AIG: When everything changes, but nothing changes
There’s only one story this morning: AIG, and all it has come to represent. The maddening excesses; the cool, destructive incompetence of its executives; the galling arrogance of those who insist that they deserve the millions that a distorted, corrupted system showers upon them.
They insist that even now, as the rest of us gaze out over the smoldering wreckage of the economy that they helped create, and people are getting understandably angry.
So what do you do with a justified sense of raw, national outrage, when venting that outrage would be self-destructive? Do we just swallow it and move on?
In a purely rational world, maybe so. This is not that world.
In many ways, this is a problem of boundaries — boundaries between eras, between value systems, between systems, boundaries that we refuse to fully cross. We’re trying to pretend that we’re half-pregnant; we’re trying to pretend that AIG and other major companies aren’t dead, they’re just undead. We’re trying to pretend that half-measures will work, but the lesson of AIG may be that none of that’s true.
Between last spring, when the AIG bonus contracts were signed, and the spring of ‘09, when the contracts came due, an era came to brutal, flamboyant end. How do you handle employment contracts that were written before the crash but are wildly inappropriate and provocative in a post-crash environment?
How do you convince Wall Street and the banksters — and the former Wall Streeters and banksters now in government trying to fix this mess — that the pre-crash mindset is profoundly unacceptable, that financial experts cannot be paid millions of dollars to “fix” a system they broke, especially when their actions contributed to putting millions of people out of work and out of their homes?
We are told that if AIG didn’t pay those bonuses, its employees would leave and collect similar money at competing companies. Which raises a question: What are those other companies still doing paying such sums? Trillions of public dollars have been committed to propping up the private system, and people are still being allowed to skim and scam their “share” of those trillions as if nothing had changed?
Then there’s the boundary between government and business, which AIG in its current form is trying to straddle awkwardly. The company is 79.9 percent owned by U.S. taxpayers, because at 80 percent it would become nationalized and Washington and New York balked at that thought.
But at 80 percent taxpayer ownership, those previous bonus contracts would have been voided, and the restructuring process AIG could have been much more aggressive. We are trying to run AIG on government money and private-enterprise values, and the combination doesn’t work.
We’re playing that same game even now at GM and Ford and major banks, maintaining the fiction that they aren’t really bankrupt and that government money can keep them both private and whole. Maybe it’s best to let them fall into bankruptcy, so the legacy arrangements and legacy mindsets can be wiped clean.
That old world and that old way of doing things is over. Make the break and move on. Rhetorically, President Obama has been trying to send that message of changed times to Wall Street, but he and his advisers haven’t acted as if they believe it themselves. They are still trying to finesse a transition that ought to be quick and final, and by doing so they have made themselves victims of the contradictions they refuse to address.
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160 comments Add your comment
Copyleft
March 18th, 2009
8:49 am
I agree that the Obama administration has been too moderate and corporate-friendly in its approach thus far. Bold action is needeed, and there’s no reason to try to keep the old system propped up when it’s already proven not to work.
Go ahead and take ownersip of AIG and restructure it in a way that’s more accountable to the people and more suited to our needs. Hopefully, the era of CEO god-kings has finally ended and we can restore some sense of proportion and accountability to our marketplace.
Copyleft
March 18th, 2009
8:49 am
I regret the typos; no coffee yet this morning. 8~)
Curious Observer
March 18th, 2009
8:50 am
The entire country is in an uproar about the use of 1/10 of 1 percent of the bailout money for executive bonuses, when the real issue is whether there should have been a bailout at all. Get a life, folks.
I Report/ You Whine
March 18th, 2009
8:53 am
It’s almost as though Fannie Mac never existed in your little world, Bookman.
Truth
March 18th, 2009
8:53 am
1/10 of 1 percent… Look at all the pork projects that cost taxpayers much more than this. Where is the outrage?
I Report/ You Whine
March 18th, 2009
8:58 am
We’re playing that same game even now at GM and Ford and major banks, maintaining the fiction that they aren’t really bankrupt and that government money can keep them both private and whole. Maybe it’s best to let them fall into bankruptcy, so the legacy arrangements and legacy mindsets can be wiped clean.
You know, I remember a time when someone, who’s name I won’t mention (Bookman,) argued that union pensions and benefits paid to the autoworkers was not the cause of their industry’s monstrous money losses.
Huh, they always come around to my way, don’t they?
Civilian/Private/Corporal
March 18th, 2009
8:59 am
Jay:
We are trying to “pretend” we are not evolving into a destructive, dangerous, socialist (Democrats and Republicans), anti-freedom loving and anti-personal responsibilty country a la Europe. If this is the legacy we are leaving our children and grandchildren then we are the first in over 200 years to drop that torch and we should be ashamed.
