9:58AM: We’re moments away from today’s Congressional shouting match. While we wait, here’s Franky-boy this morning, telling CBS, “There are going to be multiple attacks. We’re not going to stop.”
10:00AM: Frank has taken his seat and was just saying something, not deemed important by CSPAN, which had an announcer talking over the Rep.
10:01AM: There are a row of Pink Ladies in the audience, so that oughta be good.
10:06AM: Rep. Kanjorski, apparently a rapscallion, accidentally refers to TARP as “TRAP.”
10:09AM: Kanjorski: “There’s something seriously out of whack” going on at AIG. I told Liddy back in the day that distributing bonus would create a shitstorm, but did he listen to me? Noooo. “My sound advice went unheeded.”
10:12AM: Rep. Scott Garrett wants to know why Geithner didn’t raise this issue with Obama last week, and if T. Geith were standing in front of him, he’d say “What did you expect?” (A: “I didn’t think it was a big deal! Everyone cheats on their taxes.”)
10:15AM: Frank in the hizzous. Suck it Garrett! You didn’t ask any questions either, except about covered bonds (that’s right, Frankle went back and read the transcript from AIG hearing back in July).
10:17AM: Uh, something about “fighting in the [Congressional] gym..”
10:18AM: “The problem is not the dollar amount, it’s the incentive structure. Heads they win, tails they break even.”
10:21AM: “Let’s bring a lawsuit against the people who damaged the company.”
10:24AM: Rep. Bachus: Apparently the blame game is like “trying to play pin the tail on the donkey.” Not exactly, but sure, go with that. “There’s justified anger, so we could certainly pin the donkey on AIG.” (Has Mr. Bachus ever played PTDOTD? Survey says no.)
10:26AM: The Fed and the Treasury have done a shitty job managing AIG. So have the regulators. No one can do it. “Should we take a TV poll to see if anyone can?” No, no one can do it. No one, except AIG. Ed Liddy’s a good man. He can do this. Let’s get off their asses and let them do it.
10:29AM: Rep. Ackerman, ravishing with a white carnation on his lapel, rode into this hearing “on a tidal wave of rage.” The taxpayer is “the ultimate sucker.” How was AIG able to “package smoke and sell it on the market for billions? HOW?”
10:30AM: Rep. Tom Price: “What we desperately need is an exit strategy,” like in that other battle we’re fighting. Also, this is all Geithner and Obama’s fault.
Kanjorski compliments Price on his sound bite being exactly 2 minutes.
10:36AM: Rep. Michael Capuno is clearly saving his energy for the big show. “Do you believe that what we’ve done so far is better or worse than letting AIG go bankrupt? I want to know. I want to know if AIG will ever be profitable. I want to know when.”
10:37AM: Rep. Carolyn Maloney wants to tax bonuses at 100% for any company that receives taxpayer money. Also, AIG executives “haven’t read the memo from the American taxpayer.”
10:46AM: Rep. Jeb Hensarling: The [air quotes] bonus scandal is simply the scandal of the week “and the week is not over.” Let’s talk counterparties, motherfuckers.
10:55AM: Kanjorski’s in agreement! The bonuses are shocking and all that jazz, but not really the main issue, k?
Opening Remarks:
Scott Polakoff, office of thrift supervision acting director: One less he’s learned is that Credit Default Swaps continue to be unregulated problems.
Joel Ario, Pennsylvania Insurance Commissioner: I don’t know if you people knew this, but we bailed out AIG because of systemic risk.
“The most important lesson we can learn from this whole thing is the need to manage system risk.”
Orice Williams, Government Accountability Office, Financial and Community Investment Director: We have not drawn any final conclusions.
Rodney Clark, S&P Financial Services Ratings Group MD: Tells us how the agency goes about rating companies (they write a bunch of names down on various sheets of paper, throw them down the stairs, and rate them in descending order). “Our rating on AIG remains at A-, with an increase due to government assistance.” Without the gov, this sucker would be a B-.
Okay, obviously this is an opening act, and we’re here for The Big Show, i.e. the Liddster. Ackerman correctly pointed out now that “most people’s eyes are glazing over,” and while we’re not peacing entirely, we’re gonna take it easy ’til Big E.
