The futile arrogance of AIG outrage

posted at 8:51 am on March 17, 2009 by Ed Morrissey

The Barack Obama administration needed a new target for their populist rabblerousing, since they’ve apparently decided that Rush Limbaugh fights back and the oil companies don’t make enough of a profit to matter.  The contractual bonus payouts at AIG came just at the right time for them to demonstrate moral outrage and get the people to aim their ire at a shared enemy.  So far, few have figured out that the Obama administration enabled the bonus payouts:

A tidal wave of public outrage over bonus payments swamped American International Group yesterday. Hired guards stood watch outside the suburban Connecticut offices of AIG Financial Products, the division whose exotic derivatives brought the insurance giant to the brink of collapse last year. Inside, death threats and angry letters flooded e-mail inboxes. Irate callers lit up the phone lines. Senior managers submitted their resignations. Some employees didn’t show up at all.

“It’s a mob effect,” one senior executive said. “It’s putting people’s lives in danger.”

Politicians and the public spent yesterday demanding that AIG rescind payouts that they said rewarded recklessness and greed at a company being bailed out with $170 billion in taxpayer funds. But company officials contend that the uproar is scaring away the very employees who understand AIG Financial Products’ complex trades and who are trying to dismantle the division before it further endangers the world’s economy.

“It’s going to blow up,” said a senior Financial Products manager, who spoke on condition of anonymity because he was not authorized to speak for the company. “I have a horrible, horrible, horrible feeling that this is going to end badly.”

Maybe it’s an Obama stimulus.  After all, someone has to pay all of those guards, answer those threatening phone calls, and screen the mail for anthrax.  Just think how many jobs got saved by the White House turning AIG into a pariah — after dumping tens of billions of dollars into it.

The nasty little secret at the center of all the outrage is that the Obama administration could have stopped the bonuses by simply stopping the bailout.  They could have forced AIG into bankruptcy, which would have voided the company’s contractual compensation obligations.  Instead, the Obama administration chose to inject liquidity into AIG, following the lead of the Bush administration, which had done the same thing.  That kept AIG’s doors open, and therefore kept its contractual obligations to its employees intact.

Now Obama is outrageously outraged, as Allahpundit put it yesterday, but over what?  A company complying with its contractual obligations?  AIG has no more right to abrogate those contracts than any other employer would with its union contracts.  Whether or not the compensation agreements reflect wisdom and managerial brilliance, they exist — and as a matter of law, AIG has to honor the commitments.  Screeching about the bonuses now is not just futile, but a demonstration of the arrogance involved in these bailouts. If the government wants to tear up all the contracts, it will have to nationalize AIG and get Congress to approve it.

In the future, we can avoid having taxpayer dollars go to Wall Street bonuses by not bailing out private companies with taxpayer dollars.

Update: Fausta has more, plus a poll.


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Dodd is the guy against whom much of this anger should be directed.

BuckeyeSam on March 17, 2009 at 12:00 PM

Whose anger? I’m not angry at AIG. In fact, I wish I had a job there that entitled me to some of that bonus money.

Any indignant comment from The Obamulus supporters (which includes only 3 Republicans) is self-criticism. But that point will never be made publicly.

BobMbx on March 17, 2009 at 12:07 PM

Re: Small business and stimulus.

Heard part of an interview with senior advisor Valerie Jarrett on NPR a couple of days ago. She started by talking about how important small business is and how many jobs are created by small business. Then she shifted into how women and girls are under-represented in the small business job market and how a focus of the government needs to be getting more women and girls into small business jobs even if they do not have the necessary skills. Implied some sort of affirmative action initiative.

Great idea. With high unemployment, add to the number of job seekers. Require businesses to hire the unqualified over the qualified. Make businesses add expensive training programs. substitute lower paid entry level females for higher paid, more experienced workers. The money might even out that way for the companies; the government points to higher employment for women as a success story; the only losers are the families, who substitute a lower wage from the newly employed wife/mother for a higher wage from the newly less-employable husband/father.

Dave in W-S on March 17, 2009 at 12:08 PM

While the Senate constructed the $787 billion stimulus last month, Dodd unexpectedly added an executive-compensation restriction to the bill. That amendment provides an “exception for contractually obligated bonuses agreed on before Feb. 11, 2009,” which exempts the very AIG bonuses Dodd and others are seeking to tax. The amendment is in the final version and is law.

