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Push Back Against AIG’s ‘Best and Brightest’

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Posted on Mar 19, 2009

By Joe Conason

Having long flattered themselves as “masters of the universe,” the creative financiers of Wall Street and London are today exposed as grifters rather than geniuses. Their proud claim that society cannot prosper without them—voiced so often whenever anyone raised subjects such as taxation or regulation—would now provoke bitter laughter instead of credulous nodding.

But they are not humbled.

Instead the old arrogance remains intact, at least on the premises of American International Group, where the flow of hundreds of millions of taxpayer dollars into bonuses continues, unimpeded so far by public outrage. These payments, made to many of the same individuals whose freebooting misconduct ruined their firm and laid waste to world markets, symbolize a system of rewards gone mad.

It should be obvious by now that the AIG traders, along with many others like them, deserved to be fired and perhaps prosecuted rather than enriched. The “too big to fail” argument for saving their firm and their sorry behinds always amounted to a kind of blackmail. The threat was stated explicitly in the remarkable letter sent last weekend by AIG chief Edward Liddy to Treasury Secretary Timothy Geithner that sought to justify the latest bonuses.

According to Liddy, the bonuses cannot be withheld because “these are legal binding obligations of AIG and there are serious legal as well as business consequences for not paying,” or so the company’s outside counsel has told him. “Given the trillion-dollar portfolio at AIG Financial Products”—the division that wrote all the toxic paper—“retaining key traders and risk managers is critical to our goal of repayment.” Attached to the letter was a “white paper” arguing that failing to pay the bonuses would touch off a chain of defaults that might sink AIG permanently and cost the taxpayers additional hundreds of billions of dollars and further damage the markets.

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In other words, pay up or we’ll hurt you.

President Barack Obama has expressed fury over the bonuses and ordered Geithner to claw them back, but his advisers seem to take the extortion threat quite seriously. It is far from clear that the president will use the full weight of the government’s ownership of AIG to stop these abuses.

Actually, the argument that withholding bonuses to certain employees would constitute a breach of contract seems strained. Would any judge really entertain those claims? Would any company really want to make such claims in court?

As for those “key traders and risk managers” at AIG, perhaps the time has come to call their bluff.  For many years these expensive suits have told us that they are indispensable; that if we don’t pay them extraordinary sums and guarantee their losses, no matter the moral hazard, our economy will collapse. Now it has collapsed, owing to their dishonest machinations and obtuse blundering—and they still claim that we have to pay them or else.

Or else what? The Liddy letter, which referred to the affected AIG employees as “the best and the brightest,” suggested they will seek employment elsewhere “if their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury.” A résumé that begins with a recent stint at AIG Financial Products might not be all that attractive to employers in an industry that is shedding thousands of jobs.

Disgruntled AIG employees may not just quit; they may sue us if we don’t pay their bonuses. But let’s see what happens in five years or so, as their lawsuit moves through the courts. Let’s see how many of these executives really want to answer hard questions in a deposition about their dubious activities at AIG. And let’s see how many of them suddenly realize that they may have criminal liability—like their old boss, Joseph Cassano, the former head of AIG Financial Products, who has hired a top defense attorney.

Meanwhile, New York State Attorney General Andrew Cuomo is dealing with this problem ably and forthrightly. He has subpoenaed the names and contracts of all the AIG employees whose bonuses are at stake in the current controversy. He should publish their names and let them demand their money in public. Let them explain to the world—including friends, neighbors and family—why taxpayers should pay their bonuses while autoworkers give up pensions and health care.

Even their own mothers may stop talking to them.

Joe Conason writes for The New York Observer.

      © 2009 Creators Syndicate Inc.


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By Kaelieh, March 23, 2009 at 11:25 pm Link to this comment
(Unregistered commenter)

You’ve got to read this article http://www.rollingstone.com/politics/story/26793903/the_big_takeover

It is an eye opener to everything behind the mess at AIG and the build up that led to this economic collapse.

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By cmhmd, March 23, 2009 at 7:21 pm Link to this comment

Kira,

Watch FauxNews much? LOL

Cheers

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By Debra Istvanik-Strotman, March 23, 2009 at 6:40 pm Link to this comment

samosama, you are correct. I worked with a lady once that said “People spend more time trying to get out of work and sucking up” then if they had just done the job. Of course in the case of these lowlifes from AIG and others the pay off is unbelievable.

These people have the knoweledge to have done a brilliant job, unfortunately greed, power, and ego got in the way.

