My Commentary on the AIG Bonus Scandal

mart · Post by **mart** » Sun Mar 29, 2009 7:58 pm

This is a commentary on the 'AIG Bonus Scandal' that
I wrote to go along with some news stories I sent
out to some political lists that I'm on.

mart
---------------------------------------------------
----- Original Message -----
From: martmns
Sent: Tuesday, March 17, 2009 11:30 PM
Subject: Crocodile Tears and Faux
Outrage! - Legislative "Anger" mounts
over AIG bonuses

Forward from mart
Please Distribute Widely

Crocodile Tears and Faux Outrage!
- Legislative "Anger" mounts over
AIG bonuses

What's the big deal??? Why all this sudden yelling,
threatening and knashing of teeth by the politicians??
These kleptocrat bankster fraud-artists couldn't
have pulled off their theft in the first place, wthout
the full particiipation of their Democrat and
Republican political *criminal co-conspirators* -
the same ones by the way, who are now pretending
to be so outraged! Remember - it was the Bush
*Republican* regime - with the full support and
acquiescence of the Obama *Democrats* who
together, granted the banksters the bail-out money
in the first place - and all without any oversight or
strings attached to it! The banksters have, by
holding the economy for ransom, succeeded in
looting the public purse of over a trillion dollars in
cash. This has got to go down as one of the
biggest 'bank' robberies in history! Why shouldn't
the bankster executives who pulled off this
supreme act of piracy celebrate and reward
themselves with some of the booty? Even though
Al Capone and Blackbeard were small potatoes
compared to these crooks, I'm sure they'd
approve and would be proud!

mart
--------------------------------

1) Aljazeera) "Anger mounts over
AIG bonuses"

2) (AFP) "AIG storm rages in
Washington"

3) (ABC News) "In Letter to Kerry,
Bernanke Warned of Fed's 'Limited
Rights' in AIG Oversight"

4) (Associated Press) "Washington
knew AIG was preparing to pay
bonuses"

=====================================================
1) Aljazeera
http://english.aljazeera.net
Mar. 17, 2009

http://english.aljazeera.net/business/2 ... 52828.html

Anger mounts over AIG
bonuses

US legislators have scrambled to devise new laws to stop
bailed-out firms from giving staff massive bonuses as anger
mounts over insurance company American International
Group's move to pay its employees $165m in bonuses.

US legislators on Tuesday proposed various options to try
to recoup the money, including a 70 per cent tax on
bonuses paid to executives at companies that received
taxpayer bailout money.

AIG, whose murky and complex financial dealings have
contributed to the global financial meltdown, is the l
argest recipient of the government bailout with $173bn
so far.

The company that made a $61.7bn loss for the fourth
quarter of last year said it risked being sued if it did
not pay the bonuses to staff of AIG Financial Products,
the unit of the company that sold credit default swaps,
the risky contracts that caused massive losses for the
insurer.

Andrew Cuomo, the New York attorney-general, said
73 of those employees got bonuses of at least $1m.

Urged to return money

Legislators called for those who received bonuses at
AIG to voluntarily give up the money.

But they also threatened other measures such as using
the government's new majority shareholder position
– some 80 per cent - to sue the company to recoup the
money or authorising the US attorney-general to recover
excessive compensation payments.

"Let the recipients of these large and unseemly bonuses
be warned: if you don't return it on your own we will do it
for you," Charles Schumer, a Democratic senator, warned.

Criticised by Republicans for not doing enough, the White
House said on Tuesday it was considering ways to retrieve
the money, "whether it's changing the tax code or whatever
ideas" that are being raised in congress.

"The president finds it outrageous and offensive that any
of these bonuses exist," Robert Gibbs, the White House
spokesman, said.

On Monday, Obama had said it was "hard to understand
how derivative traders at AIG warranted any bonuses,
much less $165m in extra pay".

"How do they justify this outrage to the taxpayers who
are keeping the company afloat?"

Obama has ordered another look at legal means of getting
the money back after government officials agreed with
AIG that it was contractually obligated to pay out the
bonuses, distasteful as they might be.

