Monday, March 16, 2009

Geithner: AIG Bailout and Bonuses

UPDATE, March 18, 2009: Geithner Caves on AIG Bonuses, Defends Liddy
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UPDATE: Obama: AIG can't justify 'outrage' of exec bonuses

President Barack Obama declared Monday that insurance giant American International Group is in financial straits because of "recklessness and greed" and said he intends to stop it from paying out millions in executive bonuses.

"It's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay," Obama said at the outset of an appearance to announce help for small businesses hurt by the deep recession.

..."How do they justify this outrage to the taxpayers who are keeping the company afloat," the president said.

...Noting that AIG has "received substantial sums" of federal aid from the federal government, Obama said he has asked Treasury Secretary Timothy Geithner "to use that leverage and pursue every legal avenue to block these bonuses and make the American taxpayers whole."

Obama, Geithner, Barney Frank, and others are yapping about the outrage of the bonuses.

Obama doesn't slam Geithner for his role in structuring the AIG bailout. Not one word.

Last fall, Geithner wasn't concerned about bailout money being used for bonuses. He didn't attach strings, like no bonuses, when he put together the bailout.

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Treasury Secretary Timothy Geithner is a train wreck.

This supposedly brilliant man, so brilliant and so critical to solving the economic crisis that his tax cheating ways were excused, is a screw-up. He's a bungler. He's in way over his head.

Example: The $165 million in bonuses that AIG plans to pay out after it received the $170 billion taxpayer bailout.

From the New York Times:

Obama administration officials and Republicans alike were nearly universal in condemning the $165 million in bonuses that the American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, is to pay executives in the business unit that brought the company to the brink of collapse last year.

“There are a lot of terrible things that have happened in the last 18 months, but what’s happened at A.I.G. is the most outrageous,” said Lawrence H. Summers, President Obama’s chief economic adviser, during an appearance Sunday on ABC’s “This Week With George Stephanopoulos.” “What that company did, the way it was not regulated, the way no one was watching, what’s proved necessary — is outrageous.”

The bonus plan established for the financial products unit before the federal government stepped in called for $220 million in retention pay for 400 employees for 2008. About $55 million of that was paid in December and the remaining $165 million was paid on Friday.

The retention plan also calls for another $230 million in bonuses for 2009 that are due to be paid by March 2010. Combined with the 2008 bonuses, that would bring the total retention pay for financial products executives to $450 million. But in response to pressure from Treasury Secretary Timothy F. Geithner, A.I.G. agreed to reduce its 2009 bonuses for the financial products unit by 30 percent.

The payments to executives in that unit are in addition to $121 million in previously scheduled bonuses for the company’s senior executives and 6,400 employees across the sprawling corporation. Last week, Mr. Geithner pressured A.I.G. to cut the $9.6 million going to the top 50 executives in half and tie the rest to performance.

The payment of so much money at a company at the heart of the financial collapse that sent the broader economy into a tailspin will almost certainly fuel a popular backlash against the government’s efforts to prop up Wall Street.

Word of the bonuses last week stirred such deep consternation inside the Obama administration that Mr. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them.

Austan Goolsbee, staff director of the president’s Economic Recovery Advisory Board, on Sunday detailed Mr. Geithner’s reaction.

“He stepped in and berated them, got them to reduce the bonuses following every legal means he has to do this,” Mr. Goolsbee said on “Fox News Sunday.” “I don’t know why they would follow a policy that’s really not sensible, is obviously going to ignite the ire of millions of people, and we’ve done exactly what we can do to prevent this kind of thing from happening again.

Mr. Summers suggested that the government’s ability to require the bonuses be scaled back was restricted by preexisting contracts, even though he did not specify what those restrictions may be.

“We are a country of law,” said Mr. Summers, one of several economic officials to hit the Sunday-morning talk show circuit. “There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system.”

People seem to be forgetting Geithner's role in bailing out AIG

From The American Spectator, November 24, 2008:

Geithner became the go-to guy for failing financial firms, and was at the "center of action" for the AIG bailout, according to the New York Post. He "quarterbacked and advised" the government's "taking control of tottering insurance giant AIG for a bailout deal," the Post wrote. But more and more, it looks like [Henry] Paulson and Geithner "quarterbacked" with a flawed playbook with AIG that moved the meltdown much further down the goal line.

Geithner was the architect of the AIG bailout.

He hammered out the deal. He was at the "center of the action."

Complaints about contractual obligations for millions in bonuses to be dispensed after AIG was saved thanks to the $170 billion taxpayer bailout should be submitted to Geithner.

His fingerprints are all over the AIG bailout.

From the Los Angeles Times:

[Lawrence] Summers said Geithner used all his power, "both legal and moral, to reduce the level of these bonus payments."

But one leading academic in the national policy debates said Geithner should have reined in AIG compensation when, in his former role as the head of the New York Federal Reserve Bank, he was working with Bush administration Treasury Secretary Henry M. Paulson to negotiate the first round of bailouts.

