Sunday, March 15, 2009

AIG bonuses prove need for enforceable regulation, not Dodd's nonsense "safeguards"

From the NYTimes (By EDMUND L. ANDREWS and PETER BAKER):

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...

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.

Thank goodness for Tim "Transparency doesn't matter. Just trust me" Geithner! But if you're angry, don't worry... another of Obama's top economic gurus, Larry Summers, is also on top of it!

“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.”

Funny thing is... didn't Chris Dodd write a new law last fall? I seem to recall he turned Bush's three page banker bailout* into a 450-page abomination with all sorts of "safeguards." And what were the key elements of those so-called safeguards, particularly in relation to "excessive executive compensation?"

I commented on Dodd's "safeguards" on January 30. His nonsense bill is here, but the key text seems to be:

the (Treasury) Secretary shall require that the financial institution meet appropriate standards for executive compensation and corporate governance.

and

the term ‘‘senior executive officer’’ means an individual who is one of the top 5 highly paid executives of a public company

In other words, Larry Summers is blaming the law for these obnoxious AIG bonuses. Yet according the Senate Banking Committee Chairman, Chris Dodd, the law was written to guard against such abuses. Too bad those limits apply to only the top 5 paid executives. And even then, the Treasury Secretary gets full discretion over the bonuses given to his Wall Street buddies.

Ya think anyone in The Obama Administration will actually point a finger at Dodd and say he screwed up? Of course not. And if you read more of the NYTimes article you'll see they claim these bonuses are contractual and were agreed upon prior to the bailout.

News flash...

If Bush / Dodd / Obama hadn't supported these bailouts last fall, AIG would now be in bankrupcy and none of these bonuses would be getting paid. And since that's the case, as far as I'm concerned, Larry Summers' argument about America being "a country of law" is absurd. I mean... if you're going to invoke the law, maybe you could start by reading the Constitution?

Question for Mr. Summers: What part of the Constitution provides for The Bailout?

Yeah, exactly. I say Obama should add Summers to the list of people who need to be fired. Obama can give Larry his pink slip just as soon as he signs walking papers for Bernanke and Geithner.

Anyway... this whole AIG episode reinforces my main concern... the federal government is attempting to perform tasks that are simply impossible for it to ever achieve.

Nonetheless, I fully agree with the call of many to regulate the banking the industry (what Dodd intended to do). So as an alternative to the federal government's current failures, I offer the following regulation:

The Congress shall have Power... To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures (US Constitution, Article I, Section 8)

Tim White

* I opposed Bush's billionaire banker bailout from the beginning.

5 comments:

Anonymous said...

Simmons is running. Announced on the AP tonight.

http://www.courant.com/news/politics/hc-ap-ct-simmons-doddmar15,0,5246725.story

Throw a TARP over Dodd

Pro said...

AIG = Allowing Irreversible Greed.
AIG = All in Greed.
AIG = Arn't I Greedy.
AIG = A$#holes, in general.

This is sick. Why in the world are we helping these companies that keep sending millions to people who do not know how to run a company? They cry yet get paid millions on the "average joes" taxes. Furthermore, I fear this is just the tip of the iceberg. Look what Enterprise rent-a-car did to get bailout funds:

http://www.butasforme.com/2009/02/25/alert-enterprise-rent-a-car-may-have-fired-employees-as-fake-evidence-when-lobbing-for-bailout-money/

Not to make excuses for these people, but the bailouts are making crooks out of everyone that touches the money.

Robert DeVylder Jr. said...

Unfortunatly, business either public or private has to follow contractual obligations. These people were hired and contracted to perform their services. In the contracts, AIG agreed to performance rewards that even the government cannot get around. Sad part is it is cheeper to give the bonus's rather than fight them in court.

There really is nothing the government can do without a complete takeover of AIG - and at theat point, they will be no better than any other government office.

tim white said...

AIG should have never gotten a bailout. They should have failed like any other business that makes grossly huge mistakes.

But in Washington, all the pols drink the kool-aid of the economists (like Summers, Bernanke and Geithner) and either refuse or are unwilling to challenge them in basic terms... most assuredly some of the pols are simply afraid of the economists saying some big words that the pols fear will make him/her look stupid.

Problem is, since the pols just let the economists run roughshod over America... those same pols look really dumb.

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