Monday, March 16, 2009

Much Needed: A Strong Dose Of Populist Outrage

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Career criminal Edward Liddy has had way more than 3 strikes

Yesterday we started the day in AIG hell, discussing the $100 million in "contractually obligated" bonuses for some the very losers who have wrecked the country's economy; by midday the $100 million had climbed in news reports to $165 million. One executive alone is due $6.5 million. By the end of the day Russ Feingold, Barney Frank, Nancy Pelosi and untold others in Congress were pressuring Geithner-- loudly-- to get those taxpayer-financed bonuses back... pronto.

Most Americans are feeling a long overdue streak of populist rage over this-- and by late last night it was getting worse. I mean the AIG hell was getting worse: they finally succumbed to pressure to start unraveling where the first $160 billion bailout in taxpayer dollars they got went-- other than to the bonuses. We'll get to the populist rage in a moment. First let's look at where the money went.

Turns out that Goldman Sachs, which received billions in direct U.S. government aid, also got $12.9 billion form AIG. (Edward Liddy, the new head of AIG had been on the Goldman Sachs board moments before taking over AIG from the crook who ran it before him.) It gets worse:
Three European banks-- France’s Société Générale, Germany’s Deutsche Bank and the UK’s Barclays-- were paid the next-largest amounts. SocGen received $11.9bn; Deutsche $11.8bn; and Barclays $7.9bn.

Many European banks used AIG’s credit insurance to keep from having to hold capital against their long-term securities holdings. Wall Street banks also used swaps to hedge their subprime mortgage-backed securities portfolios.

A spokeswoman for the US Federal Reserve said Sunday that AIG’s collateral payments were based on “contracts that don’t differentiate domestic versus international companies.” She said the Fed’s aid to AIG helped all of its counterparties, which range from global banks to individual insurance policyholders.

Other American banksters who had already got TARP funds who subsequently got substantial amounts from AIG included the crooks at Merrill Lynch ($5.8 billion) and Wachovia ($1.5 billion). The uber-corrupt Swiss bank, UBS, a center for cutthroat criminality unsurpassed in the Western banking world, scooped up $5 billion.
In total, A.I.G. named nearly 80 companies and municipalities that benefited most from the Fed rescue, though many more that received smaller payments were left out.

The list, long sought by lawmakers, was released a day after the disclosure that A.I.G. was paying out hundreds of millions of dollars in bonuses to executives at the A.I.G. division where the company’s crisis originated. That drew anger from Democratic and Republican lawmakers alike on Sunday and left the Obama administration scrambling to distance itself from A.I.G.

“There are a lot of terrible things that have happened in the last 18 months, but what’s happened at A.I.G. is the most outrageous,” Lawrence H. Summers, an economic adviser to President Obama who was Treasury secretary in the Clinton administration, said Sunday on This Week on ABC. He said the administration had determined that it could not stop the bonuses.

But some members of Congress expressed outrage over the bonuses. Representative Elijah E. Cummings, a Democrat of Maryland who had demanded more information about the bonuses last December, accused the company’s chief executive, Edward M. Liddy, of rewarding reckless business practices.

“A.I.G. has been trying to play the American people for fools by giving nearly $1 billion in bonuses by the name of retention payments,” Mr. Cummings said on Sunday. “These payments are nothing but a reward for obvious failure, and it is an egregious offense to have the American taxpayers foot the bill.”

...The Fed chairman, Ben S. Bernanke, appearing on 60 Minutes on CBS on Sunday night, said: “Of all the events and all of the things we’ve done in the last 18 months, the single one that makes me the angriest, that gives me the most angst, is the intervention with A.I.G.”

He went on: “Here was a company that made all kinds of unconscionable bets. Then, when those bets went wrong, they had a-- we had a situation where the failure of that company would have brought down the financial system.”

In deciding to rescue A.I.G., the government worried that if it did not bail out the company, its collapse could lead to a cascading chain reaction of losses, jeopardizing the stability of the worldwide financial system.