Geithner "should be embarrassed," said Peter Morici, a University of Maryland business professor and former chief economist for the U.S. International Trade Commission.

"When the Bush White House agreed to bail out General Motors and Chrysler, it required those companies to renegotiate their labor contracts," Morici said.

"Why did Secretaries Paulson and Geithner not require the same at AIG? The threat was the same with AIG and GM. If either shut down, the economy would plummet into chaos and depression, we were told," Morici said.

Robert Gorges, a retired Ralphs grocery worker from Highland, near San Bernardino, agreed.

Auto workers, he said, "had a contract but they did the right thing, knowing their company was in bad financial trouble. They changed their contract," he said. "Not the same can be said about AIG," Gorges said in his e-mail to The Times. "Something is wrong here."

Yes, something is wrong here.

Geithner is part of the problem. He bears responsibility for this mess. He "should have reined in AIG compensation when, in his former role as the head of the New York Federal Reserve Bank, he was working with Bush administration Treasury Secretary Henry M. Paulson to negotiate the first round of bailouts."

He should have reined in compensation as part of the deal, but the genius Geithner failed to do so.

I agree with Morici. Geithner "should be embarrassed."

If Geithner believes that the government should determine how bailout money is used once it's transferred to the private sector, then he should have taken measures to do so with the AIG bailout.

Geithner complaining about the bonuses now makes him look like a fool.

I think Barack Obama should be embarrassed as well, for assembling a team of incompetents.

4 comments:

Anonymous said...

The bonus payout excesses at AIG are just the tip of the iceberg of what is happening with the other Wall Street bailouts including Bank of America. Working productive Americans are bailing out the same crooks that destroyed our economy along with 45% of the wealth in the world and now the American taxpayers and our children will be forced to live a far lower standard of living with reduced prosperity and opportunities due to this but only we pay the price.

Washington has bailed out the banks, Wall Street & their Washington special interests and much of the cost is added to the national debt to by paid by this and future generations while real estate and investments continue to fall. Find out what a growing repudiate the debt movement could mean for treasuries, the dollar, gold and the stock market and how this is a better alternative than Washington’s plans to monetize the debt in future years and tax and destroy our remaining wealth by depreciating the dollar.

The Campaign to Cancel the Washington National Debt By 12/21/2012 Constitutional Amendment is starting now in the U.S. See: http://www.facebook.com/group.php?gid=67594690498&ref=ts

David Jacquot said...

GEITHNER & RANGEL TO BE SUBPOENAED IN TAX FRAUD CASE

Federal Case Alleges Political Elite Get Favorable Tax Treatment Over Ordinary Citizens

On 5 March 2009 a Motion was filed in U.S. v. David Jacquot, Case # CR 08-1171, in the Federal District Court, in San Diego, California seeking to dismiss a false tax return indictment on the grounds that the Defendant was not treated in the same manner as politically prominent individuals. A hearing on this matter is set for 30 March 2009 in San Diego and the Defendant in this case intends to subpoena Secretary of the Treasury Timothy Geithner, House Ways and Means Chairman Charles Rangel, former Senate Majority Leader Tom Daschle, and others.

The Defendant in this case is David Jacquot, an attorney and retired Army Officer. He is a decorated disabled Desert Storm veteran living in rural Idaho with his family.

This “Geithner Motion” cites HR 735 titled the “Rangel Rule Act of 2009,” which if enacted, would eliminate penalties and interest for common citizens to allow them to be treated in the same manner as House Ways and Means Chairman Representative Charles Rangel. The Geithner Motion also quotes President Obama stressing the need to “treat common citizens in the same manner as politically prominent individuals in regards to tax matters”.

The Geithner Motion details how Mr. Jacquot was vindictively indicted in retaliation for his successful defense of his clients against the IRS. The tax returns of his corporate law firm for the four (4) years of 2001 to 2004 were investigated and the government alleges that the law firm declared almost $200,000 TOO MUCH income during this time period. The Geithner Motion contains descriptions of numerous actions by the government and Assistant U.S. Attorney (AUSA) Faith Devine that are the basis for the claim of retaliation against Mr. Jacquot for his zealous representation of his client’s Constitutional and statutory rights. The improper actions of AUSA Devine have been reported to the DOJ Office of Professional Responsibility for disciplinary action and are currently under review.


A copy of the Geithner Motion can be downloaded at:

www.jacquotlaw.com/vindictive-prosecution.html

Vindictive-Prosecution

Mary said...

Interesting.

Pro said...

FALLOUT GROWS: Those who voted for the stimulus supported the clause to protect the AIG's bonuses. Obama's Own Stimulus Bill Protects the AIG Bonuses He Now Condemns —


http://www.butasforme.com/2009/03/17/obamas-stimulus-bill-explicitly-grants-aig-the-legal-right-to-hand-out-bonuses/