Chaos at AIG

PrezBO and the liberals now OWN AIG, it's their baby.

AIG questions cascade White House: Geithner handled bonus matter

WASHINGTON "Cue the outrage.

For months, the Obama administration and members of Congress have known that insurance giant AIG was getting ready to pay huge bonuses while living off government bailouts. It wasn’t until the money was flowing and news was trickling out to the public that official Washington rose up in anger and vowed to yank the money back.

Why the sudden furor, just weeks after Barack Obama’s team paid out $30 billion in additional aid to the company? So far, the administration has been unable to match its actions to Mr. Obama’s tough rhetoric on executive compensation. And Congress has been unable or unwilling to restrict bonuses for bailout recipients, despite some lawmakers’ repeated efforts to do so.

The situation has the White House and Treasury Secretary Timothy Geithner on the defensive. The administration was caught off guard Tuesday trying to explain why Mr. Geithner had waited until last Wednesday to call AIG chief executive Edward M. Liddy and demand that the bonus payments be restructured.

The White House expressed confidence in Mr. Geithner " but still made it clear he was the one responsible for how the matter was handled.

“I do know that Secretary Geithner last week engaged with the CEO of AIG to communicate what we thought were outrageous and unacceptable bonuses,” White House spokesman Robert Gibbs said. Mr. Gibbs said he could not provide a timeline to show when members of the administration " including the president and others at the White House " became aware of the bonuses.

In an interview with The Associated Press, Obama’s chief economic adviser Lawrence Summers said: “In the context of what we’re doing, Secretary Geithner was notified, he has said, last week. As he reported to the rest of us, he moved aggressively and immediately, aggressively and immediately, to recoup whatever could be legally recouped. He recognized that you can’t just abrogate contracts willy-nilly, but he moved to do what could be done.”

The bonus problem wasn’t new, as many lawmakers and administration officials knew only too well. AIG’s plans to pay hundreds of millions of dollars were publicized last fall, when Congress started asking questions about expensive junkets the company had sponsored. A November SEC filing by the company details more than $469 million in “retention payments” to keep prized employees.

Back then, Rep. Elijah E. Cummings, D-Md., began pumping Liddy for information on the bonuses and pressing him to scale them back. “There was outrage brewing already,” Cummings said. “I’m saying (to Liddy), ‘Be a good citizen. ... Do something about this.’ “

Around the same time, outside lawyers hired by the Federal Reserve started reviewing the bonuses as part of a broader look at retention and compensation plans, according to government officials who spoke on condition of anonymity. The outside attorneys examined the possibility of making changes to the company plans " scaling them back, delaying them or rescinding them. They ultimately concluded that even if AIG’s bonuses were withheld, the company would probably be sued successfully by its employees and be forced to pay them, the officials said.

In January, Reps. Joseph E. Crowley of New York and Paul E. Kanjorski of Pennsylvania wrote to the Federal Reserve and the Treasury Department pressing the administration to scrutinize AIG’s bonus plans and take steps against excessive payments.

“I at that point realized that we were going to have a backlash with regard to these bonuses,” Kanjorski said in an AP interview. In a meeting with Liddy later that month, he said he told the AIG chief that “all hell would break loose if we didn’t find a way to inform the public ... and that we should take every step to put that information out there so we wouldn’t have the shock.”

Around the same time, Congress and Obama’s team were passing up an opportunity to put in place strict laws to revoke bonuses from recipients of the $700 billion Wall Street bailout. In February, the Senate voted to add such a proposal to the economic recovery bill that cleared Congress, but in final closed-door talks on the measure, that provision was dropped in favor of limits that affect only future payments.

“There was a lot of lobbying against it and it died,” said Sen. Ron Wyden, D-Ore., who proposed the measure with Republican Sen. Olympia J. Snowe of Maine. He said Obama’s team is sending mixed messages on what will and won’t be tolerated on bonuses, with the president coming out strongly against excessive Wall Street rewards but top officials not following through.

“The president goes out and says this is not acceptable, and then some backroom deal gets cut to let these things get paid out anyway,” Wyden said. “They need to put this to bed once and for all.”

Last Wednesday, an apparently tense conversation between Geithner and Liddy brought the matter to a head. Geithner had learned of the bonus payments the previous day, said a Treasury Department official familiar with the government’s dealings with AIG.