Now to the populism. I must have deleted a dozen comments yesterday screaming about executing banksters and bureaucrats and Bush Regime criminals. And I only deleted the ones that used dirty words. People are furious. And Obama better not make himself the face of it; God knows the GOP will try doing that as is. This morning's NY Times says the administration is "increasingly concerned about a populist backlash against banks and Wall Street." I wonder if Rahm Emanuel is hiding under his desk.
As it is, there have already been moves in Congress to limit compensation to executives at banks and Wall Street firms that are receiving government help to survive.

Beyond that, a shifting political mood challenges Mr. Obama’s political skills, as he seeks to acknowledge the anger without becoming a target of it. A central question for Mr. Obama is whether his cool style-- “in a time of crisis, we cannot afford to govern out of anger,” he said in his address to Congress last month-- will prove effective when the country may be feeling more emotional.

Even as Mr. Summers was denouncing A.I.G. for the bonuses, he suggested that there was little if anything the government could do to stop them, seconding the conclusion of Treasury Secretary Timothy F. Geithner. But even if their reasoning was legally sound, they also risked having the administration look ineffectual in the face of what Mr. Summers said was the worst financial abuse of the last 18 months, since the economy began turning down in earnest.

“Never underestimate the capacity of angry populism in times of economic stress,” said Robert Reich, a professor of public policy at the University of California, Berkeley, and labor secretary under President Bill Clinton. “A big challenge for President Obama will be to maintain a rational and tactical public discussion in the midst of this severe downturn. The desire for culprits at times like this is strong.”

In fact, speaking of Bob Reich, he penned quite the expose on this mess at HuffPo yesterday. "The real scandal of AIG," he wrote, "isn't just that American taxpayers have so far committed $170 billion to the giant insurer because it is thought to be too big to fail-- the most money ever funneled to a single company by a government since the dawn of capitalism-- nor even that AIG's notoriously failing executives, at the very unit responsible for the catastrophic credit-default swaps at the very center of the debacle-- are planning to give themselves $100 million in bonuses. It's that even at this late date, even in a new administration dedicated to doing it all differently, Americans still have so little say over what is happening with our money."

I can't understand why a big Republican donor-- obviously a crook-- like Liddy was put in charge of a company the government basically owns. And it isn't just because he was a maxed-out McCain donor, as well as a contributor to the RNC, that should disqualify him from employment. He was the chairman of Allstate when they were cheating Hurricane Katrina victims out of their insurance coverage. Before that Liddy was the CFO at a pharmaceutical company where Don Rumsfeld was the CEO. Together they axed most of the employees in order to make it an attractive property for Monsanto, which bought it in 1985 making Rumsfeld and Liddy immensely wealthy (although neither had contributed anything to the value of the company aside from firing 60% of the employees who had built it up.) See Liddy's swell digs on the right. I wonder who vetted Liddy for Bush when he wound up-- including himself, no doubt, among the losers he terms "the best and the brightest"-- as head of AIG in June, 2008.

The Bush Depression has brought with it a new world, and Society needs to do something about economic predators like the Madoff family, the Bush family, Edward Liddy and the kind of folks the NY Times was writing about this weekend in Uncorked!, a story that could have been published on the even of the French Revolution.
Champagne corks are always popping somewhere, of course, and the high life never disappears entirely, especially in New York. But these days, a $750 magnum of Perrier-Jouët stands in striking contrast to the scene outside Bagatelle’s glass-paneled door, where the Dow has lost half its value since the fall of 2007, the recession has claimed a net total of 4.4 million jobs since it began, more than 850,000 families lost their homes to foreclosure last year, and the word “depression” is being heard in the land.

...A man who works in finance and was standing near the bar of Merkato 55 the following Saturday started to talk about this issue, but then he had second thoughts, saying he could be fired for drawing attention to the subject in the news media. Any overt display of conspicuous spending, he added, even if not a dime was expensed to a corporate account, would not sit well with his employer. “Excess,” he said, “is frowned upon heavily.”