Timothy Geithner, his treasury secretary, said on Tuesday
that he was working with the justice department to
determine whether any of the bonuses could be recovered.

And AIG's new, government appointed chief executive,
Edward Liddy, is expected to be grilled when he goes
before a congressional hearing on Wednesday over the
bonuses and Sunday's disclosure that $90bn of the
bailout money had been paid to other financial institutions
such as Goldman Sachs and several European banks.
------------------------------------------------------------------------

2) AFP via Google news
http://www.google.com/hostednews/afp
Mar. 17, 2009

http://www.google.com/hostednews/afp/ar ... 3quy4MvYeg

AIG storm rages in Washington

1 hour ago

WASHINGTON (AFP) — Insurance titan AIG, which
received billions in US bailout funds, is to pay back
the government for hefty bonuses shelled out to top
executives, Treasury Secretary Timothy Geithner
has said.

Geithner's statement comes as revelations about
the staggering bonuses which were awarded to
employees of the giant US insurer fueled a political
firestorm.

The controversy engulfing bailed-out American
International Group threatened to turn nasty amid
reports of death threats against AIG workers, and
posed a critical test of President Barack Obama's
economic revival plans.

Lawmakers had been looking at punitive tax measures
to reclaim the bonuses paid largely to the same
London-based financial products traders who brought
ruin to AIG and helped to ignite the global financial
crisis.

Senator Charles Grassley, the top Republican on the
Senate Finance Committee, refused to disavow a
remark that AIG executives should go the way of
disgraced Japanese leaders in choosing resignation
or suicide.

The Iowa lawmaker declared that "from my standpoint,
it's irresponsible for corporations to give bonuses at
this time, when they're sucking the tit of the taxpayer."

New York Attorney General Andrew Cuomo disclosed
that last Friday, AIG had paid out more than 160
million dollars in bonuses to staff at its financial
products unit.

Cuomo, who slapped subpoenas on AIG Monday as
part of a probe into Wall Street excess, said 73
AIG employees had each received bonuses of one
million dollars or more.

The top 10 recipients were paid a total of 42 million
dollars, with one executive getting 6.4 million alone.
And 11 executives quit AIG despite being paid
"retention" bonuses of at least a million dollars
each to stay.

Government-appointed AIG boss Edward Liddy, who
faces a grilling at a forthcoming congressional
hearing, was sent a letter from Senate Democrats
demanding he renegotiate the employees' bonuses
or else legislation would be pushed through to tax
them at more than 90 percent.

"Given the fact that it was the employees in this unit
that brought your firm to the brink of bankruptcy and
caused such havoc in the world, rewarding them is
not only morally reprehensible, but entirely
indefensible on any business grounds," the letter
said.

AIG was saved from bankruptcy last September
because the government deemed its intricate web
of ties with banks worldwide posed an imminent
risk of financial meltdown not just for the United
States but globally.

With Treasury Secretary Timothy Geithner accused
of bungling the controversy, White House spokesman
Robert Gibbs meanwhile said Obama had "complete
confidence" in his economic overseer.

Gibbs added that "everybody is offended by every
aspect" of the bonuses at a time when millions of
Americans have lost their jobs in the worst
recession for decades.

Republicans turned up the political heat on Obama,
who must ride the public fury against Wall Street
while shoring up congressional support for
forthcoming measures to prop up tottering banks.

House Minority Leader John Boehner said Republicans
had long been calling for more protections to ensure
that taxpayers know how 700 billion in bailout dollars
are being spent by financial institutions.

"It is time for the administration to provide Congress
and American taxpayers an exit strategy that will get
the federal government out of the private sector and
out of the bailout business," he said.

Barney Frank, the Democratic chairman of the House
Financial Services Committee, noted that the US
taxpayer now controls 80 percent of AIG's equity after
pumping 180 billion dollars into the company.