God help us.
Taxpayer:
I owe you an apology. I was a little harsh last night when I dubbed you “Taxcheater”. Not knowing whether or not you practice felonious tax methods or not, that was unfair. I thought about “Taxevader” but that too was off base.
I therefore knight thee “Taxavoider” which is perfectly legal with a good accountant.
It is written. Let it be so.
Civilian/Private/Corporal
March 18th, 2009
9:02 am
To Curious Observer and Truth:
Exactly. As his chief of staff said, “never waste a crisis (especially a fake one I would add) to make change”. They are using this in an attempt to change our whole system (this is just the tip of the iceberg) and the unwashed, ignorant, non-tax paying masses waiting for their free house and car payments are like lemmings going off the cliff.
I Report/ You Whine
March 18th, 2009
9:06 am
Your right when you say we don’t need to focus on anything but the Obambi AIG torture chamber, haha, but this is pretty good-
Dr. William Happer, currently a professor of Physics at Princeton University, said “Many people don’t realize that over geological time, we’re really in a CO2 famine now. Almost never has CO2 levels been as low as it has been in the Holocene [geologic epoch] – 280 [parts per million (ppm)] – that’s unheard of,” Happer said. “Most of the time, it’s at least 1,000 [ppm] and it’s been quite higher than that.”
Happer said that when CO2 levels were higher – much higher than they are now, the laws of nature still managed to function as we understand them today.
The whole entire liberal house of lying cards is crashing and burning.
Davo
March 18th, 2009
9:08 am
All this finger-wagging at AIG executives is laughable. Save all this moral indignation for your savior Obama. If he’s so smart why is it that he allowed these clowns to retain their control over AIG? They already proved themselves incompetant; how incompetant do you have to be to ignore that fact and just throw money at them hoping for a different result?
Keynesian idiots. This is a perfect example of how smooth govt ownership works.
getalife
March 18th, 2009
9:11 am
It would be a great thing if this outrage was directed at the “missing” trillions to get accountability for all that caused this disaster but it is not.
They will not hold themselves accountable and are happy with this outrage. I good distraction from the original disaster.
Goldie
March 18th, 2009
9:11 am
I think it’s quite funny that the right-wingnuts love to whine about having to pay for the “welfare society”, and yet many will defend the multi-million dollars bonuses paid to corporate execs after they’ve bankrupted their companies and asked for taxpayers’ help, and will defend those corporate execs because of some “contractual” obligation… just amazing.
Change has certainly not come one moment too soon to the White House, otherwise, just try to imagine what kind of a worse nightmare we would be waking up to today!
Bosch
March 18th, 2009
9:11 am
Corporal,
“and the unwashed, ignorant, non-tax paying masses waiting for their free house and car payments are like lemmings going off the cliff”
Funny how you are so apologetic to Taxpayer, and then turn around with a statement like that – which again, is based on nothing but your own prejudices.
And just how is our system being changed to socialism when we are spending all this money to prop up private companies?
And when has Obama or anyone in Congress even hinted that they plan for all private businesses to become government owned?
And do you for one second think this crisis is fake? That it’s not real? That it’s made up so that Obama can advance his secret hidden agenda?
You are retired military no? Who pays your pension or your retirement benefits?
Bosch
March 18th, 2009
9:12 am
Goldie,
Yeah, especially people like Corporal who worked for the government.
Bosch
March 18th, 2009
9:16 am
Davo,
The government doesn’t own AIG – but maybe it should.
Bosch
March 18th, 2009
9:18 am
I will admit though, we are in for some excellent political theater today.
Taxpayer
March 18th, 2009
9:20 am
I’m a Taxminimizer, legal version of course, Oh blog Artist formerly known as Corporal.
PJ
March 18th, 2009
9:21 am
Calling AIG the undead was very appropriate, the blood sucking Vampires with their ill-gotten gains. It seems that the Republicans in Congress have finally caught on. Even they are calling for taxing these bottom dwellers if that’s what it takes to recoup this money. The provision was in the original stimulus to stop this from happening but it was stripped out of the bill by the lobbyist, the Republican leadership in Congress and the former Administration in the dead of night. Now that this mess has hit the fan they want to act outraged. I guess better late then never. Some Republicans have called for lynching, boiling in oil and even mass suicide for these creeps. What a difference a scandal makes. Don’t get me wrong there is plenty of blame to go around, down to the American public itself, but to get to a bottom of a problem one must goes to the begining of an operation.
