Wednesday, March 18, 2009


From the New York Times courtesy of Eschaton:

Cuomo Details Million-Dollar Bonuses at A.I.G

Mr. Cuomo did not name the bonus recipients, but the numbers are eye-popping, given A.I.G.’s fragile state. The highest bonus was $6.4 million, and six other employees received more than $4 million, according to Mr. Cuomo. Fifteen other people received bonuses of more than $2 million, and 51 people received bonuses of $1 million to $2 million, Mr. Cuomo said. Eleven of those who received “retention” bonuses of $1 million or more are no longer working at A.I.G., including one who received $4.6 million, he said.

A.I.G., which is now 80 percent owned by the government, paid out the so-called retention payments, saying the bonuses were needed to persuade workers to remain at its financial products unit. But the payouts have caused a public furor, and the White House said on Monday that the Treasury would write new requirements about the bonus money in the next $30 billion that it provides to the insurance giant. Already, the government has given A.I.G. $170 billion.

More here.

Just in case you haven't been following the hairy details of the banking and credit crisis, the reason AIG must be bailed out is that this is the company that insured, via an obscure financial instrument known as a "credit default swap," the majority of those now toxic "mortgage backed" securities. That is, they're now in hock for billions because so many investment banking firms bet the farm on these stupider-than-shit "investments" in subprime loans on houses, many of which are now in foreclosure, and AIG, for a fee, agreed to pay if these bets failed. And when the real estate bubble burst, these bets failed bigtime.

I'm still agog over the sheer stupidity of it all. It was stupid to make mortgage loans to people who couldn't pay them. It was stupid to bundle those loans into "securities" to be bought by investors. It was stupid for ratings agencies to rate these "securities" as triple A, the safest available. It was stupid for investors to buy them. It was stupid for AIG to insure them.

But everybody on Wall Street was in on the game; everybody covered their eyes and ears and pretended that it was going to work out with them getting richer. And because everybody was in on it, the entire system of finance now teeters on the brink of utter disaster. And AIG is at ground zero. If they fail, the whole shithouse caves in. On the whole fucking world.

Only the bailout has forestalled the inevitable. I say "inevitable" because if the White House and Congress continue on their present course, handing over warehouses of money without strings to the greedy idiots who caused the crisis in the first place, the wolves of Wall Street will repeat their mistakes. With our fucking money this time.

That is, AIG is insolvent. We own their ass. They only exist because of massive injections of capital by the Fed. This capital infusion has kept them from going under, and AIG knows it all too well, but they're behaving as if there were no crisis, as if their own actions haven't placed us all in grave economic danger. In many ways, these outrageous bonuses of taxpayer dollars they're handing out are no surprise at all. That's Reaganomics era business-as-usual--for many years now, CEOs of major corporations, for instance, have gotten millions and millions in bonuses whether their companies performed well or not. The whole upper eschalon of corporate capitalist culture is about enriching tribe members at the expense of whoever they can rip off. Historically, it's their workers who have been fleeced, receiving stagnating wages and fewer benefits while their productivity increases, so that executives can party like it's 1999. But right now, with AIG, it's the whole fucking country they're ripping off. And they don't give a fuck what we think about it. They've never given a fuck what anybody thinks about it.

I hope you realize that they've got tribe members working in very high positions in the White House. When the administration first responded to outrage over these bonuses last weekend, the story was along the lines of "well, you know, it's a contract and all, and you just can't break a contract." Never mind the fact that the bailout of the big three automakers forced unions to void their contracts while making wage and benefit concessions--workers aren't part of the tribe; so that's okay. I guess. But the point is that the whole contract issue is bullshit. And once it became clear how pissed off people are about the bonuses, the White House quickly changed its tune.

The bottom line here is that the federal government needs to get serious about resolving the finance crisis. That means raping and pillaging. Taking no prisoners. Nationalizing these "too big to fail" failed institutions. Firing all these assholes who caused the crisis, and who continue to profit from it. I know that some observers, NPR earlier today for instance, assert that these people are the only ones who know enough about the issues involved to actually fix them, but these bankers and executives cannot be trusted. At this point, I'd feel safer if Wall Street was run by third year undergrad accounting students from Big State U--at least they'd cost a whole lot less.

By the same reasoning, Obama needs to fire the entire Treasury Department. They're in the tribe. They're the ones who keep playing footsy, fucking around, handing over mountains of money with no oversight because they won't hurt fellow tribe members, or violate their holy belief in free markets. It's almost funny that they've already violated their own beliefs, but can't come to terms with what they're doing, or summon the willpower to go all the way.

One must now wonder whether President Obama is part of the tribe, too, or if, instead, he made a genuine mistake in hiring these bozos. The latter is forgivable. The former is not.