to the American Tax Payers.....


http://www.nytimes.com/2009/03/17/busine...ml?_r=1&hp

He's lied before and he'll lie again. Lying is what liars do.

You make it sound like Obama knew about the amount of the bonuses. No where in the article does it say that. A subordinate could of been hoodwinked. AIG guys say hey, we ned to pay out some retention bonuses to keep our productive workers in house. Subordinate says ok. Cut the guy some slack West.

(03-17-2009 07:56 AM)Machiavelli Wrote:  You make it sound like Obama knew about the amount of the bonuses. No where in the article does it say that. Subordinate says ok. Cut the guy some slack West.

Monday March 16, 2009 08:59 EDT
The sanctity of AIG's contracts

Larry Summers, Sunday, on AIG’s payment of executive bonuses:

We are a country of law. 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.

Associated Press, February 18, 2009:

The United Auto Workers’ deal with Detroit’s three automakers limits overtime, changes work rules, cuts lump-sum cash bonuses and gets rid of cost-of-living pay raises to help reduce the companies’ labor costs, people briefed on the agreement said today.

The UAW announced Tuesday that it reached the tentative agreement with General Motors Corp., Chrysler LLC and Ford Motor Co. over contract concessions, as GM and Chrysler sent plans to the Treasury Department asking for a total of $39 billion in government financing to help them survive.

Concessions with the union are a condition of the $17.4 billion in government loans that the automakers have received so far.

Apparently, the supreme sanctity of employment contracts applies only to some types of employees but not others. Either way, the Obama administration’s claim that nothing could be done about the AIG bonuses because AIG has solid, sacred contractual commitments to pay them is, for so many reasons, absurd on its face.

As any lawyer knows, there are few things more common – or easier -- than finding legal arguments that call into question the meaning and validity of contracts. Every day, commercial courts are filled with litigations between parties to seemingly clear-cut agreements. Particularly in circumstances as extreme as these, there are a litany of arguments and legal strategies that any lawyer would immediately recognize to bestow AIG with leverage either to be able to avoid these sleazy payments or force substantial concessions.

Since the contracts are secret and we’re apparently just supposed to rely on the claims of AIG and Treasury Department lawyers, it’s impossible to identify these arguments specifically. But there are almost certainly viable claims to be asserted that the contracts were induced via fraud or that the bonus-demanding executives themselves violated their contracts. Independently, it’s inconceivable that there aren’t substantial counterclaims that AIG could assert against any executives suing to obtain these bonuses, a threat which, by itself, provides substantial leverage to compel meaningful concessions. Many of these executives were, after all, the very ones responsible for the cataclysmic losses.

The only way a company like AIG throws up its hands from the start and announces that there is simply nothing to be done is if they are eager to make these payments. One might expect AIG to do so -- they haven't exactly proven themselves to be paragons of business ethics -- but the fact that Obama officials are also insisting that nothing can be done (even while symbolically and pointlessly pretending to join in the populist outrage over these publicly-funded "retention payments") is what is most notable here.

Legal strategies aside, just as a business matter, one of the first steps taken by every company in severe distress is go to its creditors, explain that it cannot make the required payments, and force re-negotiations of the terms. That’s as basic as it gets. To see how that works, just look at what GM and other automakers did with their union contracts – what they were forced by the Government to do as a condition for their bailout. Obviously, if a company goes into bankruptcy, then contracts to pay executive bonuses are immediately nullified, but the threat of bankruptcy or serious financial distress is, for obvious reasons, very compelling leverage to force substantial concessions. And the idea that, in this economy, AIG executives (of all people) will be able simply to leave and go seek employment elsewhere unless they receive their "retention bonuses" (even assuming that’s an undesirable outcome) is nothing short of ludicrous.

There may be other reasons why the Treasury Department decided it wanted AIG to pay these bonuses (Marcy Wheeler considers some of those reasons here), but this claim from Larry Summers that the sanctity of contracts precludes any alternatives is not just false, but insultingly so. It's difficult to recall anything quite so vile as watching hundreds of millions of dollars in taxpayer money flow to AIG executives. One would expect the Obama administration to do everything possible to prevent that from happening. Instead, they seem to be doing the opposite.