DB, Gwinnettian
March 18th, 2009
9:22 am
You know, I remember a time when someone, who’s name I won’t mention (Bookman,) argued that union pensions and benefits paid to the autoworkers was not the cause of their industry’s monstrous money losses.
Feel free to point out where he’s saying that in today’s column.
Civilian/Private/Corporal
March 18th, 2009
9:25 am
Bosch:
1) “A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the public treasure. From that moment on the majority always votes for the candidates promising the most money from the public treasury, with the result that a democracy always collapses over loose fiscal policy followed by a dictatorship.” Alexander Tyler
Bosch: please note the masses have discovered this. People who coudn’t even name the Vice President or the three branches of government are responsible for putting Mr. Urkel in office. Sad.
2) “The American people will never knowingly adopt socialism. But, under the name of “liberalism,” they will adopt every fragment of the socialist program, until one day America will be a socialist nation, without knowing how it happened.” He went on to say: “I no longer need to run as a Presidential Candidate for the Socialist Party. The Democratic Party has adopted our platform.” Norman Thomas
Bosch: It’s happening right in front of you and you can’t see the forest for the trees. A journey of miles starts with one step …. government control of businesses.
3) As Frank Borman said: “Capitalism without bankruptcy is like Christianity without hell.” Most of this “crisis” is fake. Let more companies fail – they will reorganize. It will work itself out ………. it’s better than going into socialism.
And this part about the AIG bonuses IS A FAKE CRISIS. Have you added up just a couple of the “pork spending” boondoggles vs. the AIG bonuses? Give me a break. At least the AIG executives would use that to buy boats, and exepensive cars, and Hawaii vacations, and ……..
4) Who pays my pension? I do and people who “work” for a living and pay taxes ………. not the people who don’t. And by the way ….. unlike those other people I EARNED IT.
Davo
March 18th, 2009
9:25 am
Bosch,
Frank: We Own AIG, Now Let’s Act Like It
http://tpmdc.talkingpointsmemo.com/2009/03/frank-we-own-aig-now-lets-act-like-it.php?ref=fp7
Meet your new CEO, Barney Frank.
-barf-
Mrs. Godzilla
March 18th, 2009
9:26 am
It will all get better once Glenn Beck gets his own bunk in the FEMA
camp us socialist commie pinko liberal O of O folks are building to
actually keep the wingnuts in once we get them all rounded up.
Yipee Ki Yay!
Civilian/Private/Corporal
March 18th, 2009
9:27 am
To Taxavoider:
Sorry, but according to some of your friends the rules have changed. We no longer get to pick our own “handles”.
getalife
March 18th, 2009
9:29 am
You know we are living in crazy times whem Beck is a big star on fixed noise.
Those beckers are unhinged.
Taxpayer
March 18th, 2009
9:31 am
Jay,
We have two basic approaches in dealing with this whole financial meltdown:
1) work within the current legal framework as best we can and accept the consequences, such as legally binding contracts, at least until we are safely beyond the crisis mode of operation
2) throw caution to the wind and nationalize all the major financial institutions and accept those consequences.
So far, we seem to be staying closer to option 1 but if things get out of hand, who knows. Many people have said that we need to go ahead and nationalize at least temporarily and be done with it. But, nationalizing just goes the extra step of making the Fed the management as well and then the Fed would be negotiating contracts with the folks needed to do what still has to be done and maybe they would negotiate a better deal or maybe not. The end result is that the big mess is still there and it has to be cleaned up first before we can move on and do the other needed stuff such as put in some regulations and oversight and get good people in those jobs and get the IRS busy going after the multitudes of crooks, etc. This is one of those cases where you have to get past step 1 before it is even possible to deal with some other major issues.
By the way, has anyone seen a list of all the counterparties that AIG is involved with. I saw that 20 states are also identified so far.
Peadawg
March 18th, 2009
9:32 am
The sad thing is Obama knew that AIG was going to pay out bonuses. Only now, does he try to do something to stop it. Also, what about the story where Obama is trying to make veterans pay for their own health insurance for wounds they received while trying to defend this country?
The worst part about all this is Democrats still try to defend him.
Bosch
March 18th, 2009
9:34 am
Corporal,
1) I don’t know who you are referring to as Mr. Urkel, but I voted for Obama and I can certainly name the three brances of government. 52% or the American population voted for President Obama – it’s time you came to grips with that.
2) No it’s not. You can not name one single incident where the government has for one second stepped in and announced that they plan to permanently take over a private corporation.
3) I agree that the AIG bonuses outrage is a fake crisis – but that’s not what you were referring to earlier. You’re earlier statement by Frank whoever is not talking about the AIG bonuses – you are trying to back up your argument with something that isn’t even relevant to your own statement.