I think he said something about hunting wabbits.
Give us Maxine Waters! Her opinion is of great importance here.
White carnation on Rep. Ackerman. Nice touch.
I just want to point out that all this bickering is about 82.5 million dollars. With federal, state and city tax – the tax rate for most of the 165 million AIG is paying is going to be around 50% anyway. When trillions of dollars in bailout are at stake, and an economy is in peril, is this really the best use of our lawmakers’ & treausry’s time?
Not to mention the fact that this was paid out due to contracts and unlikely to repeat in the future. What really do we gain by having the nation’s lawmakers and treasury spend days (weeks?) on something that’s less than 0.05% of the money in play for bailing out AIG only. I don’t care for the populist message, and being a sheep following the raukus – but it would be that much better is they were trying to make sure that AIG is using the 99.95% of the money tied up in them properly. Not to mention the other trillions at play elsewhere.
it will cost more money to break the contracts than to keep them…
too penny wise, didn’t pound foolish.
@4
Right you are but “main street” needs its blood and congress is going to give it to them.
We have serious problems to solve, and we need serious people to solve them. And whatever your particular problem is, I promise you, our politicians are not the least bit interested in solving it. They are interested in two things and two things only: making you afraid of it and telling you who’s to blame for it. That, ladies and gentlemen, is how you win elections. You gather a group of middle-aged, middle-class, middle-income voters who remember with longing an easier time, and you talk to them about family and American values and character. And wave a portfolio of AIG/Banks/Financial Institutions and you scream about patriotism and you tell them, they are to blame for their lot in life.
Sounds familiar?
@4 The reason this is important is because the incentive structure caused this whole mess. If you incentivize people to burn down houses, they will burn them down. The only solution to this mess is analyzing and changing the incentive structure on “Wall Street.” So, yes, in absolute dollar terms, this is a small issue, but it is actually the root of the whole problem.
@4 – it’s only $82.5 million, but in terms of political capital, it’s worth far, far more. Indeed, any future bailout needed by AIG is likely out of the question politically.
I know this has been said too many times, however what the F**K is wrong with these Rep’s, Maloney wants back the $125 million in bonuses ?
Hoiw can they be allowed to speak when the clearly, time and time again, do not even know what they are talking about ?!?
@8 Fine, make the change, make a law. I don’t work for AIG, and I’m all for a structure where you have a stable base salary and any bonus is tied to long term performance.
But what congress/treasury is doing is wasting time looking for loopholes to get 85 million back, when there are trillions of the tax payers money elsewhere in play. If they have the best interest in mind, they would try to navigate us of this mess not try to get on the bandwagon of populist message which makes a great media story, but does very little.
Who cares? At the helm of a country is a teleprompter reading robot!
Bush got crushed for his mixing up words. Lets see how much play this gets.
http://news.sky.com/skynews/Home/World-News/Barack-Obama-Thanks-Himself-In-Teleprompt-Blunder-During-Address-With-Irish-PM-On-St-Patricks-Day/Article/200903315243932?lpos=World_News_First_World_News_Article_Teaser_Region_1&lid=ARTICLE_15243932_Barack_Obama_Thanks_Himself_In_Teleprompt_Blunder_During_Address_With_Irish_PM_On_St_Patricks_Day
@7 Your 15 minutes are up…My name is Guest, and I am the president.
Ok I’m done watching this. Every representative is saying the exact same shit.
@8
So this public hearing is about incorrect structure of incentivized pay? I thought it was a public lynching. I will agree the structure needs to be altered but this isn’t forum or the way sensible people handle problems.
@14- these are just their opening statements.
@12- um, a lot of people.
@11 – It’s not only $85 million at stake, but also the public faith that Congress is spending bailout money wisely or even that bailout money is really necessary.
@9 what political capital? Political capital of reps involve to further their own careers? Or political capital to advance the nation?
If it’s the latter, let me point out, congress is not required by law to bail out AIG at any point in time. They can certainly pass a law (effective going forward) to not allow bonuses until AIG returns Tax payer dollars or whatever. In fact, they should have thought of this before the first time they bailed out AIG. But they didn’t, and furthermore, they were aware of these contracts for a year. Might have been better if they turned on the pressure in 4Q 2008.
