Friday, March 20, 2009

Geithner Must Go & CEOs Fear Mongering & The Culture of Greed & Corruption

UPDATE: 12:07 PM & 12:35 PM March 20, 2009

Anyway lets begin with some words of wisdom of Barack Obama before he was surrounded and tamed by the Wall Street Bully Boys the Neoconservatives and the Neoliberals:

"Flashback: In October, Obama Said That AIG Execs 'Should Be Fired' for Their Excesses" by Satyam Khanna, Think Progress at on March 18, 2009.

Update: Obama spoke today about AIG, 'Ultimately, I’m responsible. I’m the President of the United States…The buck stops with me.'"

Last fall, as Wall Street crumbled and just one week after the federal government bailed out AIG, the firm’s executives spent $440,000 on manicures, facials, pedicures, and massages at a luxury resort in California. At the time, Obama was a vocal proponent of firing AIG executives. During an October 7, 2008 presidential debate with Sen. John McCain (R-AZ), candidate Obama declared, “those executives should be fired”:

OBAMA: It means we are cracking down on CEOs and making sure that they are not getting bonuses or golden parachutes as a consequence of this package [TARP]. In fact, we just found that AIG — a company that got a bailout — just a week after they got help, went on a $400,000 junket. I’ll tell you what. Treasury should demand that money back, and those executives should be fired.

In October, the revelations about AIG’s luxury retreat sparked widespread outrage, just as the AIG bonuses are doing today. That didn’t stop AIG, however. In November, the Washington Post reported that AIG “plans to pay out $503 million in deferred compensation to some of its top employees, saying it must tap the funds to keep valuable workers from exiting the troubled insurance giant” — the same rationale AIG CEO Edward Liddy is using today.

Obama: AIG execs should be fired- Oct. 2008

Did Obama forget that he was given in November 2008 a mandate to change the system and not just be another flunky of the Elites and the Rich and powerful but to do whatever is necessary to bring some rationality and sanity back into the US economy so that it works for the people and not just for the Greedy and the Corrupt.

Anyway there has been in the US a public outcry over these multi-million dollar bonuses and Obama's failure to stop them from being paid out. But it appears there had been a provision in the bail-out bill to put a cap on bonuses but the amendment disappeared.Now it is reported that it was Geithner who took out the amendment. But anyway this is according to some just another distraction from what is more important which is whether or not AIG should be bailed-out. Whatever happened to the so called Free Market Place where entities flourish or fail because of natural economic forces. If AIG had been allowed to go bankrupt it would have saved the US government billions. These billions could be used in better ways to stimulate the US economy or at least to help out average Americans with their mortgages etc.

What these pro-business people fear is a radical change from the status quo in which they make out like bandits until their greed and corruption brings the whole system down and when that occurs they go with cap in hand (actually they point a gun at the governments head and demand money ) to the government to be bailed out They claim if they are not given billions of dollars Civilization as we know it will end ( see Arianna Huffington below).

Culture of Greed & Corruption
In October 2008 Obama sid the AIG executives should be fired !!!
Why is he now giving into the Bully Boys on Wall Street ?
CEO's Fear Mongering in order to get Billions in Bail-out
AIG bonuses
Obama's finance team especially Geithner screwed up on the bonuses
Should Obama dump Geithner
some claim the bailout is in the wrong direction
why should the government prop up failing corporations or financial institutions
if so then the government should insist on a bigger role in these institutions and should be able to share in the benefits
so maybe it is the system which has failed and needs a make over
Indictments not billion dollar bailouts and multi-million dollar bonuses

Geithner Admits Treasury Pushed For Bonus Loophole March 19,2009

Dire Consequences oh my more fear mongering if it isn't the Terrorist its the CEOs
AIG CEO warns:'Dire consequences' if company fails

Who killed the amendment to put a cap on AIG bonuses Obama's economic team defiant did they put one over on him.

A Disturbing D.C. Whodunit Arianna Huffington, Huffington post , March 19, 2009

Tim Geithner has now confirmed Chris Dodd's contention that the Treasury Department had insisted he include a loophole in the stimulus bill that allowed AIG to pay out bonuses, despite receiving bailout money. Still no word, however, from Geithner -- or anyone else in the administration -- about the killing of Sen. Wyden's bonus amendment that is the subject of this post. But the circumstantial evidence pointing to Obama's economic team is mounting.