Liddy, in a letter to Geithner on Saturday, referred to their “open and frank conversation” over the retention payments on March 11. “I admit that the conversation was a difficult one for me,” Liddy wrote.

It posed a challenge for Obama’s team as well. Knowing that the bonuses were about to be paid, the administration moved over the weekend to get ahead of what was certain to be an embarrassing story.

Unprompted, officials leaked news of the bonuses to select reporters late Saturday afternoon, highlighting what Geithner had done to try to restrain the payments. The story quickly became fodder for the Sunday news talk shows.

Then on Monday, the president himself came out strongly on the issue, calling the payments “an outrage” and publicly directing his team to look for ways to cancel the payments.

Questioned repeatedly to explain this in light of the fact that the administration had already scoured its options and come up empty " and that the bonuses had already gone out the door to their recipients " Gibbs said that the president wanted his aides to make sure “to exhaust all legal remedies.”

That did little to quell the expressions of outrage that were blasting about by Tuesday.

“It’s shocking,” said Sen. Mitch McConnell, R-Ky., the minority leader, that “the administration would come to us now and act surprised.”

“It’s shocking,” said Sen. Mitch McConnell, R-Ky., the minority leader, that “the administration would come to us now and act surprised.”

What a sensible and practical fellow. I'm an admirer.

What was supposed to be a legal lynching of AIG boss Edward Liddy over the firm's bonus plan turned into a humiliating defeat for the lynch mob. Liddy came off as a smart straight shooter, a man who gave up retirement for $1 a year to rescue AIG so it wouldn't bring down the financial system.

He also proved himself a cut above those who aimed to make cheap headlines at his expense. I'd pay to see him question Congress on its role in the economic mess.

Most important, he revealed the dirty little secret that much of Washington knew and approved of AIG's promises to pay retention bonuses to members of its financial products unit. That revelation came early in Liddy's testimony and punctured the hot air balloon.

Liddy's matter-of-fact claim directly implicates the Federal Reserve, which he called the "gatekeeper" for the 80% of AIG owned by the taxpayers. He also said Treasury Secretary Tim Geithner knew of the bonus plan nearly two weeks before it became public.

Over to you, President Obama.

Much of the government outrage over the bonuses pool of $165 million was phony anyway, canned up for a public now being taught that the private sector is evil and must be punished. The real outrage is that the bonuses represented a fraction of the $180 billion of public money pumped into AIG without any real oversight.

Predictably, most of Liddy's tormentors steered clear of that topic, lest they be forced to make a tough call on a complex issue.

Liddy stands guilty of being tone deaf to the public anger on any bonus payouts at a time when people have lost their savings, their homes and their jobs. But as he repeatedly made clear, he came not to defend AIG's past, merely to clean it up.

That puts him head and shoulders above those in Washington who follow no star except merciless ambition.

More...

http://www.nydailynews.com/opinions/columnists/goodwin/index.html

I have been extremely busy the past few weeks and have been unable to publish many things or to even comment as I would have liked. However, attorney and nationally recognized blogger, John Hinderaker, of Powerline Blog, has been picking up my slack.

The constitutional prohibitions on ex post facto laws, bills of attainder and contractual obligations is a fascinating and broad subject. Constraints of time prevent me from expanding on those subjects today, but I can offer John’s words because I agree with him wholeheartedly. The bizarre and twisted drama unfolding nationally over the bonuses contractually guaranteed to the employees of American International Group’s financial products division has served the Obama administration well (Chris Dodd excepted) by diverting the public attention from where it rightfully belongs. The sanctimonious, faux indignation of the White House, Democrats in the House and Senate, the MSM and spineless, clueless Republicans has been both repulsive and astounding.

Wednesday, Edward Liddy, the man who agreed to lead AIG for one dollar per year, testified to the following before Congress:

* All of these payments, as to AIG’s troubled financial products division, are retention bonuses, not performance bonuses.

* The money is not going to anyone responsible for the implosion of AIG"those people, who were in the credit default swap area, are gone.

* These retention bonuses were promised to AIG employees who are responsible for winding down the company’s financial products division. At the beginning, this division had a potential exposure of $2.7 trillion. Winding down AIG’s book of business in this area was a dead-end job, and there was a great likelihood that the people responsible for the work, who knew the most about the products involved, would take jobs elsewhere.