Also, Sen. Dodd was AIG’s largest single recipient of campaign donations during the 2008 election cycle with $103,100, according to opensecrets.org.

fox business.
Obama got 101,000 from AIG.

seven on March 17, 2009 at 12:13 PM

Obama signed the AIG bonuses into law.

faraway on March 17, 2009 at 12:17 PM

Great idea. With high unemployment, add to the number of job seekers. Require businesses to hire the unqualified over the qualified. Make businesses add expensive training programs. substitute lower paid entry level females for higher paid, more experienced workers. The money might even out that way for the companies; the government points to higher employment for women as a success story; the only losers are the families, who substitute a lower wage from the newly employed wife/mother for a higher wage from the newly less-employable husband/father.

Dave in W-S on March 17, 2009 at 12:08 PM

(emphasis mine)

Well, not counting the owner, operator, and all employees of that business when it goes under because it can’t actually turn a profit when its customers flee the shoddy product the unqualified workforce produces. But hey, throwing the whole company out of work just means that Present “The Won” gets more credit for jobs created instead of saved when they all end up digging holes to be filled by those who were their former suppliers, now also out of work!

Blacksmith on March 17, 2009 at 12:17 PM

Obama signed the AIG bonuses into law.

faraway on March 17, 2009 at 12:17 PM

Like that matters to this crew.

NoFanofLibs on March 17, 2009 at 12:30 PM

Least we forget that this is yet another tactic in the ongoing struggle known as class warfare.

Class envy has become a staple of the Democrats as they try to convince the average American that his enemy is other Americans, specifically Americans who are successful and wealthy.

Fish or cut bait…this decision is rapidly filling the cockpit window as our way of life spirals out of control.

Helaing that kills!

dmann on March 17, 2009 at 12:32 PM

Oh, over at Dkos, there isn’t the slightest sound of Dodd’s approval of the AIG bonuses.

BobMbx on March 17, 2009 at 12:37 PM

The way the adminstration is whipping up hatred for AIG and for executives in general is going to get someone killed. Is there where we are going as a society? When they get finished with the evil executives are we going to move on to Jews, Catholics or some other targeted group? Our corrupt political class will not stop until they turn us into 1930s totalitarians seeking scapegoats and revenge for political mismanagement.

jerryofva on March 17, 2009 at 12:41 PM

Oh, over at Dkos, there isn’t the slightest sound of Dodd’s approval of the AIG bonuses.

BobMbx on March 17, 2009 at 12:37 PM

Wow! What a surprise!

ladyingray on March 17, 2009 at 12:47 PM

These people are insane. Sometimes I wish I could just Drift Away.

Christien on March 17, 2009 at 1:00 PM

I see nothing wrong with taking the bonuses away…however, the senate then should take away any pay increases for the same reason, and Dodd, Cox, Frank, wRangel should all be removed for being ineffective.
If you punish one group for being ineffective, then you need to be consistent.

right2bright on March 17, 2009 at 1:04 PM

This isn’t populist pap it is about corruption and incompetence inside and outside of government.

rsl775 on March 17, 2009 at 1:07 PM

Yeah, there is alot of covering your ass in Washington.

Why are they doing this:

Obama Undercuts Whistle-Blowers, Senator Says:

http://www.nytimes.com/2009/03/17/us/politics/17signing.html?ref=us

getalife on March 17, 2009 at 1:10 PM

I see nothing wrong with taking the bonuses away…however, the senate then should take away any pay increases for the same reason, and Dodd, Cox, Frank, wRangel should all be removed for being ineffective.
If you punish one group for being ineffective, then you need to be consistent.

right2bright on March 17, 2009 at 1:04 PM

Except, those employees had a contractual right to the bonuses, and perform work worth far more than the amount of the bonuses. Congress really doesn’t have either of those advantages.

But here’s a hypothetical. What level of bonuses WOULD be acceptable? $100 million? $10 million? Is it acceptable to pay million-dollar salaries to these people? My point is, if you let the government draw the line on what someone’s effort is worth, you’ve given them shackles that may someday bind your own efforts.