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By california dreamer, March 23, 2009 at 11:38 am Link to this comment

I hope Cuomo stands up to the political pressure and follows through on a complete investigation.  We need to uncover the cover-up.  Will this one be AIGate?  The idea that AIG needed to be propped up so that they could pay taxpayer money to Goldman, etc for the failed mortgages is a telling indictment of the whole system.  It is a house of cards and I guess the gov’t has been told that if one fails, they all fail.  So we must rescue the masters of the universe in order to save the world.  Meanwhile, back at the homefront, the tax-paying homeowner did not have the option of hedging his equity.  When the bubble burst, he has no one to turn to.  The meager $75 billion for the all the homeowners is less than half of what AIG has gotten already.  But that’s how these people get their bonuses:  by figuring out how to maximize profit and minimize risk.  Geithner is a product of this world and his ego-centric view is all about saving his peers and screwing the people.  Most of these fat cats don’t have mortgages as they paid in cash for their mansions.  My wife and I both make about $100,000 a year and we would have to both work 30 more years to equal the bonus one employee of AIG received.  How is that fair?  My wife is a nurse and I am a psychologist.  We spend our days helping people.  Why is a derivatives trader worth so much more than I am?  What kind of world allows this to happen.  I guess it’s the world we live in.

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By samosamo, March 22, 2009 at 9:34 pm Link to this comment

By Debra Istvanik-Strotman, March 22 at 11:47 pm
***************************************
Yet we are told the very greedy,arrogant, dishonest ignoramuses that have brought the banking business, and our country to her knees are now telling us these people are so smart that we can’t make it without them.
***************************************

Believe it or not, it does take intelligence and a lot of it, depending on the situation, to set a goal(steal the money), devise a plan to pull it off, and some extra intelligence to not get caught(bribery, political influence, wait I said bribery or make someone else take the blame.

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By Debra Istvanik-Strotman, March 22, 2009 at 8:47 pm Link to this comment

We are all replaceable in the work force and someone is always waiting in the wings to not only replace us but to prove to the company that they can not only do the job but do it better than their predecessor.

Yet we are told the very greedy,arrogant, dishonest ignoramuses that have brought the banking business, and our country to her knees are now telling us these people are so smart that we can’t make it without them.

Well how smart are they when it is they who have ruined peoples lives. They who could care less as long as they get a bonus for their disasterous work.

These same people don’t want us to know their names or titles and are now crossing their fingers that congress doesn’t obtain or release that information.

Fire them, release their names to the public, take their bonus away and let them spend years in court fighting for that bonus. They won’t have anything else to do without a job, and millions in bonuses.

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By Kira, March 20, 2009 at 12:44 pm Link to this comment
(Unregistered commenter)

All of you have only Chris Dodd to thank for these bonuses.  If it weren’t for him adding that line into the stimulus bill these would not have had to be paid.  Yes the are legally binding agreements but without Chris Dodd this could have been avoided.  So instead of directing your anger at the “Wall Street Thugs”  why don’t you direct it towards the people that caused the mess in the first place.  Dodd, Frank and Geitner.

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By cmhmd, March 20, 2009 at 9:35 am Link to this comment
(Unregistered commenter)

>>Their proud claim that society cannot prosper without them—voiced so often whenever anyone raised subjects such as taxation or regulation—would now provoke bitter laughter instead of credulous nodding.<<

This is what goads me most. They think they have been the engine of the American economy, or the engineers running the locomotive, when they are merely the grease in machine.

They create NOTHING of real value. No manufacturing, no building, no items of value are created, simply living off of transactional costs and evanescent financial instruments.

One last thing: In the past 30 years of deregulation, I think there were only a few Congress people who really understood what they were doing. I think Phil Gramm was one of them, and he needs to be made to stand up and reap a bit of what he has sewn.

Cheers,

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By blogdog, March 20, 2009 at 4:58 am Link to this comment

La Place de la Concord redux!  If the Global Finance Oligarchy expects that its towers of glass elevate and insulate them, as did the inhabitants of Versailles, then they must be taught (in the flesh) how the Ancien Régime met its demise.

Indeed, those ignorant of or arrogant to the fates doled out across history’s killing fields are forced to relive them.

Erect the machines in Battery Park and along the banks of the Themes, near enough to Wall Street and City of London, respectively, so the carts need not have too far to roll.