4) Who are “these people” you are referring to? Let me just guess – you are trying to stereotype the “Welfare Queen” types. Well, those don’t exist. Can you name one social program that exists today for people who are just too damn lazy to work and get money? No, you can’t.
Davo,
Barney Frank is a wacko – who cares what he says – as Jay mentioned earlier – the government does not own AIG – but maybe it’s time they bought up that extra percentage point so they can get these crooks out of it.
Barry
March 18th, 2009
9:34 am
Abolish the payroll (a.k.a. FICA) tax. Let’s let Hendrik Hertzberg of that notoriously right-wing magazine, The New Yorker, explain it: “The payroll tax…skims around fifteen percent from the payroll of every business and the paycheck of every worker, from minimum wage burger flippers on up, with no deductions. No exemptions either – except that everything above a hundred grand or so a year is untouched, which means that as salaries climb into the stratosphere the tax, as a percentage, shrinks to a speck far below. This is one reason Warren Buffet’s secretary (as her boss has unproudly noted) pays Uncle Sam a higher share of her income than he does. In fact, three-quarters of American households pay more in payroll tax than in income tax”. Read all about it in the March 23 issue – the one with the hilarious depiction of the Rushster on the cover. Annoyance alert – I will post this suggestion every day until we get some traction.
Joey
March 18th, 2009
9:36 am
Jay: You almost made it.
Next time try really hard to acknowledge that Frank, Dodd, Waters, Reid, Pelosi, Kennedy and Rangel were neck deep in the actions, yes actions, that lead to this mess. Hey, add as many Republican House and Senate member names as you want.
I Report/ You Whine
March 18th, 2009
9:36 am
My Lord this is getting so good-
A teleprompter blunder has led to Barack Obama thanking himself in a speech at the White House in a St Patrick’s Day celebration.
I can’t stand this anymore, the laughing is tearing me up inside, please, please, somebody make this stop, now!
Bosch
March 18th, 2009
9:36 am
Well apparently I can’t spell “branches” but I can certainly name them.
Taxpayer
March 18th, 2009
9:36 am
getalife,
do you mean that a new life form has evolved — the beckerheads.
G
March 18th, 2009
9:41 am
People conveniently forget that President Obama wanted caps on ALL executive pay. But oh no, that could not happen! It was deemed some sort of “socialist plot” for the government to run corporations.
Now the same people agree that a portion of this pay should be taxed at 100% to recover – because of public outrage.
The problem is, people accept these myopic arguments being made in the media, and the idea that this somehow is and should be a political disaster for the President.
It’s completely insane.
Amazing how this fact is getting lost in the right wing noise machine.
william reese
March 18th, 2009
9:42 am
Hey Curious Observer…When you’ve got a big zit like AIG on your forehead..165 million shows like a big whitehead.Enjoy your latte.
Civilian/Private/Corporal
March 18th, 2009
9:43 am
Bosch:
1) Steve Urkel http://en.wikipedia.org/wiki/Steve_Urkel
Sure “you” can name the three braches of government but Mr. Urkel was elected largely by those who can’t. That’s the point of the masses being able to vote themselves from the “public Treasury”. Sad. It basically boils down to “taxation without representation” when those who pay NONE can DICTATE to those who DO and you know what that caused.
2) Do you think they would do it all at once overnight? Is that they way it happened in other countries? No…….it’s “frog in the kettle time” and that’s why even you can’t see it.
3) Both are in large part fake. Just my opinion. Once you started bailing out the first one the others had no incentive to change. Let a few go down the tubes and you would have seen a big difference.
4) We have raised whole generations (white and black) who have no work ethic – no role models. If you can’t see that I can’t help you.
Enjoying the debate. This is what it is all about.
Brad Steal
March 18th, 2009
9:43 am
Jay writes: “We are told that if AIG didn’t pay those bonuses, its employees would leave and collect similar money at competing companies.”
“We” are suppose to believe this assertion and we are suppose to sit still while we are fed the line that “well.. we have a contract”. This sounds like a pandering line form the Bush years.
1. We should let the AIG twits leave. We should insist on it.
2. F’ the contract. Sue us.
The pabulum we are suppose to be accepting is condescending crap. No one is buying the reasoning. And no one should.
Joey
March 18th, 2009
9:43 am
Bosch: We all need to care what Barney Frank says and does. I agree with you that he is a wacko, but he is a powerful wacko who has helped do a lot of harm to our economy.
Civilian/Private/Corporal
March 18th, 2009
9:45 am
To You Report/I Whine:
HA! HA! Mr. Urkel is amazing ……..