"I think the time has come to exercise our ownership
rights," he said, as a new poll by CNN and Opinion
Research Corp. showed strong public support for the
outright nationalization of distressed banks.
---------------------------------------
3) ABC News
http://abcnews.go.com
Mar. 17, 2009

http://abcnews.go.com/Blotter/story?id=7107011&page=1

In Letter to Kerry, Bernanke
Warned of Fed's 'Limited
Rights' in AIG Oversight

Fed chair Bernanke warned that the
Fed did not monitor bonuses
by the company

By MATTHEW JAFFE, JONATHAN KARL
and JUSTIN ROOD
March 17, 2009

Just one day before the Obama administration expressed
its disapproval of AIG's $165 million in bonuses, Federal
Reserve chairman Ben Bernanke warned in a private letter
to a key lawmaker that the Federal Reserve did not
monitor bonuses by the company.

The Fed had "limited rights" in its oversight of AIG, Bernanke
wrote Sen. John Kerry, D-Mass., and was "not in a position
to review or approve all of the specific compensation or other
expenditures" at the insurance company.

In the letter, sent last Tuesday, Bernanke noted that the
Fed has the power to "monitor the financial condition of
AIG and to restrict certain major decisions that might
reduce the ability of AIG to repay its loan from the
Federal Reserve."

But he cautioned that the Fed's oversight role was limited,
and did not cover compensation or "other expenditures
related to the ongoing business operations of AIG and its
subsidiaries."

"These types of decisions are within the authority of the
company's senior management," wrote Bernanke, "and,
as noted below, are also, to some degree, within the
authority of the Treasury as an equity owner."

Despite its oversight limitations, Bernanke touted the
Fed's efforts to restrict AIG's compensation and travel
expenses. "Importantly, we routinely make our views
known on key issues," he wrote. "Last fall, for example,
we made clear to AIG's management our deep concern
about reported incidents of corporate spending and
questions surrounding certain executive compensation.
We have also pressed the company to ensure that
robust corporate governance surrounds all
compensation actions."

The timing of Bernanke's letter -- sent months after
Kerry wrote him last October to ask about lavish AIG
executive retreats -- raises questions about how
much the Fed knew about AIG's bonuses and
they knew it. The day after Bernanke sent the letter,
Treasury Secretary Tim Geithner called AIG Chairman
Edward Liddy and demanded he stop the
"unacceptable" payments. Liddy responded that his
hands were "tied" and the company was contractually
obligated to pay the bonuses.

After hearing Bernanke state that the Fed does not have
a role in setting compensation, a Kerry aide told ABC
News that they want the Fed to know about the
compensation practices of any company they help and
would also like to see the Fed working more closely
with Treasury.
-------------------------------------------
4) Associated Press via Boston.Com -
http://www.boston.com
Mar. 17, 2009

http://www.boston.com/news/nation/washi ... n_outrage/

Washington knew AIG was
preparing to pay bonuses

WASHINGTON—Cue the outrage. For months, the
Obama administration and members of Congress have
known that insurance giant AIG was getting ready to
pay huge bonuses while living off government bailouts.
It wasn't until the money was flowing and news was
trickling out to the public that official Washington rose
up in anger and vowed to yank the money back.

Why the sudden furor, just weeks after Barack
Obama's team paid out $30 billion in additional aid
to the company? So far, the administration has
been unable to match its actions to Obama's tough
rhetoric on executive compensation. And Congress
has been unable or unwilling to restrict bonuses for
bailout recipients, despite some lawmakers' repeated
efforts to do so.

The situation has the White House and Treasury
Secretary Timothy Geithner on the defensive. The
administration was caught off guard Tuesday trying
explain why Geithner had waited until last
Wednesday to call AIG chief executive Edward M.
Liddy and demand that the bonus payments be
restructured.

Neither Obama nor Geithner learned of the impending
bonus payments until last week, senior administration
officials told The Associated Press late Tuesday,
speaking on condition of anonymity about internal
discussions.

Publicly, the White House expressed confidence in
Geithner -- but still made it clear he was the one
responsible for how the matter was handled.

"I do know that Secretary Geithner last week engaged
with the CEO of AIG to communicate what we thought
were outrageous and unacceptable bonuses," White
House spokesman Robert Gibbs said. Gibbs declined
to provide a timeline that would show when members
of the administration -- including the president and
others at the White House -- became aware of the
bonuses.

