: WE DESERVE THIS MONEY

AIG’s new management team last year proposed that its employees give up their “retention” bonuses, or at least reduce them. The response from the 370 or so employees set to rake in $450 million in bonuses through 2010?

Take a hike.

“We suggested that early on, but there are people who feel this money was due them,” a source close to the company told The Hill.

It apparently didn’t matter that taxpayers have provided $170 billion and counting to bail out AIG. “Quants,” the people who put together the computer-programmed algorithms behind the complicated hedges and trades that brought down the company, pushed back hard against any notion they should sacrifice their bonuses, the source said.

If that doesn’t warm the hearts of taxpayers and lawmakers alike, maybe this will: Many of those receiving bonuses already have made enough money not to have to work again.

Not all of the workers in AIG’s financial products division were taking home million-dollar bonuses. But according to New York Attorney General Andrew Cuomo, the division’s top recipient got $6.4 million, while the top 10 bonuses totaled $42 million. Seventy-three people received bonuses of $1 million or more, according to Cuomo, who subpoenaed the company for information.

“It’s terrible; it’s disheartening,” the source said.

That’s the line AIG CEO Edward Liddy is expected to take with Congress on Wednesday during what is expected to be a grilling before a House Financial Services subcommittee.

Liddy, who contributed $2,300 to Sen. John McCain’s (R-Ariz.) presidential bid last year, took on an annual salary of $1 when he came to AIG on Sept. 17, 2008, amid the company’s collapse.

Unlike other corporate executives who have testified over the past year on government bailouts, Liddy did not travel to Washington this week on a private plane; he took the train.

Liddy will tell Congress what he already laid out in a letter over the weekend: that AIG is doling out the bonuses as a business decision. That argument is unlikely to win over many lawmakers, however.

AIG could have decided to keep the money, but determined it might then have had to pay $1 billion in damages in legal fees and lawsuits, more than double what it was contractually obligated to pay the division’s employees in bonuses. It also figured it would have lost the quants, something Liddy and others felt they couldn’t risk.

The beleaguered company believes AIG’s quants, who created the complicated credit swap defaults that got much of Wall Street into the financial crisis, are the only ones who can unwind them. If they leave, it could make today’s crisis worse.

“The risk is, you lose them, you pay close to $1 billion, and you [can’t] unwind the books,” the source said.

For the last three months, AIG worked with officials at the New York Federal Reserve Bank on how they might avoid paying the bonuses, the source said. In the end, AIG decided there was a greater risk to the company of not paying the bonuses.

“Nobody liked the decision. Nobody liked the result, including us,” the source said.

AIG’s previous management signed contracts providing $450 million in bonuses to the financial division. On Friday, $165 million went out the door, and another $230 billion is set to be paid in 2010.

The names of the AIG executives who received the bonuses have not been released.

The Financial Services subcommittee hearing on Wednesday had been scheduled previously, and AIG initially believed it would be about what happened at the company, and that Liddy would tackle questions such as when taxpayers will be paid back for the 2008 bailout.

With the news of the last week, the company expects a dramatically different line of questions.
Liddy will be on the second panel with Rodney Clark, who is managing director of insurance ratings at Standard & Poor’s. Officials from the Office of Thrift Supervision and the Government Accountability Office will testify on the first panel.

— Ian Swanson and Silla Brush

AIG gives GM headache

AIG just made General Motors CEO Rick Wagoner’s life that much tougher.

Wagoner is asking GM’s unions, bondholders and dealers to make concessions as he seeks to restructure a company that is asking for more taxpayer help. GM is due to present a report on its long-term viability by the end of the month.

GM will have to do this in the wake of news stories about AIG granting $165 million in bonuses to employees blamed for escalating a financial crisis that helped put GM in its predicament.

Wagoner knows about populist anger as well as anyone. He was pilloried late last year for taking a corporate jet to Washington to plead for help. The next time, he drove with other executives.

“It had a different kind of feeling,” Wagoner said Tuesday, remembering his experience on Capitol Hill and how it differed from working with administration officials. “I can tell you that personally.”

While AIG wasn’t the main point of his message to reporters on Tuesday, he was ready to talk about how GM is different from the insurance giant.

Wagner drew “a dramatic distinction” between AIG and GM, which he said had a greater role in the economy of “Main Street” but has received far less government support. While AIG has secured $170 billion from the government, GM has received about $13.4 billion, though it is asking for more.

Speaking at a breakfast sponsored by The Christian Science Monitor, he also insisted every part of GM is making sacrifices, from unions to dealers and suppliers to executives who have cut their salaries. Even though AIG has come under criticism for funneling $165 million in bonuses to executives last week, Wagoner said most salaried employees at GM have taken pay cuts.

“Everybody’s got skin in the game,” he said. “So my pitch is we’re all in this, and we understand it’s a tough ask, and we’re doing everything we can to make it as fair for everybody as we can.”

As demonstrated by the 1929 stock market crash and the ensuing Depression, corporate America and the elite upper class cannot be trusted despite what Conservatives try to tell you. While conservatives taut personal responsibility and self-reliance as central themes of their ideology they seem to forget about the little guy and be very willing to bailout their corporate allies. For example, while they were all for bailing out Wall Street and the banks with taxpayer money, they tried to destroy the blue-collar workers in the auto industry wanting the companies that employeed them to collapse (i.e. Senator Richard Shelby of Alabama) even though the auto corporations needed only a fraction of what the finanancial institutions needed.

What is also apparent is that conservatives (like an asshole who goes by Gouligo) thinks that everything in America is achieved based on hard work and merit. While that plays a part of it, much of it is based on who you know (i.e. Blackwater and the former Halliburton getting government contracts because of their ties to Bush and Cheney). If you do not have money and power, you have nothing. Thus, government serves the purpose of looking out for the least of us in society. Many Conservatives believe that O.J. Simpson beat the murder charge because he was black with a majority black and Hispanic jury (despite prosecutor Marcia Clark pointing out that she has had juries of Blacks and Hispanics convict other people of color to die before). The reality is that O.J. like Robert Blake and Scooter Libby have access to money and power, which allows them to beat legitimate criminal charges that the regular blue collar guy could not. The point is that the wealthy in society should pay more taxes because they get more benefit out of society. Case in point if you tried to get a meeting with the President of the United States you would get laughed at but Bill Gates, Warren Buffet, Brad Pitt, or any other wealthy individual has access to the powerful in our government. So to all Conservatives who think that the playing field is level, well I guess you are really stupid or really hate your fellow Americans because you think that a social safety net is for the weak and restrictions on corporate assholes is wrong. The danger of private industry is that they can make bad decisions that affect your life and you cannot do anything about it. At least with government you have some ability to affect the outcomes through elections, protests, etc. Government has the power to counteract the bad decisionmaking of Wall Street that allows corporate assholes to borrow money they cannot afford to pay back, sell bad securities tied to bad mortgages that people of average intelligence were tricked into by unscrupulous brokers and lenders.