As for how he and his fellow Wall Streeters could still afford such afternoons, he said: “We all made so much money in the past five years, it doesn’t matter.”

A 29-year-old man who works for a large investment management firm and was at Bagatelle’s brunch one recent Saturday and at Merkato 55’s the next, put it another way: “If you’d asked me in October, I’d say it’d be a different situation, and I don’t think I’d be here. Then the government gave us $10 billion.”


UPDATE: LIDDY ON THE WITNESS STAND

Congress gets to question Liddy on Wednesday, not just "Congress," but the very aggressive House Financial Services Committee which includes banes of banksters' existence like Barney Frank (chairman), Maxine Waters, Brad Sherman, Keith Ellison, Jim Himes and, best of all, Alan Grayson, the Orlando congressman who previously made a legal career out of successfully skewering war profiteers. (On the other hand, AIG's Liddy will not just have fellow Republicans like Spencer Bachus and Frank Lucas there to stick up for him; some of the worst Blue Dogs in Congress, like Melissa Bean, Travis Childers, and Joe Donnelly will be there to help out as well.)

Eric Massa, a member of the Populist Caucus, was seething about AIG this weekend. "I am furious over this blatant waste of taxpayer dollars," he said. "I opposed the banking bailout specifically because I saw this kind of government waste on the horizon. When we have AIG executives giving themselves $165 million in bonuses after the government committed $170 billion to save the company, it is not only unacceptable, I think it's borderline criminal.
 
"American taxpayers are sick and tired of failed Wall Street executives using their money on bonuses and extravagant resort vacations. I cannot remain silent while families in my district worry about their jobs and their pensions. That is why today I have asked my colleague Rep. Barney Frank, the Chair of the House Finance Committee, to hold open and public Congressional hearings so we can get our money back from AIG."
 
"I think it's about time that we use the full power of the Congress to get into the wallets of those greedy executives that have decided its ok to fleece the American taxpayer. It's not their money, it's our money and we need a full Congressional investigation. These specific executives give American business and the vast majority of CEO's who are working to save our economy a bad name. It's not fair and we need to hold them accountable for their decisions."
 
"In the end, Washington lawyers may win this fight, but if we had let AIG go bankrupt these bonuses would never have been paid and it's about time that we let that happen. I will continue to fight any Wall Street bailouts." But keep in mind, there are dangers when that populist thing gets out of the bottle: open with care; the far right uses it to install fascism.

Obama must have felt the heat. He's stepping up to the plate and saying he'll "try" to block the AIG bonuses. I hope-- for all of our sakes-- he tries real hard. Glen Greenwald dicusses the sanctity of the AIG contracts today at Salon.

Obama rebuked his own economic team over the AIG bonus outrages. There's a movement afoot to try to get CNBC to stop shilling for Wall Street and start holding crooked banksters accountable. Watch the president discussing the AIG bonuses (notice where the applause comes in):

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15 Comments:

At 7:23 AM, Anonymous Anonymous said...

Do you hear the people sing?
Singing a song of angry men?
it is the music of a people
Who will not be slaves again!
When the beating of your heart
Echoes the beating of the drums
There is a life about to start
When tomorrow comes!

http://www.youtube.com/watch?v=AdQpQgYHc4w

finally some outrage from Americans
its about time

 
At 7:26 AM, Blogger Juan Liberale said...

Two words: Seize AIG.

 
At 10:22 AM, Anonymous Anonymous said...

Yes I am outrage, however I more outraged to our government, that they are faster willing to brake the law in order to be political correct. If they have a contract then....

 
At 10:28 AM, Anonymous Anonymous said...

Where's the due diligence on the part of the government? These contracts for bonuses existed before the government bailout. Why didn't the government review these details before agreeing to the bailout? Did they get in such a hurry to handout taxpayer money that they didn't have enough time to review these details? Isn't this basically what the government is blaming the banks for doing when making risky loans?

