Wednesday, March 18, 2009

Please Bring Back Jimmy Carter

Obama will try to block executive bonuses at AIG

March 16, 2009 YahooNews (Excerpt)

WASHINGTON – “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.

Obama spoke out in the wake of reports that surfaced over the weekend saying that financially strapped American International Group Inc. was paying substantial bonuses to executives.”

As angry and outraged as I am at the idea of AIG using government money to pay legally required contractual bonuses to their executives, I have to go against the crowd because I am more angry that the Obama Administration would attempt to interfere in the business decisions of an American company. Is this Venezuela, and are we dealing with a Hugo Chavez? Did our Forefathers not impose a Constitution and a system of checks and balances to prevent such assertions and abuses of power? This has to be seen in the background of other attempts to chastise American business owners and managers and tell them how to treat their employees and their customers. This has to be seen in the wake of the outrage expressed by the likes of Barney Frank and Chris Dodd (in addition to Obama and his staff) to the idea that the use of private jets and the entertainment of executives and customers at posh resorts was bordering on criminal if those companies accepted government help. This is still a free country, and business owners should decide what is best for their companies and their businesses.

I well understand that the Obama Administration is greatly embarrassed because these bonuses were known by them well in advance and makes them look even more foolish. To confiscate these unwise bonuses smacks of Bills of Attainder – something our forefathers gave their lives to end forever.

As bad a president as Jimmy Carter was, when, in the aftermath of the great blizzard of 1978, I applied for and accepted very-low-interest government loans for each of my five corporations, I never received, nor did I expect to receive, any hints or pressure from the U.S. government telling me how I could spend or not spend the money. I guess Jimmy Carter wasn’t so bad after all. At least he followed the spirit as well as the terms of the Constitution.

On a related matter, all this caterwauling about AIG also honoring its insurance contracts to its clients is being done by people who know full well that our banking system would have collapsed if AIG had not honored those contracts as well.
The Real AIG Outrage

MARCH 17, 2009 (Excerpt)

“President Obama joined yesterday in the clamor of outrage at AIG for paying some $165 million in contractually obligated employee bonuses. He and the rest of the political class thus neatly deflected attention from the larger outrage, which is the five-month Beltway cover-up over who benefited most from the AIG bailout.

Taxpayers have already put up $173 billion, or more than a thousand times the amount of those bonuses, to fund the government's AIG "rescue." This federal takeover, never approved by AIG shareholders, uses the firm as a conduit to bail out other institutions. After months of government stonewalling, on Sunday night AIG officially acknowledged where most of the taxpayer funds have been going.

Since September 16, AIG has sent $120 billion in cash, collateral and other payouts to banks, municipal governments and other derivative counterparties around the world. This includes at least $20 billion to European banks. The list also includes American charity cases like Goldman Sachs, which received at least $13 billion. This comes after months of claims by Goldman that all of its AIG bets were adequately hedged and that it needed no "bailout." Why take $13 billion then? This needless cover-up is one reason Americans are getting angrier as they wonder if Washington is lying to them about these bailouts.
* * *
Given that the government has never defined "systemic risk," we're also starting to wonder exactly which system American taxpayers are paying to protect. It's not capitalism, in which risk-takers suffer the consequences of bad decisions. And in some cases it's not even American. The U.S. government is now in the business of distributing foreign aid to offshore financiers, laundered through a once-great American company.

The politicians also prefer to talk about AIG's latest bonus payments because they deflect attention from Washington's failure to supervise AIG. The Beltway crowd has been selling the story that AIG failed because it operated in a shadowy unregulated world and cleverly exploited gaps among Washington overseers. Said President Obama yesterday, "This is a corporation that finds itself in financial distress due to recklessness and greed." That's true, but Washington doesn't want you to know that various arms of government approved, enabled and encouraged AIG's disastrous bet on the U.S. housing market.”


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At 7:53 AM, Blogger René O'Deay said...

while the ire of Congress and the media focus are on the $165 million that AIG paid out in bonuses to their executives, the president is hoping you won’t notice the $100 billion in taxpayer bailout dollars that AIG paid out to other banks, including $58 billion to foreign banks and $36 billion given to French and German banks alone. See more on this: Track Bailout Money


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