What they are doing now is showboating. It gains nothing. Except for them. They are on TV, getting great coverage and for once getting to blame everything on somebody else. The politicians have hit a goldmine. In the meantime, if the other trillions in play are not properly invested – well see you in hell in a few years. I don’t see just greedy bankers and traders, I see greedy politicians as well, and a main street that never really gets it.
Looks like it Wabbit hunting season…
Obama took over $100,000 in campaigne money from AIG so did Dodd.
Shumer and Clinton took big money from Madoff. No one gave any back.
Its spine tingling whenever these hypocritical cock suckers get “angry”
I think the posters on this thread can whine all you want. You’re not going to change a thing.
The outrage train is picking up steam, and hopefully it will roll over any other bailout money that may be in the offing. I sure as hell hope that not one more dollar goes to any bank or insurance/finance company. I also hope that the gov’t calls back a lot of those TARP loans soon.
This whole AIG disclosure is a tipping point. The f’n country has had enough of Wall St.
The Guy from Delaware
Notice Erin Burnett’s snarky comments she slips in right before/after commercial breaks?
They’re positioning her to be the new foil/’pot stirrer’.
She is an attractive white girl and if Leibowitz attacks her he will come off looking like an asshole.
Ratings Ratings Ratings.
@11, 8 here,
If a bridge collapsed somewhere, an enormous amount of time, energy, and money would be spent identifying and investigating the causes. This process would include an examination of the individuals or corporations that were negligent in building/maintaining said bridge. This is what Congress is now doing and it is an appropriate job for Congress to do. Perhaps, by looking at this issue, Congress will pass better thought out laws in the future.
WWCS?
what would capuano say?
this is a joke and the joke is on us.
yes, it’s shameful, but what part of the constitutional prohibition on ex post facto laws that punish are we pretending to misunderstand – and this is all about punishment. barney, chuck et al signed a bill they didn’t read – again. someone has to pay.
someone will get summers to speak in a less controlled atmosphere and it will be revelatory – b/c he disdains lying to a direct question.
on the bright side, when the economy turns around and 3 years out we have very low yoy growth, none of this will matter anyway, b/c what we’ll owe will be staggering.
@18 – Political capital to pass advance any future bailouts of the financial industry. Constituents were willing to buy off on TARP etc. b/c there was enough political capital to push the legislation – i.e., the potential for “financial Armageddon,” which, by the way, was never really explained all that convincingly.
You’re right, Congress can certainly pass a bailout bill that disallows bonuses, but you’re assuming that they’ll actually have the political capital to advance any bailout legislation at all. The bonus payments – although only $85 million – diminishes any chance that the populace will support future bailouts.
As for showboating – welcome to CSPAN.
Things are bad. All this mother load of money news and no can make money on it. Except dealbreaker.
@22, 11 here,
“If a bridge collapsed somewhere, an enormous amount of time, energy, and money would be spent identifying and investigating the causes.”
I’m with you so far. However, AIG paying 82.5 million is not the cause of economic collapse. It was a contract to retain/bring in qualified people in a collapsing company. This kind of contracts goes to top executives in any industry, anywhere.
What was wrong with the compensation structure you are really talking of, is year end bonuses being tied to short term profits (again note, AIG in this case was NOT paying year end bonuses on short term profits). And I’m all for reviewing/changing that. Some institutions have already begun to address this.
Lastly, as per your analogy, there are millions of other bridges at stake (representing the many hundreds of millions of funds in TARP, TALF etc). Those won’t be saved by figuring out a loop hole to get 82.5 million back from AIG, and spending time bashing it’s execs. It could feel good. But does nothing of substance. And not thinking of substance or end result is what got us here in the first place.
So this is what happens when the Govt runs the banks? Wow I am impressed.
Maybe they can get in the car business soon too. zoom zoom.