..."It is the ultimate indictment of what Washington has become," Sen. Ron Wyden, co-sponsor of the eliminated provision, told me. "It's a place where, again and again, the public interest is deep-sixed behind closed doors and without any fingerprints."

For those of you who might have missed Sam Stein's original story, here it is in a nutshell:

Building on public outrage and presidential denunciations of executives at bailed out companies getting bonuses, Wyden and his Republican colleague, Sen. Olympia Snowe, crafted a provision in the stimulus bill that would have forced bailout recipients to cap their bonuses at $100,000 (any amount above that would be taxed at 35 percent).

According to Wyden, he "spent hours on the Senate floor," working to get the bipartisan amendment passed. He succeeded -- not a single Senator voted against the provision. "But," says Wyden, "it died in conference."

...It took Andrew Cuomo, using his authority as New York Attorney General, to get us at least some of the details about the AIG bonuses.

It's time for the White House to do the same, using its authority to uncover who removed the Wyden-Snowe provision from the stimulus bill.

"I pulled out all the stops," Wyden told me, "to convince the president's economic team that this amendment was vital to the White House for two reasons: 1) the president had spoken out against bonuses; 2) fury about bonuses would kneecap confidence in the president's entire economic policy."

But no one inside the president's economic team was in favor of it. As Wyden put it: "If the White House economic team had made it clear that this was important, this provision would never have been removed. I don't believe the president has been well-served on the bonus issue by his economic team."

So who asked for the amendment to be removed? Jason Furman? Peter Orszag? Tim Geithner? Larry Summers?

Such a move would certainly be consistent with the positions put forth by Summers who, as late as yesterday -- even contradicting the president -- continued to argue that attempting to stop the AIG bonuses would have "put the whole economy at risk."

Have you noticed how, whenever there is a serious effort to put an end to business-as-usual, we are warned by insiders like Paulson and Summers that the result will be the end of civilization?

Americans in general seem to have an irrational fear of making major changes to their economy for fear they will be like the Europeans. Maybe the Europeans are right and the American notion of sticking with the status quo is wrong.

The Joys of Not Being European (They're Not What Conservatives Think) by Eli Epstein-Deutsch Truthout, March 19, 2009

...If there is anything we should take away from this crisis, it's that risk and safety are intimately connected. The credit derivatives that poisoned the banking system began as safety measures to hedge against defaults - but they became the most toxic liabilities imaginable. These in turn led to the forced deployment, retroactively, of the largest safety net ever: Billions and billions in bank bailouts.

Where we should be looking to go now is to a healthy relationship between safety and risk - not just trying to heave the "pendulum" from depressed back to manic. In healthy circumstances, a social safety net (Welfare State) is a rational counterbalance, or hedge, against the chance element in any individual's economic fate. More risk-taking by definition means a bigger chance element, so it's fair to say that if we want private citizens to step up and take more risks, we need to fund a more generous public safety net.

The main objection to this seems to be that Europeans do it, and Americans are so sure they're not Europeans ... This obsessive loathing of Europe as socioeconomic Other is strange, but not necessarily an impediment to the argument. If Americans have an irrepressible, innate, non-European zeal for commerce, as Brooks argues, than why worry that a little beefing up of the Welfare State would have us acting like Parisians? Could a bunch of business-lusting conservatives really view a few points' increase to the marginal income tax rate as an incentive not to innovate or produce... This is hardly the behavior of a rabid commerce addict, nor even a hyper-rational "homo economicus," but rather an apathetic chimp who won't climb a stool to reach the banana if it's slightly smaller than yesterday's.

... The battle now is not between wealth-seeking entrepreneurs and statist liberals, or between investors and the government. It's mainly between all of us and a rapidly contracting future. Fighting this requires gutsy actions, both public and private.

Naomi Klein argues that Obama has surrounded himself unfortunately with the same old gang who were the architects of this economic meltdown. The seeds of this crisis she argues were first sown in the Clinton administration when these pro-wall Street gang started down the road of deregulation. They believe in unfettered capitalism until their profits begin to decline and then they go to the government demanding that they be helped out. But they are ready at the sign of a crisis to step in and help out those who shouldn't be helped .Is Obama just not able to think outside of the box and so feels compelled to maintain the status quo. All his talk about change is beginning to sound hollow. He must do something bold ie stand up to these insiders who only care about their profits and maintaining their positions and those in government who just want to ingratiate themselves with the Rich and Powerful.