(03-17-2009 08:22 AM)Artifice Wrote:  Apparently, the supreme sanctity of employment contracts applies only to some types of employees but not others. Either way, the Obama administration’s claim that nothing could be done about the AIG bonuses because AIG has solid, sacred contractual commitments to pay them is, for so many reasons, absurd on its face.

They can't open that can of worms though. If they try to fight AIG contracts then they would be forced to fight union contracts as well. They would never do that.

I was listening to the radio yesterday and they were talking about the infrastructure projects that were funded in the porkulus bill were actually ready to go. Had previously been put out to bid, secured resources, ready to start. All they needed was the money. Now, because of an amendment that said union wages had to be paid in right to work states. So a job that would normally be 15 bucks an hour is now 57 bucks an hour. As a result the projects have to be put back out to bid and the process starts all over. yet more delays in putting people to work because of the unions.

This is the point where Robert al-N comes in and tries to say this is a good thing.

There's an implication in this that I've not seen addressed anywhere, and it troubles me.

One of the ways that the US has been able to attract some business investment, despite our higher pay scale and higher tax rates and more byzantine environmental regulations and jackpot civil justice system and crumbling infrastructure and declining educational system, is that political risk has always been deemed to be much lower in the US than in other places. When the government starts interfering in ways like this--changing contractual obligations after the fact--that will materially alter the calculus with respect to political risk.

The end result could be a move away from the US by investors. We're a long way from knowing how large that move might be, if it in fact materializes. But with us doing everything we can to drive investment away in all the other areas mentioned above, it would seem to make sense to try to hold on to the one advantage we have.

(03-17-2009 08:22 AM)Artifice Wrote:  Monday March 16, 2009 08:59 EDT
The sanctity of AIG's contracts

Larry Summers, Sunday, on AIG’s payment of executive bonuses:

We are a country of law. 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.

Associated Press, February 18, 2009:

The United Auto Workers’ deal with Detroit’s three automakers limits overtime, changes work rules, cuts lump-sum cash bonuses and gets rid of cost-of-living pay raises to help reduce the companies’ labor costs, people briefed on the agreement said today.

The UAW announced Tuesday that it reached the tentative agreement with General Motors Corp., Chrysler LLC and Ford Motor Co. over contract concessions, as GM and Chrysler sent plans to the Treasury Department asking for a total of $39 billion in government financing to help them survive.

Concessions with the union are a condition of the $17.4 billion in government loans that the automakers have received so far.

Apparently, the supreme sanctity of employment contracts applies only to some types of employees but not others. Either way, the Obama administration’s claim that nothing could be done about the AIG bonuses because AIG has solid, sacred contractual commitments to pay them is, for so many reasons, absurd on its face.

There is a huge difference between the AIG contracts and the autoworkers' contracts, and the author is being disingenuous at best--and outright lying at worst--for failing to mention it.

The AIG payments are pursuant to EXISTING contracts. The autoworkers' concessions are with respect to negotiation of NEW contracts.

I"m not saying that the AIG workers should be paid, or that the autoworkers should have to make concessions. But if we don't want the AIG workers paid, someone should have raised the point before now. For the record, I don't think AIG should have been bailed out in the first place, and if the autoworkers don't make the concessions then I think GM should be allowed to fail too.

I'm almost thinking the Obama administration wanted these payments to be made, so they would have a new whipping boy just in time for the budget debate. That would obviously require a disingenuous, if not blatantly dishonest, administration. Come to think of it, that's why I think Obama just might have.

(03-17-2009 09:20 AM)Owl 69/70/75 Wrote:  There's an implication in this that I've not seen addressed anywhere, and it troubles me.

One of the ways that the US has been able to attract some business investment, despite our higher pay scale and higher tax rates and more byzantine environmental regulations and jackpot civil justice system and crumbling infrastructure and declining educational system, is that political risk has always been deemed to be much lower in the US than in other places. When the government starts interfering in ways like this--changing contractual obligations after the fact--that will materially alter the calculus with respect to political risk.

