While Congress attempts to get back roughly $170 million in bonuses paid to executives at American International Group (AIG), AIG is suing the U.S. government (its largest shareholder) for $306 million in tax payments. Between bailouts, bonuses, and tax refunds, it is getting difficult to tell how has what amount of the public fisc.
AIG wants the government to return of $306 million in tax payments including some tied to its offshore tax havensin the Cayman Islands, Ireland, the Dutch Antilles and other offshore havens. AIG had a reputation for fighting aggressively to prevent having to pay taxes to the country that ultimately bailed it out of its disaster. Presumably, some of the public bailout money is now being used to sue the government for past taxes.
As for the bonuses, the legislation has passed the house. I remain skeptical as I discussed on ABC News last night. While it is true that the court defer greatly to Congress on taxes, the intent to punish these executives was hardly hidden by the sponsors. I was lead counsel in the last successful bill of attainder case (Foretich v. United States in 2003) and I believe that there is considerable merit to a challenge to such a law. To that extent, as Steve Chapman discussed today in his column, I disagree with professors who insist that just framing it as a tax is sufficient to pass judicial review.
For the full story, click here.
This is an outrage. We need to pull the plug on AIG now by removing its entire management team and replace it with people who are actually cognizant of how lucky they are to have a well paying job.
bonus for them, malus for others.
send them to work on a pig farm.
Amen Rafflaw & pardonme?,
But let me add, people who are competent rather than greedy and duplicitous.
In order to determine how much money we “owe” AIG we need to look at their books. We need a forensic accountant in there to determine their tax liability and payments for the past seven years. I’m certain they will be happy to agree to this because they want to get everything that is coming to them.
Secondly, I wish Elizabeth Warren would resign in protest. I believe the administration is using her for street cred to cover their real actions on behalf of donors/Wall Street. I don’t think she is a liar. She should get out so she may speak frankly and tell us what she knows.
Summers and Timmy should be handed subpoenas as the door hits them in the ass.
Then we have to watch out. AIG cannot consume our attention. The Hedge Funds are getting a hugh payment under the AIG outrage radar. Summers was warned about hedge funds in the 90’s and told the person who warned him to go take a hike.
We need an independent prosecutor to look into the Fed and Treasury and Congress. Take the facts wherever they lead, much like we desperately need these measures for war crimes.
Companies who claim they will return the money or not take it if AIG is “treated badly” should be taken at their word. They are welcome to give back the money and refuse any aid. Then the Fed must be forced to open their books. It’s where really hugh sums are going to hide. Companies shouldn’t be allowed to give back TARP money, only to have it handed out in secret by the Fed.
Pardonme,
I think the pig farm is too good for them.
Thanks Mike and I agree that competence is the key word.
Jill,
there are a lot of other bombshells waiting to go off on the economy in light of the lack of oversight by the Bush regime.
The Fed must go. You can’t really run a government when finances are controlled by an independent entity, whose chairman
is appointed to a 6 year term, is cloaked in secrecy and can’t be impeached except for direct crimes. In the name of controlling inflation the Fed by its policies has ensured that the unemployment rate can never fall below 4% (which is 8% in the real world) and thus have wages rise due to supply and demand. At the same time that the wages of workers are artificially controlled, the wages of the elite financial thieves have risen exponentially and the inequality of capital has reached epic proportions between classes. The Fed is a rigged game: Of the rich, by the rich and for the rich. It is not capitalism, but welfare socialism for the upper class.
The Connecticut AG is now saying the totals paid out are $218m.
http://www.huffingtonpost.com/2009/03/21/connecticut-attorney-gene_n_177638.html
MikeS:
I agree the Fed must go. They have caused nothing but problems since their inception in 1913 and have artificially placed our economy in an endless cycle of boom and bust.
rafflaw:
“This is an outrage.”
Sure you protest, but deep down don’t you see it as a comical train wreck that you can’t seem to ignore?
I like Olympia Snowe’s style and stand on most matters, but then I like Olympia (R-ME). The previous Wyden-Snowe amendement was crafted by constitutional lawyers – a month ago…
http://www.sunjournal.com/story/308196-3/MaineNews/Snowe_AIG_bonus_mess_could_have_been_avoided/
Snowe: AIG bonus mess could have been avoided
“I talked to Secretary Geitner and also, specifically, Larry, and told him to go back and look at our bill,” she said. “He said he was going to look at it.”