Naomi Klein Interview
By Matthew Rothschild, The Progressive, February 2009 Issue

But to me it’s just shocking—and I know we shouldn’t be shocked—that Larry Summers is [a leading economic adviser]. And even more shocking to me—and I don’t know how to say this in a politically correct way... the fact that he was the main architect in Treasury for the shock therapy in Russia that impoverished sixty million people... He cheer led Boris Yeltsin as he attacked the Russian parliament, dissolved democracy, and suspended the constitution.

And Summers played a key role in the shock therapy in Thailand and South Korea in 1998. So he has a dismal track record. He was standing by Clinton’s side when Clinton abolished Glass-Steagall, which is the key piece of legislation that would have prevented the financial crisis we’re in now. He fought tooth and nail alongside Alan Greenspan to prevent the derivatives industry from being regulated.

The reason I’m so upset about this is because we’re paying the price for the deliberate amnesia that so many of us signed onto during the Bush years, where we were allowed to say whatever we wanted that was critical about U.S. policy, even about the free market, if we said it all started in 2001, when Bush took office...

Obama’s campaign was the ultimate example of this. “This crisis that we’re seeing is the result of the deregulation policies that have been in place for the past eight years.” No, not eight years! The key pieces of legislation were passed under Clinton.

... Politicians don’t take the kind of bold risks that we really need in this moment.

As for America's overarching theme of Greed:

...Greenspan said he believed the banking industry could self-regulate because trust and reputation are important assets in the market. What he didn’t calculate for is just greed. That’s a completely implausible story. This is a man who was an Ayn Rand protégé. His whole philosophy was that greed is the primary driving force in all of humanity. So how could Alan Greenspan be surprised by greed? The prime regulator of the global economy for eighteen years did not calculate that bankers might be greedy?

as for the Bail Out:

...This bailout was the Bush Administration’s last trough. Like the Iraq War, it was a cash machine, where private companies withdraw funds and pay them back in the form of campaign contributions. The Bush Administration cut an incredibly bad deal with the banks. We know how bad it is because five days earlier Britain’s Gordon Brown negotiated a deal to purchase equity in exchange for a capital injection. He got a 12 percent return, a seat on the board, voting rights, and he got guarantees that they would use the capital injection to lend money to small businesses and homeowners. So, five days later, Henry Paulson comes up with his terms: 5 percent as opposed to 12 percent, no voting rights, no seats on the board, and no guarantee that the money will be spent doing what they said it was intended to do: to get lending going.

The stakes are so huge. Think about $700 billion that we’re just throwing away. Then the right turns around and says, “About all that ‘yes, you can’ stuff, No, you can’t. We’re broke.”

We all have a huge stake in stopping this heist.

Forget AIG Bonuses - The Next Bailout is Here by Ruth Conniff The Progressive, March 19, 2009

Democrats from Andrew Cuomo to Barney Frank to Barack Obama are demanding that the 418 AIG employees who received bonuses give them back. Sure, it's outrageous that the very people who drove AIG off the cliff, along with a whole lot of other financial firms, walked away with million-dollar bonuses paid with taxpayer bailout money. But as the Wall Street Journal opinion page points out, "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.'"

And there is more to come.

The Obama Administration and Congressional Democrats are responding to outpouring of anger.

But the truth is, the bonuses to greedy execs are just a sideshow. It's the government's willingness to give away hundreds of billions of dollars in yet another massive bailout that people should be shouting about.

"How the Fed Failed to Tell Obama About the Bonuses" by David Cho and Michael D. Shear, Washington Post , March 19, 2009

Federal Reserve officials knew for months about bonuses at American International Group but failed to tell the Obama administration, according to government and company officials, exposing problems in a relationship that is vital to addressing the financial crisis.

As pressure mounted on AIG employees to return the bonuses, new details emerged yesterday about what the Fed, the Treasury Department and the White House knew regarding the payments and when. AIG executives said the Fed was informed three months ago by the company that it would pay $165 million by March 15 to employees working at its most troubled division. The Treasury and White House said they learned of the payments from Fed officials only days before they were due.

and when did Obama know about these bonuses:

Obama learned of the bonuses March 12, the day before they were paid out, from Axelrod, whom Geithner had briefed on the situation. The president was "aggravated" and "a little bit disbelieving," Axelrod said ...

and Obama on March 15th "... instructed Geithner and the others to seek legal ways that the government might recover the bonuses. And he made plans to tell the public what he thought the next day.