If Congress or the WH REALLY cared to fix this, all they’d have to do is give AIG $29 billion instead of $30 billion in their next bailout package.

hawksruleva on March 17, 2009 at 1:13 PM

I am Independent for a reason. I don’t trust either party and think the blame game is a distraction. I will continue to support the President and our country but this thing stinks bad, real bad.

getalife on March 17, 2009 at 11:16 AM

Yet you participate in the game. How many times in the last week have you commented “Bush depression is over”, while ignoring the Democrats dirty hands in fueling the mortgage crisis. When the market drops you blame Bush and when the market goes up, you give all the credit to Obama’s policies.

Independent? Your comments suggest otherwise. Are you trying to fool us, or just kidding yourself?

fogw on March 17, 2009 at 1:30 PM

Whether or not the compensation agreements reflect wisdom and managerial brilliance

And I am the Queen of Spain!

they exist — and as a matter of law, AIG has to honor the commitments.

An oath to a scoundrel is morally meaningless.

PercyB on March 17, 2009 at 1:34 PM

Obama and the country found a new scapegoat, and Stephen Fowler breathes a sigh of relief. Seriously, the bonus thing stinks, but if it’s against our law and AIG’s rules to go in and muck it up, don’t go in and change the rules ex post facto. Still, the argument that most of AIG is profitable isn’t defensible; generally bonuses are tied to the performance of the company, not just the person or the group, and it’s hard to think of why bonuses by that metric should be more than 0%.

calbear on March 17, 2009 at 1:44 PM

Geitner was the guy who wrote the AIG bailout. They all knew this was coming. Now they are trying to use this as distraction to get the President’s plummeting poll numbers up. Trying to make it look like he is standing for the people — NOT. He is either covering up his incompetence or worse, trying to clear the way for his socialist agenda.

Christian Conservative on March 17, 2009 at 1:45 PM

PercyB:

An oath to scoundrel is still an oath and must be honored.

A lot of bonus money was paid to nan-managerial employees for successful performance. They aren’t scoundrels. Be careful to identify enemies of the people less you find yourself in the dock someday.

jerryofva on March 17, 2009 at 1:46 PM

“I have a horrible, horrible, horrible feeling that this is going to end badly.”

Bigger picture: when the government socializes the economy, winners and losers become supplicants and rivals for government protection. This leads to class hatred and civil unrest. It’s no accident of history that socialism preceded Germany’s fall into Naziism.

Yes, I have a horrible feeling too.

Socialist Roots of Naziism

PattyJ on March 17, 2009 at 1:46 PM

I am Independent for a reason.
getalife on March 17, 2009 at 11:16 AM

Yeah right, and I’m married to Donald Trump without a prenup. Thanks for a good laugh, getaclue.

Knucklehead on March 17, 2009 at 2:04 PM

A lot of bonus money was paid to nan-managerial employees for successful performance.

jerryofva on March 17, 2009 at 1:46 PM

Successful performance at what? AIG is probably the best poster child for complete abject failure ever. When the Titanic went down did anyone get bonuses? Even someone who had done a good job at shinning the silverware?

MB4 on March 17, 2009 at 2:07 PM

MB4:

Perhaps you can’t read. Our dear friend Percy believes that contractual bonus owed to AIG employees should not be honored because they are scoundrels.

How is a non-mangerial employee who did his job a scoundrel and why should we not honor his contract?

Please inform me who we should make walk the plank next?

jerryofva on March 17, 2009 at 2:19 PM

Obama accepted over $100K in contributions from AIG executives (#2 to only Dodd). Wonder when he will decide to give that money back?

Hypocrite central — 1600 Pennsylvania Ave.

scm on March 17, 2009 at 2:20 PM

Dodd got a lot of campaign contributions from AIG peeps.

Isn’t this bonus issue masking the fact that AIG paid almost 90 BILLION out to European owned banks from USA Tax dollar bailout funds?

Aren’t they using the bonus controversey to mask this fact from the sheeple with the willing help of the MSM?

karenhasfreedom on March 17, 2009 at 2:25 PM

How is a non-mangerial employee who did his job a scoundrel and why should we not honor his contract?

How is someone who was in the German or Japanese army during WWII who did his job a scoundrel? If you lay down with dogs, you get up with fleas. And just how much of the hyper millions in bonuses do you think are going to non-managerial types anyway? The sickening excuse for a company was only kept out of bankruptcy, which would have null and voided such contracts, by a deviant co-conspirator congress.

Please inform me who we should make walk the plank next?

jerryofva on March 17, 2009 at 2:19 PM

LOL. Such a list could be put together with the greatest of ease.