—–
http://blogs.telegraph.co.uk/james_quinn/blog/2009/03/18/tim_geithner_cant_take_all_the_blame_for_aig_bonus_debacle
“…As an aside, it should be noted that the original version of the Senate’s fiscal stimulus bill contained legislation – championed by Senator’s Olympia Snowe and Ron Wyden – that would have clawed-back all bonuses over $100,000 paid by companies receiving federal funds, or levied a 35pc excise tax on the money…”
Bob,Esq.,
It may be hard to not watch this “train wreck”,but it is just too damaging to our economy to allow this kind of largess to go unchallenged.
I agree Mike S. and Bron,
The Federal “Open Market Committee” is Orwellian and should be abolished. This is not a free market economy. It is rigged (as Mike S. pointed out quite well). It’s also the black hole of taxpayer funds. That place swallows light just when we need it the most.
rafflaw,
I think receivership is a good idea for AIG and many other companies.
Buddha,
Thanks for the update.
rafflaw,
Say what you will, but the ENTIRE weekend news cycle was taken up by the AIG story; what’s more you now have activists taking bus tours of the houses of AIG employees.
I’m just waiting now for the first media/AIG scandal related death.
Proportionality?
SIYOM,
Bob
“I think we are absolutely taking the right policies,” said Christina D. Romer, chairwoman of the White House Council of Economic Advisers, during an appearance on CNN’s “State of the Union,” one of two stops she made on the talk-show circuit. “I have every expectation, as do private forecasters, that we will bottom out this year and actually be growing again by next year.” (nytimes)
I think only a few forcasters believe such a thing. This is damage controll after Paul Krugman spoke on the administration’s newly released plan saying:
“Why was I so quick to condemn the Geithner plan? Because it’s not new; it’s just another version of an idea that keeps coming up and keeps being refuted. It’s basically a thinly disguised version of the same plan Henry Paulson announced way back in September. ..
But Treasury is still clinging to the idea that this is just a panic attack, and that all it needs to do is calm the markets by buying up a bunch of troubled assets. Actually, that’s not quite it: the Obama administration has apparently made the judgment that there would be a public outcry if it announced a straightforward plan along these lines, so it has produced what Yves Smith calls “a lot of bells and whistles to finesse the fact that the government will wind up paying well above market for [I don't think I can finish this on a Times blog]”
Why am I so vehement about this? Because I’m afraid that this will be the administration’s only shot — that if the first bank plan is an abject failure, it won’t have the political capital for a second. So it’s just horrifying that Obama — and yes, the buck stops there — has decided to base his financial plan on the fantasy that a bit of financial hocus-pocus will turn the clock back to 2006.”
And looking at the actual economy I don’t see the magic recovery. Food banks have run out, we have tent cities. People can’t pay energy bills, they have no health care, they’re losing jobs. It will take more than one year to fix these problems, and that’s with a sound starting position. We don’t have a sound economic policy. We have crony capitalism. (Glenn Greenwald has some good links to information backing up this claim in his column of 3/20/09. I don’t want my president sending out minions to talk propaganda. I want him to give real consideration to people other than the same ones who got us into this mess in the first place. Propaganda won’t feed, clothe or house anyone. The fact that the adminstration chooses to use it instead of meeting this problem head on is deeply disturbing.
Jill, I second the Greenwald links. He is God (and not just on this issue, either). One of the links is to a Rolling Stone article, which is particularly lucid.
FFN,
I don’t think GG is a god. His reasoning is worth real consideration but everyone has to come to her/his own conclusions. I agree that the RS article was informative.
What bothers me so much about the economic crisis is that our government: the Congress, the President, the Fed–they are all betraying us. The new plan is a gift basket to the wealthy and connected people who imploded our economy in the first place.
We are so desperately in trouble. To ignore this and use the opportunity to fix the problem as a cover for further enriching the already obscenely rich, while watching the rest of the people in our nation go down is an anathama.
Here’s a link to Paul Krugman’s anaylsis: The new plan is very bad news.
http://krugman.blogs.nytimes.com/
I called the White House at 9:15 am today and clearly and concisely made the case for Summers and Geithner being discharged because of this plan, which is actually a windfall for the thieves who got us into this mess. Any other takers?
202-456-1111 White House Comment line. If you get a busy signal keep using your phones redial, it takes at most 5 minutes to get an operator and they transcribe what you say.
Mike,
Counted! This is a great idea. The more of us who call the harder it is for us to be ignored. We just had an article in our paper that the real unemployment rate in Toledo may really be as high as 27 percent. This is an outrage.
Here’s Dean Baker’s take (along with many other very reputible but not insider economists). If this were really all about sub-prime mortages as I heard on NPR via the Treasury today (a lie) then why don’t we just pay off everyone’s subprime mortgage and let people rent back their homes at fair market value. Nobody gets kicked out. The underlying mess should be cleaned up and gamblers, aka, investors, take their losses at the casinos just like every other losing bet.