@15 This is exactly how angry “sensible people handle problems.” Angry, insensible people would actually use violence (i.e. conduct a real lynching).
these bonuses are so absurd.. they’re out of this world :)
yes AIG is now ALIEN INTERNATIONAL GROUP.
ha. funny Grassley photo. He’s off to space…
http://weeklyworldnews.com/alien-alert/6971/charles-grassley-confronts-aig-execs/
Hearings on steroids in baseball were a waste of time. This is not. The message is getting through. Grab a pitchfork and hunker down.
Is there even one person here that believes the politicians in DC can steer the country through this recession?
AIG is one giant disaster. BK it! LEH went down. We are all still alive. The world didn’t end.
There are people / corporations out there with cash just waiting to buy assets for pennies on the dollar. Those people will create a market for these assets. Right now there is no market.
AIG doesn’t want to sell off their assets in current market conditions. Too F’ing bad. My neighbor doesn’t want to sell his home now in this market either but he can’t pay his mortgage. Too F’ing bad!
Lets BK all these Fuckers! AIG, BAC, C, etc. Pennies on the dollar will get the markets moving again. It won’t be pretty at first but I guarantee there are people sitting on the sidelines waiting for this.
@26, 22 here,
“I’m with you so far. However, AIG paying 82.5 million is not the cause of economic collapse. It was a contract to retain/bring in qualified people in a collapsing company.”
I am not so sure. If you want to retain/bring in qualified people in a collapsing company you would probably issue large equity stakes. If the execs at AIG thought that AIG was facing a cash crunch, paying large cash bonuses tied to a previous years performance figures is not the way to go. Some could view it as a form of fraud. Personally, I find it extremely negligent, especially since the retained “talent” seemingly did not understand the concept of hedging wrong-way risk.
http://financial-dictionary.thefreedictionary.com/Wrong-way+risk
Unfortunately, I think we are going to have to investigate each bridge, one by one, to understand everything that happened. But, the focus in each case should be on the actions of the executives and the compensation structure and mindset that drove those actions. What Congress is doing today is a start.
remember marty sullivan and robert willumstad? perhaps they should be the ones in front of “blow me” frank and his cohorts. instead, we have the gov’t fall guy who was pulled out of retirement after successfully running allstate for years getting grilled. after watching this $hitshow, who do you think the gov’t will be able to recruit to run the company and somehow/someway get my hard earned tax dollars back (from goldman et al)?
Liddy is going to get crucified in front of those populist torch-bearing freaks.
About halfway through the crucifixion, he should say “fuck this, I didn’t cause the problem, it ain’t worth $1/year, I fucking quit.” And walk out.
Then little Timmay Geithner and his deputies can run AIG directly.
everything the gov’t touches turns to sh_t. i’m pretty sure at least some of the employees receiving bonuses this year worked in profitable centers of AIG and were not resonsible for the CDS blow up. If the government sets this dangerous precedent then can’t they start clawing back any bonus paid out at a TARP fund receiving firm? Why stop there, look back 10 years and start clawing back bonuses already paid to the douches who really caused this mess, let’s get some accountability on who’s bonus we claw back instead of pillaging every ‘evil’ wallstreeter’s wallet. p.s. barney frank is a douche.
As David Fredesso writes,
“But why is Obama so outraged and surprised? Today we learn that he signed the very bill that quite clearly made those bonuses legal — the $787 billion stimulus package he had traveled around the nation promoting. The bill includes restrictions on executive compensation, but creates an exception for bonuses contractually obligated before February 11 of this year. The provision, and the exception, were inserted into the bill by the chairman of the Senate Banking Committee, Chris Dodd (D, Conn.), who has received more than $100,000 from AIG employees in the last 20 years, had written and inserted the relevant provision, with the relevant loophole. How can he, the president, or anyone else who voted for the stimulus, suddenly act surprised? Don’t tell us they didn’t read the bill.”
So, Obama signed this bill, which ACCEPTED bonuses contractually viable before Feb 11th of this year. He SIGNED it. And Chris Dodd WROTE it.
And, he continues
“Here is the loophole, from the section of the stimulus package that deals with compensation rules for TARP recipients:
The prohibition required under clause (i) shall not be construed to prohibit any bonus payment required to be paid pursuant to a written employment contract executed on or before February 11, 2009, as such valid employment contracts are determined by the Secretary or the designee of the Secretary.