In an interview with The Associated Press, Obama's
chief economic adviser Lawrence Summers said: "In
the context of what we're doing, Secretary Geithner
was notified, he has said, last week. As he reported
to the rest of us, he moved aggressively and
immediately, aggressively and immediately, to recoup
whatever could be legally recouped. He recognized
that you can't just abrogate contracts willy-nilly, but
he moved to do what could be done."

The bonus problem wasn't new, as many lawmakers
and administration officials knew only too well. AIG's
plans to pay hundreds of millions of dollars were
publicized last fall, when Congress started asking
questions about expensive junkets the company had
sponsored. A November SEC filing by the company
details more than $469 million in "retention payments"
to keep prized employees.

Back then, Rep. Elijah E. Cummings, D-Md., began
pumping Liddy for information on the bonuses and
pressing him to scale them back. "There was
outrage brewing already," Cummings said. "I'm
saying (to Liddy), 'Be a good citizen. ... Do
something about this.' "

Around the same time, outside lawyers hired by the
Federal Reserve started reviewing the bonuses as
part of a broader look at retention and compensation
plans, according to government officials who spoke
on condition of anonymity. The outside attorneys
examined the possibility of making changes to the
company plans -- scaling them back, delaying them
or rescinding them. They ultimately concluded that
even if AIG's bonuses were withheld, the company
would probably be sued successfully by its
employees and be forced to pay them, the officials
said.

In January, Reps. Joseph E. Crowley of New York
and Paul E. Kanjorski of Pennsylvania wrote to the
Federal Reserve and the Treasury Department
pressing the administration to scrutinize AIG's bonus
plans and take steps against excessive payments.

"I at that point realized that we were going to have a
backlash with regard to these bonuses," Kanjorski
said in an AP interview. In a meeting with Liddy later
that month, he said he told the AIG chief that "all hell
would break loose if we didn't find a way to inform the
public ... and that we should take every step to put
that information out there so we wouldn't have the
shock."

Around the same time, Congress and Obama's team
were passing up an opportunity to put in place strict
laws to revoke bonuses from recipients of the $700
billion Wall Street bailout. In February, the Senate
voted to add such a proposal to the economic recovery
bill that cleared Congress, but in final closed-door talks
on the measure, that provision was dropped in favor of
limits that affect only future payments.

"There was a lot of lobbying against it and it died," said
Sen. Ron Wyden, D-Ore., who proposed the measure
with Republican Sen. Olympia J. Snowe of Maine. He
said Obama's team is sending mixed messages on
what will and won't be tolerated on bonuses, with the
president coming out strongly against excessive Wall
Street rewards but top officials not following through.

"The president goes out and says this is not
acceptable, and then some backroom deal gets cut
to let these things get paid out anyway," Wyden said.
"They need to put this to bed once and for all."

Last Wednesday, an apparently tense conversation
between Geithner and Liddy brought the matter to a
head. Geithner had learned of the bonus payments
the previous day, said a Treasury Department official
familiar with the government's dealings with AIG.

Liddy, in a letter to Geithner on Saturday, referred to
their "open and frank conversation" over the retention
payments on March 11. "I admit that the conversation
was a difficult one for me," Liddy wrote.

On Thursday, as Treasury lawyers scrambled to find
a way to cancel the payments, Geithner informed the
White House of the situation, and senior aides there
relayed it to Obama, the administration officials said.

Meanwhile, the administration moved to get ahead
of what was certain to be an embarrassing story.

Unprompted, officials leaked news of the bonuses
to select reporters late Saturday afternoon, highlighting
what Geithner had done to try to restrain the payments.
The story quickly became fodder for the Sunday news
talk shows.

Then on Monday, the president himself came out
strongly on the issue, calling the payments "an
outrage" and publicly directing his team to look for
ways to cancel the payments.

Questioned repeatedly to explain this in light of the
fact that the administration had already scoured its
options and come up empty -- and that the bonuses
had already gone out the door to their recipients
-- Gibbs said that the president wanted his aides to
make sure "to exhaust all legal remedies."

That's done little to quell the expressions of outrage
that were blasting about by Tuesday.

"It's shocking," said Sen. Mitch McConnell, R-Ky.,
the minority leader, that "the administration would c
ome to us now and act surprised."