“The Geithner Plan: Billions More for Failed Banks
The last-ditch effort to save Wall Street will hurt taxpayers and still require another big bailout down the line
by Dean Baker
Treasury secretary Timothy Geithner’s latest bank bailout plan is another Rube Goldberg contraption intended to funnel taxpayer dollars to bankrupt banks, without being overly transparent about the process. The main mechanism is a government guarantee that would allow investors to buy junk with a 12-to-1 leverage ratio, where they only risk the downside on their own investment, not the borrowed money.
Ostensibly, this is supposed to reveal the “true” price for junk assets, as investors compete at auctions to buy assets under the new rules. But this story doesn’t pass the laugh test. All we will really learn is what price investors are willing to pay for these junk assets when they are given a large subsidy from the government to buy them. In reality, this plan is a way to use taxpayer dollars to get investors to pay far more than these assets are worth in order to give more money to bankrupt banks.
The results will be mixed. Some of the assets undoubtedly have some value. There are, no doubt, shrewd investors who have identified certain assets that they would have been willing to buy from the banks, but instead put off purchasing while they waited for a deal like this. Now these investors will have the opportunity to buy these assets with large subsidies from the government, allowing them to make substantial profits. (It’s not clear if President Obama will want to invite this new group of hedge fund billionaires, who got rich off this government programme, for photo ops in the White House Rose Garden.)
A second outcome is that many investors will see the subsidy and decide to dive in, recognising that most of any potential loss will be borne by the government. This route might prove especially attractive for one of the zombie banks, which would effectively have nothing to lose anyhow, since they are already bankrupt. In these cases, the government can expect to take substantial hits, since the investors would bid more than the assets are worth – and the government would be stuck with the eventual loss.
A third result of this path is that the subsidised class of assets would rise in value relative to assets that do not benefit from the government subsidy. This could cause banks that are relatively healthy, and therefore not taking part in this programme, to suffer. With investors opting to buy assets that come with government subsidies, the demand for mortgages or mortgage-backed securities that don’t have these subsidies might suffer.
A fourth likely outcome is that even with the subsidies, much of the toxic waste would stay on the banks’ books. There is a large gap between the price that investors have been willing to pay for these junk assets – which has been around 30 cents on the dollar – and the price that banks list on their books, which has been 60 cents on the dollar. If the government subsidies raise the price that investors are willing to pay by 50% (a very large increase), then the banks would still have to write down these assets by another 15 cents on the dollar in order to make the sale.
It is likely that the gap between the asking price and the offer will not be closed for a large portion of these assets, even with the government subsidy. As a result, the banks are likely to have several hundred billion dollars’ worth of bad assets on their books even after this plan has been put in place. The Obama administration will then be forced to go to Congress with yet another bailout proposal.
It is also worth noting that this is a situation that invites all manner of fraud, since there are very large government subsidies that could be appropriated through clever schemes. The Obama administration assured the public that the Federal Deposit Insurance Corporation (FDIC) will be closely monitoring the programme, but the FDIC does not have the staff or the expertise to effectively track a programme of this size. The situation is complicated further by the fact that many of the big actors are likely to be hedge funds and private equity funds, which are almost completely unregulated in the current environment.
It is hard to understand this plan as anything other than a last-ditch effort to save the Wall Street banks. Unfortunately, Obama seems prepared to risk his presidency on their behalf.”
Jill:
and that is why I am for free markets. the gamblers take their losses or go out of business and healthier companies take up the slack and the tax payer does not pay for any of it. Had Bush and the other 2 idiots not done the TARP I am pretty confident that we would almost be out of this mess and the people that caused it would be the ones paying. The entire “plan” has been to bail out Wall Street “players” so they can keep their jets and homes in the Hamptons.
Just plain crony capitalism with the tax payers getting cornholed and picking up the tab to boot.
Bron,
We may differ on the solution, but we certainly agree on the cause in re TARP and the two idiots. When someone named Bush says “hurry up” it always means “hurry up and bend over”. Although I must admit, I am starting to think torch and pitchfork for real, Canada is looking better all the time. Just less hassle. Or perhaps a small island devoid of TV, internet and politicians. Nice and quiet.
Buddha:
Planning on doing some gardening? Mr. Jefferson’s Tree appears to be parched.
Bron,
No. At this point a little drinking is in order. Everyone knows you should not drink and garden at the same time. I will say I am more empathetic than ever to the frustration at human nature and political shenanigans Jefferson must have felt when he penned those words. The last two weeks have just been brutal to the psyche. My doctor advised a regime of vodka and cranberry before bed. So a toast to Thomas Jefferson! We could sorely use a man of his skills today.