Frankly, it’s hard to imagine how the government could prevent such contracts from being honored. But the presence of this loophole, in black and white, certainly gives the lie to all of this phony outrage — by the senator who created the loophole, by the president who signed it into law, and by everyone else who voted for the stimulus package.”
And the truly ironic thing is 52 people who received retention bonuses have left AIG. So that worked.
But it makes me wonder, who writes these bills? I can’t see Dodd or Frank sitting down at a keyboard hammering them away, so I presume they have aides to do it. Then I wonder further still – do the Prez and Congress actually READ the freakin’ things, or just blindly sign what’s thrust in front of them. My money’s on the latter.
There are two lessons here:
1) Government shouldn’t be allowed to run a lemonade stand. The Treasury knew, or should have known about these bonuses. Treasury ratified those contracts. Trying to claw them back now is nonsensical. Someone should take responsibility (ahem, Geithner) and fall on their sword, Grassley style.
2) If politicians don’t like how you make money, even if it was legal and contractually specified at the time, they will arbitrarily tax it to death. That 90% tax rate could soon fall on you. (Coal miners, fast food restaurant operators, mortgage brokers take note)
@34 Tim has no deputies, or under secretary or staff…
no one wants the fucking job. Now thats change we can believe in…
Frank is a total shithead.
@36 Yes, Congress and the Prez screwed the pooch. Fortunately, they can pass a new law that gets rid of the loophole and expands the prohibition.
@35 Yes, they should go back, but it will be hard, if not impossible, to go back 10 years. Going back 2 years is probably feasible.
For 6 months, I’ve been waiting to hear a convincing argument that justifies use of gov’t funds as payouts to CDS holders who are not also the actual holders of the underlying bond and then only after the actual bond has defaulted.
I’ve heard nothing other than some contractual bullshit. F*k the third-party CDS holders. They have no “skin in that game” other than the premium they paid. Piss on them. The country will survive.
The Guy from Delaware
p.s. @#31…TGFD likes what you wrote.
The Guy from Delaware
KevinB@36, Why don’t you volunteer to help Geitner or to help congress write better bills. You sit here and tell us all about what’s wrong. WTF have you done to help other than to make chickenshit analyses?
Small minds make mountains out of small problems. It’s easier to focus their pea brains that way.
41: Obama/Geithner/Congress wrote the bailout package and the stimulus bill. We told them it was a bad idea, but they passed it anyway.
Does that qualify as volunteering to help?
There’s no way Obama is going to pay for all his unicorn fairy shit by raising the top tax rate to 39.6% and someone who is smarter has probably told him this. He’ll end up raising it to 70% or maybe even 80%.
Taxing the TARP recipients bonuses at 70% would set a nice precedent, wouldn’t it?
@ 22 — you are a fucking idiot.
just an fyi
Agree with 31 and TGFD, no money should have been wasted on counterparties or propping up bal sheets, let them all rot in hell and use the cash to support american workers.
@26
Do you work for the government? Cause only there the concept of – we have a deadline of 1 week for this project, we will spend 1 month analyzing, 1 year implementing, and if you are lucky, you’ll enjoy the results in 10 years – work.
When you have finite amount of time, and trillions of dollars to manage, you don’t spend days analyzing to get back $82.5 million from AIG (which was paid as per the law), when on the other hand you have loaned $17,000 million to them (170 Billion). When you have given them 17,000 million, 82.5 million paid as per a previous contract is only worth spendind days/week on to get on the bandwagon of the populist message. No good comes out of it.
Do I think the bonuses were unjustified? Yes. But trying to show boat and one up one another with populist messages is not going to get us out of this. Politicians have found someone to blame – now they can dodge any real responsibility as long as they can continue to blame the other guys (and a lot of those other guys didn’t even have anything to do with the problem in the first place).
at 31.. yeah those people with cash… they are in asia and the middle east.. merry christmas if you want them owning our fine institutions
@48
I’m here… with lots of dry powder ready to put to work… in five, four, three,…
Calling me a vulture does not sway me.
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