 
At 10:42 AM, Anonymous Anonymous said...

Most of these "brilliant" bonus worthy AIG execs would have been out on the streets if the gummermint hadn't bailed them out.

Doesn't Liddy look like a successful breeding from "Caddyshack" and "Groundhog Day" of Bill Murray, The Gopher AND the Groundhog?

 
At 10:47 AM, Anonymous Anonymous said...

I am more then outraged. It is the tax dollars of the American people that is funding this. We pay the salaries of all elected officials, in case anyone cares to remember. All I see at this point is good money being thrown after bad. Our elected officials keep funding banks and Wall Street. And those honest, hard-working, ethical folks, just keep getting richer and more removed from the working man/woman. I am sick of it. I won't vote for anyone currently in office. Don't care who I have to vote for, but Mr/Ms Congressman/Senator/Legislator, YOU LOST MY VOTE !!!

 
At 11:11 AM, Blogger Unknown said...

Who the HELL is in control of this country!!??? Obama - or the damn rich?

Do as you are told... pay taxes like the damn rest of us, and close those damn offshore accounts!

Don't you see?? We are falling apart, and if we do not get our shit together, than the Russians are going to walk right in.

 
At 11:13 AM, Anonymous Anonymous said...

What tickles me, is, everytime something like this comes up, we hear how the "rules" will be changed in the "future". Yes, lets keep closing that barn door after the horse is not only out, but GONE !

 
At 11:17 AM, Blogger jim said...

the damn crooks were in no trouble at at all this proves it . id call it high treason against the us and if anyone had any balls bring them to justice

 
At 11:18 AM, Anonymous Anonymous said...

I have never really blogged before but issues like this are pushing me to it. Just remember Mr. and Mrs. taxpayer, AIG is only that tip of the iceberg you can see. If Obama and congress are outraged about the $165 million that AIG claims to be "contractually obligated" to pay (yeah, right), then they should also be outraged by the bloated union paychecks, benefits and retirement $$ being funded by the GM and Chrysler bailouts. Funny that we aren't hearing about that. As an Independent, I can see that there has been no change in Washington, District of Corruption, where politics are concerned.

 
At 11:21 AM, Anonymous Anonymous said...

I am going to ask AIG if it's willing to pay me $500,000 for keeping my mouth shut as a taxpayer and not raise hell. If they can't pay me, then they better stop ALL bonuses. After all I'm busting my chops as a responsible taxpayer to help bail them out.

 
At 11:27 AM, Blogger Juan Liberale said...

If you ask a known swindler to hold your wallet, can you then bitch after you discover he snatched one of your credit cards?

The strings that should have been attached to the bailout should have been a replacement of management and a court master to authorize disbursements.

Too late now.

 
At 12:43 PM, Anonymous Anonymous said...

Here here - good on Obama for governing this surreal Wall St. bailout auction.
Great youtube economy: recap
http://www.youtube.com/watch?v=Nay4VbUJl3E

 
At 2:14 PM, Anonymous Anonymous said...

As a European I must say I think we need some more Billion Dollar lurv from you Yankees. I sense a certain vapidity of cash in my high street, so get out your wallets!

 
At 8:29 AM, Anonymous Anonymous said...

Are these people serious? Grassley calling for suicide? The bonuses amounted to less than one tenth of one percent of the bailout. What they really need to concentrate on is the interest of 8% to 30% plus being charged on credit cards. What the military industrial complex is ripping off, while selling guns to Mexicans on the side, as we speak. The obscene profits oil companies are making. Re-writing of the bankruptcy laws to screw people out of everything.

This is just a nice little side show to take our mind off of the really important things like the world heating up because we are all driving to non wealth producing jobs, like AIG, while the planet heats up through the consumption of fossil fuels.

These politicians vote themselves big pay raises every year, you don't hear people calling for them to commit suicide, well maybe a few.

 

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