Dear Buddha:
I do hope your “frustrafunkadelic” lifts soon!
If not please seek a second opinion pronto; because while you’ve
“Got to look out for yourself” know that you are not alone and are much loved and admired!
CEJ,
Thanks for the kind words and the wonderful music. A honky tonk style walking bass line is always appreciated.
Buddha:
I think I remember that cranberry juice is good for the bladder, the acidity cuts down on urinary tract infections. If I remember correctly my uncle, a veteranarian, used to give it to his cats when they would come down with one.
Bron,
It is indeed. Another way to avoid UTI’s in cats is to feed them a mix of wet and dry food. My vet told me years ago that dry food alone will almost guarantee a UTI. So far, these cats I have now have not had a one. In addition to being a good mixer, it’s healthy for humans too. It helps avoid oxalate kidney stones. Being prone to these, I always have cranberry juice on hand especially since I refuse to give up the coffee. If you’ve never had a kidney stone, that’s a unique pain that I could only wish upon certain members of the Bush Administration. Pun intended.
Buddha:
I had a buddy in Lafayette, La that had one and I had to take him to the hospital he was in so much pain. I almost had to bitch slap the nurse to get her to do anything. He was doubled over in pain leaning against a wall, I thought he was going to die. In my early 20’s I am pretty sure had the nurse not done something I would now be serving time for assault.
So I have experienced it vicariously although that is probably about the same as experiencing sex by way of a porn movie. A kidney stone has my healthy respect.
This is a fascinating interview which helps to understand the economic crisis. It is interesting that there are still people who blame poor people getting houses for the crisis. In fact, this crisis formed at the highest level of govt. and fiancial industries. It is well worth listening to. (from Terry Gross)
“Years before the current economic crisis, law professor and former Wall Street trader Frank Partnoy was warning about the dangers of risky financial practices.
In his 1997 book FIASCO: Blood in the Water on Wall Street, Partnoy detailed how derivatives — financial instruments whose value is determined by another security — were being used and abused by big financial firms. Partnoy used his experiences as a derivatives trader at Morgan Stanley to give the book an insider’s perspective. In the preface to FIASCO, Partnoy wrote about the growing influence of derivatives:
“Derivatives have become the largest market in the world. The size of the derivatives market, estimated at $55 trillion in 1996, is double the value of all U.S. stocks and more than 10 times the entire U.S. national debt. Meanwhile, derivatives losses continue to multiply.”
Partnoy is a professor at the University of San Diego law school. In addition to FIASCO, he’s the author of Infectious Greed: How Deceit and Risk Corrupted the Financial Markets.
Partnoy joins Fresh Air to explain derivatives, credit default swaps and how they led to the current financial crisis.”
http://www.npr.org/templates/story/story.php?storyId=102325715
More Ayn Rand funny . . .
http://www.huffingtonpost.com/jeff-dorchen/atlas-shrug-this_b_176699.html
I almost hurt myself laughing.
BIL,
Good to hear your laughter! Rick Santelli is an extortionist. Plain and simple. I dealt directly with him from 1990 to 1996 when he managed Drexel’s futures desk. Look up conniver in the dictionary, his picture is properly displayed.
Jill, I heard the Partnoy interview. It was excellent. However, I found myself a bit disturbed that this guy is a law professor at the University of San Diego and did not appear to be the least bit concerned about the ethical aspects of his work when he was trading derivatives, despite his understanding at the time that it was all a shell game.
I noticed that also Mike. I think he fell into a trap that many people do–he kept saying it was exciting to be on the cutting edge of these “new deals”
. I’ve met weapon designers who speak the same way. It’s fascinating, interesting, absorbing etc. until, one day, you wake up and remember you have a soul. Other times, people wake up and find nothing. That’s really scary.
Just a little side thought on all this that I’ve been pondering for awhile. It relates to the supply and demand types who think the market rules all. Think of Alex Rodriguez,
whether you like him or not is immaterial and I personally don’t like him, but concede he is one of the five best players in baseball. The major leagues have 30 teams and with expanded rosters of 40, about 1,200 players play major league baseball in the course of a year. If you add the Japanese Leagues, which appear to have some talent that is perhaps another 1,000. Add an extra 300 for unrecognized talent and you get about 2,500 people who are the best baseball players in the world.