The end result could be a move away from the US by investors. We're a long way from knowing how large that move might be, if it in fact materializes.

We've already seen this when City-governments tried to intervene too much. Business took flight to suburbs and smaller cities. What's unclear is what options would be available to investors; but it seems clear to me that Taiwan, Singapore, S. Korea and India have made progress in making themselves attractive to investors.

(03-17-2009 09:45 AM)DrTorch Wrote:  We've already seen this when City-governments tried to intervene too much. Business took flight to suburbs and smaller cities. What's unclear is what options would be available to investors; but it seems clear to me that Taiwan, Singapore, S. Korea and India have made progress in making themselves attractive to investors.

If investors looking to leave the US create a demand, I'm quite certain a supply will be created to satisfy them.

Keep in mind that in addition to the places you list, there are any number of places all over the world that are marginaly less attractive than the US is today, but which would become more attractive than the US with only slight negative moves on our part.

(03-17-2009 08:39 AM)Ninerfan1 Wrote:  They can't open that can of worms though. If they try to fight AIG contracts then they would be forced to fight union contracts as well. They would never do that.

....except, that already happened.

(03-17-2009 09:26 AM)Owl 69/70/75 Wrote:  There is a huge difference between the AIG contracts and the autoworkers' contracts, and the author is being disingenuous at best--and outright lying at worst--for failing to mention it.

The AIG payments are pursuant to EXISTING contracts. The autoworkers' concessions are with respect to negotiation of NEW contracts.

... new contracts that replaced existing labor contracts.

While all the attention is on AIG, Wall Street is putting its top minds to the task of finding fresh pay loopholes "to sidestep tough new federal caps on compensation," the WSJ reports. New TARP restrictions signed into law last month mean the top five executives of those firms that received bailout cash must forego bonuses. "In response to expected bonus restrictions, officials at Citigroup, Morgan Stanley, and other financial institutions that got government aid are discussing increasing base salaries for some executives and other top-producing employees," the newspaper reports, citing sources in the know. Meanwhile, Citigroup disclosed in a filing yesterday that CEO Vikram Pandit saw his salary increase nearly fourfold in 2008 to $958,333, Fortune reports—a far cry from his vow to award himself "$1 a year in salary until the bank returns to profitability." All told, it was a good year for Pandit. His total compensation package topped $10.8 million, the magazine reports. It's a shame the share price has fallen 90 percent in the past year or the compensation could have been considerably higher.

Senator suggests AIG execs should kill themselves
By NIGEL DUARA, Associated Press Writer Nigel Duara, Associated Press Writer 1 hr 38 mins ago

IOWA CITY, Iowa – Iowa Sen. Charles Grassley suggested that AIG executives should take a Japanese approach toward accepting responsibility for the collapse of the insurance giant by resigning or killing themselves.

The Republican lawmaker's harsh comments came during an interview with Cedar Rapids, Iowa, radio station WMT on Monday. They echo remarks he has made in the past about corporate executives and public apologies, but went further in suggesting suicide.

"I suggest, you know, obviously, maybe they ought to be removed," Grassley said. "But I would suggest the first thing that would make me feel a little bit better toward them if they'd follow the Japanese example and come before the American people and take that deep bow and say, I'm sorry, and then either do one of two things: resign or go commit suicide.

"And in the case of the Japanese, they usually commit suicide before they make any apology."

Grassley spokesman Casey Mills said the senator isn't calling for AIG executives to kill themselves, but said those who accept tax dollars and spend them on travel and bonuses do so irresponsibly.

"Senator Grassley has said for some time now that generally speaking, executives who make a mess of their companies should apologize, as Japanese executives do," Mills said. "He says the Japanese might even go so far as to commit suicide but he doesn't want U.S. executives to do that."

The senator's remarks added to a chorus of public outrage over the disclosure that AIG intends to pay its executives $165 million in bonuses after taking billions in federal bailout money. President Barack Obama lambasted the insurance giant for "recklessness and greed" on Monday and pledged to try to block payment of the bonuses.