MB4 on March 17, 2009 at 2:29 PM

Whitehouse spokesweasel is on talking about “recouping” those bonuses.

So, now the President of the US is getting involved in private contracts which were legaly enacted between a company and its employees?

Even as a Stockholder, you cannot Ex Post Facto change a contract.

They are just trying to change the subject… now, AIG, last week, Rush… wonder what its going to be next week?

Romeo13 on March 17, 2009 at 2:31 PM

The Obama people and congress have to have their opportunity to “posture”. As I understand this the government has known about these bonuses for at least a year. I guess that they just needed an softer target than Rush since he was making them look as totally foolish as he previously did to Reid.

duff65 on March 17, 2009 at 2:32 PM

Successful performance at what? AIG is probably the best poster child for complete abject failure ever. When the Titanic went down did anyone get bonuses? Even someone who had done a good job at shinning the silverware?

MB4 on March 17, 2009 at 2:07 PM

Its my understanding that large parts of AIG are still profitable.

Its the bank insurance, and insurance they allowed on derivitives which are killing the company…

So, you have a division which is profitable, and a lot of that Executives pay is based on performance, why should HE not get paid?

Your painting with a very broad brush.

Romeo13 on March 17, 2009 at 2:36 PM

MB4:

Perhaps you can’t read.

jerryofva on March 17, 2009 at 2:19 PM

Well apparently I can read, although sometimes laughing at human folly does make it somewhat difficult.

MB4 on March 17, 2009 at 2:38 PM

Its my understanding that large parts of AIG are still profitable.

And large parts of Teddy Kennedy’s body are cancer free and most Muslims don’t kill people.

Your painting with a very broad brush.

Romeo13 on March 17, 2009 at 2:36 PM

Well, AIG is a very bad enterprise, which by itself is a large part of the reason that America’s economy is in such dire straights, and as I said, if you lay down with dogs, you get up with fleas. Even Chavez does some good things, but even if I were a Venezuelan I would still not want to pay any of his bonuses. AIG should not even exist anymore. It would be a whole lot better for America if it never had. Those who lashed themselves to that ship can all go down with it as far as I care.

MB4 on March 17, 2009 at 2:46 PM

So, you have a division which is profitable, and a lot of that Executives pay is based on performance, why should HE not get paid?

Your painting with a very broad brush.

Romeo13 on March 17, 2009 at 2:36 PM

I agree with you totally. AIG is a large operation and it is that one division which caused all the trouble. This is like saying that the person running one of GE’s profitable commercial divisions at a comfortable profit should be screwed because the financial arm got in trouble. Anything to appeal to the under educated donkey base.

duff65 on March 17, 2009 at 2:47 PM

Congress is Legislating for ONE COMPANY ?
AIG bonuses are done. Do not punish the workers. Congress has Billions to explain . . .I am not distracted.

JayTee on March 17, 2009 at 2:48 PM

It’s time to start telling the whole story and the truth. The fact is that every bonus paid was contractually required and approved by Dodd. The media needs to be honest and stop shilling for Obama and the left wing congress. You might not like it but AIG was required to pay the bonuses . . . Obama knows it, Dodd knows it and the media knows it. This entire charade was a game designed by the administration to incite populist outrange among the uniformed masses.

And why aren’t they going after the billions that AIG laundered to other banks. This entire affair is nothing but a political game and no one is actually concerned about the waste of the people’s money. I’m anxious to see just how long these shyster politicians can get away with this scam.

rplat on March 17, 2009 at 2:48 PM

The nasty little secret at the center of all the outrage is that the Obama administration could have stopped the bonuses by simply stopping the bailout.

Bingo

That kept AIG’s doors open, and therefore kept its contractual obligations to its employees intact.

Well good for AIG for finally recognizing certain obligations. No such recognition existed when they were selling all the swaps that they had neither intention nor ability of covering.

tartan on March 17, 2009 at 2:50 PM

How is someone who was in the German or Japanese army during WWII who did his job a scoundrel?
-MB4

Wait – so the people who created a market to spread the impact of credit defaults is the same as someone who ushered civilians into a gas chamber? Surely you don’t believe that.

There’s a lot of facts missing from this argument. How many people did AIG ALREADY fire? How many new people did they bring in to fix the mess? Employees of the FP group already took a 43% cut in compensation, compared to ’07. Also lost are some other facts -the AIG employees in question are responsible for hundreds of millions of dollars in assets. If they walk away, will the company perform better? Of course not.