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By samosamo, March 19, 2009 at 4:54 pm Link to this comment

By Jim Yell, March 19 at 4:59 pm

All right, you at least took it back as far as reagan’s demented presidency, but it sure enough goes even further back than the 8 years of republican and democrat support of ‘unfettered corporate america’ of which I am sure that little piece of shit milton friedman would be very proud. Then just drop it on back all the way back through the 20th century to 1913 when woody the woodpecker wilson signed the Federal Reserve Act of 1913 for the bankers, not the american people but the bankers, that wanted and got the bill signed into law in exchange for his presidency. And from what I have read, the late 19th century was the time of better organized corporations(not good for the people but for those corporations that were positioning for leverage of our, the people’s, government). Since then this country has lost about all laws that were created to prevent what is happening here right now and now obama ‘talks the talk’ but he sure appears to be falling over when he tries to ‘walk the walk’.

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By Jim Yell, March 19, 2009 at 1:59 pm Link to this comment
(Unregistered commenter)

The motive power for the Bush/Cheney, yes even the Reagan Republican Party has been to free business of any accountablility and with the active cooperation of the past 8 years of two arrogant, spoiled, chicken Hawks we have watched our tax money be dumped into the military industrial complex without even the most modest accountability.

Sadly a large part of Democratic Leadership cooperated with the rape of the treasury by the obscenely wealthy either thru not having the courage to launch proper opposition to the crimes, or being too concerned with their own portfolios to do their obligated jobs of being honorable opposition.

Now we are watching a balancing act in which the government and the nation can easily collapse from the results of Reagan/Bush/Bush and even Clintonian favoritism to banking and international corporations, not to mention the above military industrial complex.

The Republicans for their part are trying to sell the same snake oil that they fed the country for the last 5 Republican Administrations. We are to believe that the collapse which was brought on by their squandering of tax money on no bid contracts, un-necessary invasions and laying the ground work for fascist revolution oppression had nothing to do with the difficulty facing the current administration in sorting out a path to save the republic. Is there anyone out there stupid enough to buy this dead parrot?

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By samosamo, March 19, 2009 at 12:42 pm Link to this comment

What this really means is that through the ‘lobbying/bribery’ portal, companies such as aig have stacked the deck so much to protect themselves and to immunize themselves from attack or legal action are in the position to tell america or the world to f**k off and pay up for their best and brightest. They can do what can to take every unfair advantage of the people but just keep playing the aristocratic game and see what will happen, you are NOT too big to fail. As a matter of fact, for this country to recover your failure along with many other corporations are essential so that rebuilding the economy will provide for a better and stronger economy. Just like the nazis found out, bigger is NOT better in just about any situation and especially not aig’s.

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By Ribald, March 19, 2009 at 9:50 am Link to this comment
(Unregistered commenter)

It is all well and good to voice outrage, but is that all we can do? I suppose so, because there has been very little work done to resolve problems like these, even from a publicity standpoint. Those in power claim it is out of their control, while the rest of us know it is certainly out of ours. *Sigh*

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By photoshock, March 19, 2009 at 8:35 am Link to this comment

Mr. Conason, your able and cogent argument for making these men and women publicly demand the bonuses that are contracted to them is the, ‘stuff of legend.’
We the people, cannot long stand for the thievery and actions of the ‘Wall Street Thugs!’
These people are the worst group of men and women to eve grace the earth. They are greedy and avaricious to the nth degree and would gladly bankrupt the United States of America, for their bonuses to be paid to them. Such actions are not the actions of human beings but the actions of thugs and thieves.
Now that these ‘bonuses’ have come to light, let us the people, the largest stakeholder in AIG, determine
if these people are due the exorbitant and outrageous
sums that they have contracted for.
If not, then these men and women, should do the perp walk, without mercy and without an ounce of sympathy from the people of the US. Spending the rest of their
lives in prison is too good for these thugs, let them
work for their bread and housing at minimum wage for the rest of their natural lives, right up until the time that they die.

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By Inherit The Wind, March 19, 2009 at 8:35 am Link to this comment

Sam’s right—to some extent.  I don’t know and AIG isn’t saying but it’s very possible SOME of these bonus babies actually offset some of the division’s losses.  THOSE people are entitled to bonuses.

If UAW and teachers are required to take pay cuts, it’s insane that millionaire bankers aren’t!

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By Bud, March 19, 2009 at 7:44 am Link to this comment
(Unregistered commenter)

There seems to be an abundance of greed,and general lack of honesty in the good old USA. The people at AIG with their very insightful attitude concerning retention bonuses is disgusting,and obscene! Not too many corporations are going to solicit these incompetent individuals for hiring purposes.I have about as much respect for these people as I do child molesters.