That decision ran counter to the belief among some in his inner circle that the bonus issue while an outrage was a small problem compared with the economic issues confronting his young presidency. "The first and most important job we have is to get this economy moving again," Axelrod said. "As galling as this is, it doesn't go to the main issue."

Over the following days, Obama came out swinging, denouncing the bonuses while expressing "complete confidence" in Geithner. Yesterday, he continued the effort, saying that "I don't want to quell anger. I think people are right to be angry. I'm angry."

Mixed Messages: How Do Politicians Really Feel About AIG? by Steve Benen, Washington Monthly March 18, 2009

Both Democrats and Republicans are having a hard time talking straight about AIG.

My hunch is, we're hearing mixed messages because it's not too difficult to point blame in different directions. For Democrats, there's a realization that Tim Geithner and Obama's Treasury Department hasn't exactly been vigilant when it comes to AIG. For Republicans, there's that nagging reality that it was the Bush administration that helped set the terms of the AIG bailout last fall.

The result, it seems, is many of the relevant political players stepping on each others' lines.

Dodd: Treasury Officials Insisted On Weakening Bonus Provision by Sam Stein, Huffington Post March 18, 2009.

The disclosure should put to rest one aspect of the debate over how AIG was allowed to dole out $165 million in bonus payments.

also see "Dodd: Administration pushed for language protecting bonuses "CNN March19, 2009

" AIG Won't Release Names Of Executives, Citing Death Threats " by Ryan Grim, Huffington Post, American News Project & March 18, 2009.

Rep. Barney Frank (D-Mass.), chairman of the Financial Services Committee, requested the names and threatened to subpoena them.

Members of a congressional panel interrogating AIG CEO Edward Liddy on Wednesday repeatedly asked that he release the names of executives who were on the good end of $165 million in bonus payments.

Rep. Barney Frank (D-Mass.), chairman of the Financial Services Committee, requested the names and threatened to subpoena them. Reps. Mike Castle (R-Del.) and Gary Ackerman (D-N.Y.) seconded and thirded the plea.

Liddy said he was glad to comply as long as he could be "absolutely assured that they will remain confidential."

Frank said no confidentiality would be given. Liddy refused to give the names, citing the safety of his workers.

"Let me just read two things to you," said Liddy. "'All the executives and their family should be executed with piano wire around their necks. My greatest hope: If the government can't do this properly, we the people will take it in our own hands and see that justice is done. I'm looking for all the CEO's names, their kids, where they live, etc.' You have a legitimate request. I want to protect the well being of our employees."

"Half? That's Not Going to Cut It AIG" by Steve Benen, Washington Monthly at March 18, 2009.

AIG's Chief Executive has a plan that seems unlikely to work.

As the lucrative bonuses paid to employees of the American International Group fueled fresh outrage at the White House and on Capitol Hill on Wednesday, the embattled chief executive of A.I.G. said that he had asked some recipients to give at least half the money back.

The chief executive, Edward M. Liddy, made the announcement during his testimony on Wednesday afternoon before a Congressional committee investigating the problems at the insurance giant.

"I have asked the employees of AIG Financial Products to step up and do the right thing," Mr. Liddy told lawmakers. "Specifically, I have asked those who received retention payments of $100,000 or more to return at least half of those payments."

The A.I.G. chief said that some recipients had already offered to give up all of their bonuses.

Of the 418 employees who received bonuses, 298 received more than $100,000, according to the New York attorney general, Andrew M. Cuomo. The highest bonus was $6.4 million, and 6 other employees received more than $4 million. Fifteen other people received bonuses of more than $2 million and 51 received $1 million to $2 million.

For one thing, Liddy's asking ...298 people to voluntarily, just out of the goodness of their hearts, hand over hundreds of thousands of dollars -- in some cases, millions -- to which they believe they're entitled? It seems like an unlikely scenario.

For another, if comments from lawmakers at today's hearing are any indication, "half" isn't going to cut it.

and so it goes,

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