AIG bonuses are a Lewinsky moment
English football's Manchester United may need a new sponsor.
As he often does, the comedian Andy Borowitz nailed it Monday on his online satire site, BorowitzReport.com:
In New Terror Video, AIG Demands Huge Ransom from U.S.
Shadowy Group Seeks Bonuses, Golf Retreats
American intelligence experts are analyzing a new terror video from the American International Group (AIG) in which the leader of the shadowy organization demands billions of dollars from the United States.
In the four-minute tape, which surfaced over the weekend and caused deep concern among U.S. officials, a man believed to be the chairman of AIG says that if his organization is not paid its ransom, “chaos and destruction will rain down on the American economy.”
“If we are not paid billions more in bonuses and corporate golf retreats, America will be made to suffer,” the man threatens.
Perfect. So perfect, in fact, that it’s frightening. This outfit, this AIG, an insurance company, for crying out loud, is into the taxpayers for $173 billion. How much is that? Look at this way:
Estimates of the direct costs to the economy of the Sept. 11, 2001, terrorist attacks on New York and Washington range between $21 billion and $27 billion. Thus AIG has cost taxpayers six to eight times what 9/11 did.
Osama bin Laden threatened to rain destruction down on the United States. Taxpayers have been told that the threat posed by AIG every bit as serious: Systemic failure of the U.S. financial system.
But at least Al Qaida had the good form not to demand $165 million in bonuses for its executives.
This revelation — that AIG took $165 million in taxpayer money and paid bonuses to the very people who exploited the market in hyper-leveraged derivatives that have plunged the United States into the worst financial crisis since the Great Depression — could be a turning point in the financial crisis.
President Barack Obama and congressional leaders must handle it like a live grenade. People may not understand arcane terms like collateralized debt obligations and credit default swaps, but they do understand bigshots getting bonuses from the government while folks like them are losing their jobs and houses.
The House Post Office Scandal of the early 1990s was going nowhere until people found out members of Congress were bouncing checks and getting away with it. The Whitewater investigation was a sleazy land deal on page 21 before people found out about Monica Lewinsky. People know about bounced checks. People know about cheating husbands. The AIG bonuses are a bounced check. The bonuses are a Lewinsky moment.
Sure, the $165 million in bonuses amount to less than 1/1,000th of the money poured into AIG. But they threaten public and political support for Mr. Obama’s recovery plan. The president must do everything possible to recover them, up to and including a 100 percent tax on income derived from bonuses paid by companies with the initials AIG.
The president and Congress must stop using “accountability” and “transparency” as mere soothing words. It is time to require full and immediate disclosure of who is getting what and why. The original AIG bailout money was authorized in a hurry last September. Trust us, said then-Treasury Secretary Henry Paulson. We don’t have time to be careful. We need to spend now and ask questions later.
Congress went along with it. But the promise was that full disclosure and oversight would catch up. So far they haven’t.
That may be because the crisis continues to widen and deepen. It may be because the size of the bailout has overwhelmed regulatory agencies that had grown used to giving a wink-wink, nudge-nudge to everything Wall Street did. But AIG still has $1.6 trillion in potentially toxic securities sitting in its worldwide portfolio, and $800 billion more in life insurance contracts.
Sorting out this mess, at a price fair to bondholders and taxpayers alike, is going to take time and patience. The bonus story is the kind of distraction that can make that impossible.
“The president must do everything possible to recover them, up to and including a 100 percent tax on income derived from bonuses paid by companies with the initials AIG.”
Umm…How bout no. The Treasury Dept, the Fed, and the President (current and former)should have read the fine print before they started doling out the money. AIG stated a year ago those bonuses would be paid and paid they were. The feds, state and local govts are going to get almost 50% of this money back anyway thru the taxes already in place. Going after the other 50% is nothing more than a CYA due to administration screwups. It’s funny. None of the governments were saying a word when times were good and these bonuses (and the resulting tax receipts) were being paid did they?
I mean really, is the government going to stop propping up AIG? Me thinks not. If they stopped throwing money at them then AIG might have to go under. That would take us right back to the reason they got involved in the first place. However, this time, it would be the feds fault, not AIG’s. The government has no exit strategy from this situation or the auto makers situation. They are stuck, and as a result, so are the rest of us.