Untold countries no play baseball and this includes South America, the Caribbean, China, etc. Almost every American boy has played baseball at one time or another so i would say that it is a conservative estimate to say about 100 million have played baseball worldwide. That means that that 2,500 represents 0.000025 of the potential pool of top level baseball players. If ARod is in the top five then he represent 0.000000005 of the total population. He is the highest paid baseball player and he makes $25 million a year,
which he deserves given the rarity of his skills.
Does anyone seriously believe that these crooks in investment banking rate in the 0.000000005 of potential investment bankers? Do they rate in the top 0.000025 of their profession? Lets be charitable and say that they rate in the top 0.1 of their profession due to knowledge. If that is so then even in America with 350 million people, there are 35 million people with comparable abilities. To me that level of competence doesn’t rate the salaries/bonuses being given out and all of them are easily replaceable.
And it’s out of the park! lol Nice one, Mike.
Excellent analogy, Mike. Please don’t apply your analytic skills to the legal profession.
Here you go Mikes x2 – enjoy…
“Current and former prosecutors who’ve handled white-collar cases said the defendants’ most common trait was avarice.
“It doesn’t matter if you graduated from the best schools in the world and had every privilege accorded to you or not,” said Mr. Campbell, a member of the Enron Task Force with degrees from Yale University and the University of Chicago School of Law. “Greed is a strong motivation, and it can cause you to make mistakes.”
http://www.washingtontimes.com/news/2008/jul/04/schools-and-scoundrels/
…”People who succeed in corporate America are risk takers,” said Anthony Barkow, a former federal prosecutor and Harvard Law School graduate who is now a New York University Law School professor. “They’re smart, confident and sometimes even arrogant. That’s what it takes to succeed. Risk takers get closer to the line and sometimes cross it.”
Graduates from top-tier universities may feel so special, they think law doesn’t apply to them, Wharton’s Schweitzer said.
“We encourage our students to explore and think outside the box,” Mr. Schweitzer said. “In general, this approach is very constructive, but it may prompt people to be less likely to recognize an ethical dilemma.”…
Hey Sport’s Fans,
Great thread; thanks for all the links funny and serious.
For an example of rare talent check out Lebron James’ Incredible
underhanded shot!
Oops; here is the link I think:
”People who succeed in corporate America are risk takers,” said Anthony Barkow, a former federal prosecutor and Harvard Law School graduate who is now a New York University Law School professor. “They’re smart, confident and sometimes even arrogant. That’s what it takes to succeed. Risk takers get closer to the line and sometimes cross it.”
**************
I’d call that an indictment of the system worthy of consideration by the Grand Jury of public opinion.
Here’s a little video providing supplemental musical proof from Matthew Grimm:
Mespo,
Wow, yikes,… great song!
Mespo:
“I’d call that an indictment of the system worthy of consideration by the Grand Jury of public opinion.”
Well, issues not withstanding, it appears the “grand jury of public opinion” is indicting ham sandwiches left and right lately.
On the Bill of Attainder front, ACORN has just filed suit in Brooklyn NY Federal District Court to challenge Congress. It charges that legislation cutting off its funds was a Bill of Attainder.
Traditionally, a Bill of Attainder is a 1) legislative act that 2) intentionally inflicts punishment on a 3) named individual, or individuals so narrowly described as to be effectively named.
ACORN was certainly singled out by name. There seems to have been a lot of intent to punish it for bad behavior, although there was an arguable legislative effort to prevent fraud by a recipient of federal funds. On the other hand, the traditional use of such a Bill was to inflict punishment on natural persons rather than corporations or business associations. ACORN would argue that the clause applies to both to persons and to groups of persons who are vulnerable to nonjudicial determinations of guilt.
Billions of dollars!
Quote:
Offshore Bank Accounts Revealed To IRS By 14,700 Taxpayers
MIAMI (AP)– More than 14,700 U.S. taxpayers came forward to disclose billions in offshore bank accounts in 70 countries under a voluntary Internal Revenue Service program allowing most to avoid criminal prosecution as long as they pay what they owe, IRS officials said Tuesday.
A flood of people came forward in the last days before the amnesty program expired Oct. 15, IRS Commissioner Doug Shulman said. The final total far surpasses the number who disclose offshore accounts in a typical year — about 100 — and comes amid a broad U.S. crackdown on international tax evasion at Swiss bank UBS AG and other institutions.
“To put it simply, this is a historic milestone for the nation’s hardworking taxpayers,” Shulman said in a conference call from Washington.
The total in taxes, interest and penalties collected from those in the voluntary disclosure program will be in the “billions of dollars,” Shulman said. The disclosures involved accounts on every continent but Antarctica
http://www.huffingtonpost.com/2009/11/17/offshore-bank-accounts-re_n_361136.html