By the way, have you read “Dreams of my Father”? I’m almost through.
Comment
March 18th, 2009
9:48 am
destructive incompetence — pretty well sums up the current administration.
Please comment or correct me on the following — The current administration was aware of these contracts before signing off on the bail-out; and provisions to stop these “bonuses” in any future bail-outs were deleted from the stim bill by the current administration — correct???
Civilian/Private/Corporal
March 18th, 2009
9:49 am
Bosch:
What’s this !!! Breaks in the ranks ?
HEADLINE: “Some Dems want brake in Obama plans … ”
http://www.politico.com/news/stories/0309/20150.html
Joey
March 18th, 2009
9:50 am
G: Why was President Obama unsuccessful in his effort to cap executive pay?
G
March 18th, 2009
9:51 am
Well, thank you, Bush. Let’s leave everything up to the states. They do such a phenomenal job.
http://www.cnn.com/video/#/video/us/2009/03/18/rich.getting.food.stamps.wlwt
Hillbilly Deluxe
March 18th, 2009
9:51 am
Jay writes: “We are told that if AIG didn’t pay those bonuses, its employees would leave and collect similar money at competing companies”
Yet 11 of the 74 who received bonuses of $1 million or more have already left the company according to CNN. That’s a shade under 15% who didn’t think the bonus they received was reason enough to hang around.
Don’t give them any more money. Let them fail and take our lumps. We’re only prolonging the inevitable anyway. It’s going to be painful and there’s no way around it.
Observer
March 18th, 2009
9:51 am
The fault for the AIG bonus debacle lies with those that crammed the original $700 billion bailout down our throats in two days. They handed out the money with little or no restriction and they drafted the legislation with little or no forethought.
People like Chris Dodd went so far as to ensure, under the terms of the bailout, that contractual bonuses would be paid (funny how Dodd is one of the ones screaming the loudest now). Interestingly, Dodd is the senior senator from Connecticut – the same state where AIG is based.
If our lawmakers were truly interested in acting in the interest of fiscal responsibility with OUR money, they would have written some stringent limitations into the language of the bailout. They didn’t. Period. The fault lies in Washington.
Truth
March 18th, 2009
9:51 am
Obama has become a puppet for the morons in DC. He needs to show some backbone and point out the real problem… (Frank, Dodd, etc.)
Civilian/Private/Corporal
March 18th, 2009
9:51 am
To Comment:
Here you go:
HEADLINE: Fake Outrage? AIG Bonuses Known Months Ago
http://www.cbsnews.com/stories/2009/03/18/politics/main4873238.shtml?tag=topStory;topStoryHeadline
Bosch
March 18th, 2009
9:52 am
Corporal,
1) You are not worthy of debate if you are going to so adolescently compare the President of the United States to a fictional sit com character. Your credibility is worthless in this part of the discussion.
2) It’s not gonna happen overnight or ever. That’s a fictional neo-con ghost story made up to scare everyone with absolutely no basis in reality.
3) I disagree.
4) I agree that we have raised a whole generation of lazy, unmotivated workers with no work ethic. I see more of those in traditional “white collar” jobs.
Again, there is no such thing as a social program for folks who are just too lazy to work, and until you can name one, this discussion need go any further.
Davo
March 18th, 2009
9:53 am
Here’s how it works…ummm…I mean, here’s how Obama manipulates the economy.
Citigroup’s top economist tapped for Treasury post
(you know, the company that needed a multi-billion dollar bail-out from the Federal Government)
http://finance.yahoo.com/news/Citigroups-top-economist-apf-14671442.html
Change….whatever. Obama is looking alot like W these days…when are we gonna get a real leader.
Wyld Byll Hyltnyr
March 18th, 2009
9:55 am
Jay, you write, “But at 80 percent taxpayer ownership, those previous bonus contracts would have been voided, and the restructuring process AIG could have been much more aggressive.”
Oh Jay, baby, ooh, baby, ooh, you’re the best and I learn so much from you. Please tell me how shareownership effects and incorporated entity’s obligations under an existing contract? Whether the Fed owns 1% or 100%, it seems, to me, that the corporation’s obligations under a contract do not change.
Part of the problem with the Fuhrer Obama’s liberal kristallnacht against bankers and capitalism is the consistently erroneous information fed into the argument by the liberal media.
Observer
March 18th, 2009
9:56 am
Barry @ 9:34 – The reason Warren Buffet’s secretary pays a higher income tax rate than he does is because he earns very little in income. His money is earned in the form of capital gains which, of course, are (currently) taxed at a much lower rate than ordinary income.
Mr. Buffet’s statement, while technically accurate, is very misleading.