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By SteveK9, March 19, 2009 at 6:53 am Link to this comment

Call their bluff is exactly right.  At the end of the day we really need a finance system that does not so dominate the economy.  We are in a nasty circle where their wealth buys political power, but perhaps the public is outraged enough this time to finally bring them to heel.

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By Purple Girl, March 19, 2009 at 6:44 am Link to this comment

RICO, Treason and Crimes Againt Humanity
“Want to paly ball Scarecrow??”
The ‘street’ gang has been swindling investors into buying worthless paper- Fraud. AIG helped by claiming they would back these paper & promises-Thus giving some ‘legitamacy’ to the ‘products- money laundering. Both were essentially embezzling moeny from their investors through the purchase of these ‘Brooklyn Bridge’ deeds of owership and the guise it was liegit because it the deal was ‘insured’.
Then Bereneke & paulson write alittle ransom note and stick in the desk for 6 months, allowing time to not only continue the ‘sting’, but to assure no other means of stopping the economic collapse could be utilized Except backhoeing money into the system- ‘Pay Up or the place goes up in flames’- that’s extortion.
Now that pretty much covers the RICO Charges. What compounds their crimes i snot only that it efffected every aspect of Our economy, but also compounded the amount we will be indebted to another nation to try and dig ourselves out from underneath. We have no choice but to further indebt ourselves to a foreign nation, leaving US at their mercy. That’s Treason.
Beyond that is the fact this is a Global catastrophe- effecting people around the world who not only depended on Our Consumerism for their economy, but also our US Aid for their survival- literally. Our Federal Aid and our charitable donations to help feed them and provide medical care. So now due to this Rackettering Treason, people are dying. That makes these Crimes against Humanity.
Of Course we could throw in War crimes since 2 unnecessary invasion were instigated purely to gain control of Oil Fields- and What also helps drive up the price of Oil other than supply & Demand, speculation. And What does the ‘streeters’ thrive on - Speculation, which inturn is able to drive the market price up or down. Add to that the fact Oil has a direct effect on food Production, and we’re back to Crimes against humanity.so dicking around with contractual legalities or legislative rangling is ridiculous and only proves both sides of the aisle are either pussies or complicit. Levy any one of these Crimes from RICO to Crimes against Humanity and everyone of these peoples Assets are eligible for a Freeze & Seize action.
so no don’t give the money back ‘Street’ gang members- we will savor prosecuting and punishing you for any and all of the crimes you have committed instead.

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By frank1569, March 19, 2009 at 6:19 am Link to this comment
(Unregistered commenter)

F@#k it - let’s just buy the other 20% of AIG, kick all the masters of the lying and stealing universe to the curb, and then break up AIG into little pieces and sell em off, after our own team of “best and brightest” comb through the books and then set a new record for most single company employee indictments, naturally. Enough dicking around already…

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By Margaret Currey, March 19, 2009 at 5:26 am Link to this comment
(Unregistered commenter)

They are no longer a private company since they are owned 80% by the taxpayers.

We have used the slogan “too big to fair”, to we cannot go back on the contract we have to award bonuses or there will be a lawsuit, the letter of the law is a bonus is not a given and since when have AIG which is so big can demand a bonus based on 2007.  I’ll bet you the corporate giants knew even in 2007 that there was going to be a depression.

But this mess I put to Bush because he was letting the religious right vote him into office not on merit his merit but on his “supposed” religion and that he talks to God.  Sure wish God would have told him about the AIG messs.

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By Margaret Currey, March 19, 2009 at 4:19 am Link to this comment
(Unregistered commenter)

I say to the president and his enablers to call their bluff.  How dare they say there will be lawsuits, there will be worse than lawsuits there will be blood in the streets.

There are plenty of people to take their place and just as qualified.

The far right say it is because of lending to the poor, but there must still be guidelines, giving a house to a person who has just a service job which will be replaced with cheaper and cheaper labor is not the answer.

I find it ironic that the top gets 400% more than those at the bottom.

I remember when failed companies were giving their executives large salaries and justified that by saying everyone else does it.  Well the time of greed has to end.

Madoff’s wife just goes to Fla. where she pays no taxes on her mansion.  Good ole Fla. tax haven for the rich.

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By SamSnedegar, March 19, 2009 at 4:09 am Link to this comment

vintage Conason: great stuff!

these remarkable “bonuses” have to be tied to something that the recipients DID in order to qualify for them; had these people done what they are required to do, their company wouldn’t be in need of a bailout, so whoever PAID the bonuses is surely guilty of (at the very least) mismanagement.

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