BTW, why does Obama care? He already got his bonus from AIG.
http://www.examiner.com/x-268-Right-Side-Politics-Examiner~y2009m3d17-Obama-Received-a-101332-Bonus-from-AIG
A question for the legal folks: Isn’t demanding a massive tax on AIG bonuses a Bill of Attainder forbidden in the Constitution? You can’t make a punitive law that applies retroactively to one group of citizens.
#1 - by the age of 30, most people figure out that you never trust anyone who says “trust me”
#2 - follow the money folks - Hank Paulsen hired Edward Libby to head AIG -
Paulsen used to head Goldman Sacks. Guess which company got a huge chunk of money from AIG - Goldman Sacks. The U.S. gov is using AIG as a conduit to get money to other companies, most of those actually overseas.
#3 - do you want to know why the PD has become irrelevant as a newssource?
Neither this editorial nor the front page story reported that Mr. Obama was the second leading recipient of AIG campaign donations under Dodd. I guess the White House did not give them clearance to report that information.
P.S. Also, Geithner who claims ignorance of knowing anything was the chief architect along with Paulsen of the bank bailout.
Yes, the bonuses are absurd. Yes, the politicians and regulators who allowed the money to be paid without proper safeguards should also be held up as incompetent. Allegedly, Sen. Snowe, the sometimes Republiccan tried to insert language that would have prohibited the bonus payments. It was taken out by Dodd, who has reportedly received $300k in donations from AIG over the past ten years.
The real crime here tracks back to Eliot Spitzer, who tried to build his reputation to bolster his run for Governor of NY. Spitzer used new corruption laws, post-Enron, to terrorize corporate executives. He tried to accuse Hank Greenberg, the former AIG CEO of all sorts of wrongdoing. Hank, a grizzled veteren refused to pay him off. However, the AIG board, buckled under and agreed to fire Greenberg to feed the Spitzer campaign. Greenberg who had managed AIG for many years very profitably, was replaced by the current crew who decided it was easier to make money with smoke and mirrors products. All allegations against Greenberg were dropped after it was determined there was no evidence. This begs the question, which institution is really at fault? Business or Government?
Has anyone else noticed how this new socialist Obamanation is trying to get the American people to hate corporations and trying to get the heat off our elected officials (all stripes) who are the ones who created this problem by not doing their jobs serving the American people and thereby losing our trust and now they are the same people who are coming to our rescue - yes that same government body folks. AIG was doing what companies do - just like teens will misbehave if you let them. Example - if your teen comes home smelling like marajuana and you pretend not to notice and then one day you are upset when he od’s on cocaine and dies - who do blame?
Centrist,
I agree. If the govt can become successful at making people hate corporations for whatever reason, it’s that much easier to get them to become dependent upon the government. It’s another step towards a bigger nanny state than we already have in place.
Someone said it earlier - follow the money. In this case it leads right back to those who are supposed to represent us, not them. Dodd, Frank, Geithner, Paulson, etc. all knew what they were doing. This AIG bonus brouhaha is simply a diversion technique to get the focus off those who look like they should get some blame.
The slippery slope here is once you let government set salaries for one industry (TARP recipients) who’s to say they won’t expand their reach to others, maybe all industries? Take it even further, if the govt starts running the banks they will have the ultimate control over you. They set your salary, they know your account balances. It’ll go something like this;
“Hey Joe, what’s this $1000 deposit here? Are you working for cash on the side? Well, we’re gonna need to tax that”
Is it just paranoia on my part or is this the ultimate goal?
Is anyone else laughing at Barney Fwank saying people who didn’t do their jobs should be fired?
Is anyone else amazed that “the One” is going to LA to be on Leno while his Obamanation is self-impoding and the ecomony is collapsing? Who new that “the One” stood for one-term?
Guess which party in Congress voted against the bail-out!
AJ - The problem is, if people hate corporations and allow government to destroy them, there will be nobody to pay taxes to fund the gubmint.
Who is John Galt?
.32
“The phrase “Going John Galt” was used in October of 2008 to refer to successful members of society cutting back on work in response to the projected increase in marginal tax rates for those over $250,000, limits on deductions for higher earners, and the use of tax revenues for causes they regard as immoral”