* In late 2007 or early 2008, AIG made a deal with these employees: if they would stay at AIG until specified conditions were met, i.e., either certain business was wound down or a given period of time had elapsed, they would receive a specified retention bonus.

* As to all of the employees involved, they satisfied the terms of the bonus by wrapping up a portfolio for which they were responsible and/or staying on the job until now. As a result of the efforts of this group, AIG’s financial products exposure is down from $2.7 trillion to $1.6 trillion.

Hinderaker states plainly:

There is no legal principle that would justify not paying these bonuses. If you make an offer to someone along the lines of, if you do X I will pay you Y dollars, and he does X, it’s too late to change your mind. You’re on the hook for Y dollars, and you should be.

The legislation introduced by the Democrats today to tax these bonuses (and possibly a few others, although it isn’t clear that any others have been or will be paid that are covered by the statute) at a 90 percent rate is an outrage. It is, in my legal opinion, obviously unconstitutional. It is evidently intended to calm the current political firestorm and not to achieve any real objective.

The Republicans’ alternative, which basically just demands that AIG give the money back, somehow, is better but still silly. No doubt one could deduct $165 million from past and future bailout payments to AIG and thereby make the taxpayers “whole.” But that just illustrates the foolishness of concentrating on these bonuses rather than the larger picture.

The bonuses promised to AIG employees who agreed to stay and help unravel and liquidate the highly complex financial obligations and entanglements of the company should be paid to them. They and their employer entered into an agreement and the employees upheld their obligation. It is correct, ethical and proper they should be compensated according to the contract AIG signed.

UPDATE: Here is the official roll call vote tally for HR1586. Eighty-seven Republicans and six Democrats voted against the bill. Eighty-five Republicans, two from Texas, Lamar Smith and Joe Barton, voted along with the Democratic majority to pass this legislation, which Minority Leader John Boehner precisely described as a piece of crap.

A bill of attainder (also known as an act or writ of attainder) is an act of legislature declaring a person or group of persons guilty of some crime and punishing them without benefit of a trial.

Democrats Violate “Bill of Attainder” Clause of the Constitution

Punitively and retroactively taxing AIG bonus recipients is a clear violation of Article I, Section 9

...So the bluster has now turned toward what to do about these “outrageous” bonuses. True to form, the Democrat outrage has expressed itself in taxation - 90% taxation of whatever bonus money is not willingly returned by the people who were contractually promised to receive it. There aren’t enough mops on Capitol Hill to swab up all the spittle spewing forth from the falsely indignant Democrats, threatening to expose the names of AIG employees, and now legislating the confiscation of their income retroactively.

But there is one little problem Dems. I know you are loathe to let that damned inconvenient constitution get in the way of your march toward Socialism, but that brilliant document still stands, and still has meaning. At least to a great many of us.

Article I, Section 9, Paragraph 3 of the Constitution of the United States (yes, that document you’ve sworn to uphold) provides that: “No Bill of Attainder or ex post facto Law will be passed.” For those who’ve been educated in a university in the past couple decades, a “Bill of Attainder” is a legislative act that singles out an individual or group for punishment without a trial…

...And now, with the passage of this legislation that singles out one small group of people and retroactively nullifies their employment contract through punitive taxation, the Democrat congress under the demagogic hand of their dear leader Barack Hussein Obama, has plainly and completely violated the Bill of Attainder clause of the Constitution they’ve sworn to uphold.

A bill of attainder (also known as an act or writ of attainder) is an act of legislature declaring a person or group of persons guilty of some crime and punishing them without benefit of a trial.

GOP to Probe Links Between AIG, Obama, Dodd
by Connie Hair
03/20/2009


Reports of additional bailout negligence and mismanagement are rocking the Obama administration as lack of oversight has produced one big TARP mess after another, leaving Democrats running for cover. There were more revelations yesterday of excessive executive bonuses from the mismanaged Fannie Mae and Freddie Mac, companies at the very heart of the current financial meltdown, and an announcement from Democrats in Congress that 13 of the financial firms receiving bailout money from taxpayers owe more than $220 million in unpaid back federal taxes.

This mess was created when the Republican Congress passed the Glass-Steagal Act with 282 pages sneaked in by former Texas Senator Phil Gramm that deregulatedthe financial industry removing the four pillars and allowing mergers thus putting all the eggs in one basket ... AIG.