Quote:All animals are equal, but some animals are more equal than others - George Orwell

If the citi group guy pocketed 10 million last year he should be publicly flogged at the least. Head lopped off at the most.

there are some, non pitchfork carrying views on this out there:

http://www.nytimes.com/2009/03/17/busine...in.html?hp

Quote:If you think this economy is a mess now, imagine what it would look like if the business community started to worry that the government would start abrogating contracts left and right…

But what about the commitment to taxpayers? Here is the second, perhaps more sobering thought: A.I.G. built this bomb, and it may be the only outfit that really knows how to defuse it.

A.I.G. employees concocted complex derivatives that then wormed their way through the global financial system. If they leave — the buzz on Wall Street is that some have, and more are ready to — they might simply turn around and trade against A.I.G.’s book. Why not? They know how bad it is. They built it.

Law of Unintended consequences, the idea of the Govt. abrogating contracts would be reason for me to move my company off shore asap.

Moral Hazard

Quote:I'm almost thinking the Obama administration wanted these payments to be made, so they would have a new whipping boy just in time for the budget debate. That would obviously require a disingenuous, if not blatantly dishonest, administration. Come to think of it, that's why I think Obama just might have.

Odds of this are high, right out of the playbook as well. They can't pathetically use Rush Limbaugh for this forever.

(03-17-2009 11:28 AM)GGniner Wrote:  

Quote:I'm almost thinking the Obama administration wanted these payments to be made, so they would have a new whipping boy just in time for the budget debate. That would obviously require a disingenuous, if not blatantly dishonest, administration. Come to think of it, that's why I think Obama just might have.

Odds of this are high, right out of the playbook as well. They can't pathetically use Rush Limbaugh for this forever.

So does that mean Grassley is the biggest pawn getting played right now?

He comes across like a complete doofus. Good chance he'll alienate his entire consituency base before it's said and done. One more seat ripe for picking.

(03-17-2009 08:39 AM)Ninerfan1 Wrote:  

(03-17-2009 08:22 AM)Artifice Wrote:  Apparently, the supreme sanctity of employment contracts applies only to some types of employees but not others. Either way, the Obama administration’s claim that nothing could be done about the AIG bonuses because AIG has solid, sacred contractual commitments to pay them is, for so many reasons, absurd on its face.

They can't open that can of worms though. If they try to fight AIG contracts then they would be forced to fight union contracts as well. They would never do that.

I was listening to the radio yesterday and they were talking about the infrastructure projects that were funded in the porkulus bill were actually ready to go. Had previously been put out to bid, secured resources, ready to start. All they needed was the money. Now, because of an amendment that said union wages had to be paid in right to work states. So a job that would normally be 15 bucks an hour is now 57 bucks an hour. As a result the projects have to be put back out to bid and the process starts all over. yet more delays in putting people to work because of the unions.

This is the point where Robert al-N comes in and tries to say this is a good thing.

Damn it. What are Jose and Jesus going to do now that they actually have to use American union workers? THe horror. Oh, and using someone who actually knows what they are doing. How stupid is that? We could get Hector and Juan who were knitting shirts the day before build our roads today so we can save money.

What the Government should have done was to say to AIG - file for Chapter 11 so that you can decide what contracts need to be honored and then we'll guarantee some of the indemnity losses. That way, the bankruptcy court would have required the AIG Executives to file claims which would have been either preferred wage claims or unsecured claims (not sure which category they'd fit in), and the Court could have dealt with those claims by either squashing them or approving them or requiring that they be paid out over 100 years without interest. My concern is the number of overseas claims in the billions that are being paid to shore up European banks with our tax dollars.

(03-17-2009 01:18 PM)RobertN Wrote:  Damn it. What are Jose and Jesus going to do now that they actually have to use American union workers? THe horror. Oh, and using someone who actually knows what they are doing. How stupid is that? We could get Hector and Juan who were knitting shirts the day before build our roads today so we can save money.

The stupidity running rampant through your post is the implication one must be unionized to "know what they're doing."

What a waste of oxygen you are.