The underlying housing market really sucked in the asset managers, but I don’t blame them when they saw Congress on TV saying the subprime mortgage crisis wasn’t a crisis. If Uncle Sam is guaranteeing the loans, then what’s the risk in insuring them? Then the bubble burst, and the CDS securities became unmovable because there was so much bad paper floating around everywhere. In a real sense, those asset managers were victims.

hawksruleva on March 17, 2009 at 2:52 PM

You all know this is a fake deal, right? Hussein & Fwank have known about the AIG bonuses for over a year and Chrissy Dodd put a special provision in the porkulus to protect them.

Hussein needed to get the Veteran Medical Insurance Scandal off the front page.

dogsoldier on March 17, 2009 at 2:59 PM

Well good for AIG for finally recognizing certain obligations. No such recognition existed when they were selling all the swaps that they had neither intention nor ability of covering.

tartan on March 17, 2009 at 2:50 PM

They were for being bloody bastards before they were against it. Rather like much of congress.

MB4 on March 17, 2009 at 3:00 PM

Wait – so the people who created a market to spread the impact of credit defaults is the same as someone who ushered civilians into a gas chamber? Surely you don’t believe that.

hawksruleva on March 17, 2009 at 2:52 PM

It’s an analogy, not an equation.

MB4 on March 17, 2009 at 3:03 PM

dogsoldier on March 17, 2009 at 2:59 PM

Dead on target!!! Rush laid out the facts on his program today. Coordinated with the MSM to provide the required distraction.

Keemo on March 17, 2009 at 3:05 PM

hawksruleva on March 17, 2009 at 2:52 PM

Good point, hawks. However, I have raised this issue before and I will raise it again: the 4 quadrillion dollars in CDS (which was born out of the Commodity Futures Modernization Act of 2000, which was also responsible for the Enron loophole) is really at the crux of the problem. While I agree that the housing bubble was responsible for this current collapse, I do not believe that *only* housing could have caused this downturn. The concept of the CDS which lies in the unregulated world of bogus insurance paper, essentially could have created *any* boom a *lot* worse, leading to the death of banks. So, I believe that if the CDS existed during the tech bust, it could have potentially created a very similar situation (since a lot of the tech companies that went under were insured).

Bottom line : here is the flowchart that I see working out:
boom –> industry in boom is insured –> CDS-ed –> boom turns to bust –> run on banks –> bank dies

peter_griffin on March 17, 2009 at 3:08 PM

When all is said and done this mess was caused by the democrats idiotic policies. The prime movers were Frank and Dodd but they had a lot of help. The idea of putting people who could not qualify for a loan into houses anyway was bound to blow up eventually. The bad thing is that the same people are now neck deep in handling the “so called” recovery.

duff65 on March 17, 2009 at 3:09 PM

You were right Emanuel, I just took a quick look at Hotair through my blackberry interface and we got those fools over there actually defending AIG just because we decided to attack them for a change. It sure is working to keep them off our backs on things that would resonate with the sheeple and could bring us down. I think I will get George Soros to give you another bonus.
- Barack Obama

MB4 on March 17, 2009 at 3:11 PM

Out of Limbaugh’s mouth “folks, we are being played for the biggest suckers around, everybody expressing outrage for these bonuses knew about them over a year ago, including Obama.” A single reporter asked the girlyman “Gibbs” when exactly did Obama know about these bonuses. Gibbs answered with “I haven’t asked Obama that question, you know, there are lots of questions I haven’t asked Obama.”

Translation: We haven’t had the think tank figure out that response yet, I’ll get back to you as soon as I can stay on message.

Keemo on March 17, 2009 at 3:12 PM

Apparently, Grassley has walked back from having AIG execs commit suicide, but he’s now accusing them of “sucking at the teat of the government.”

Anyway, a little OT, despite the efforts today to impose a surtax on these bonuses (seemingly inapplicable to bonuses already paid), are we even sure that these bonuses are even subject to U.S. income tax in the first place?

Some of these bonuses are being paid to people who are in London. If they’re not citizen and they don’t reside in the U.S. and the compensation doesn’t relate to services that they performed in the U.S., I’m not sure they’ll have to pay U.S. income tax on them.

Thoughts?

BuckeyeSam on March 17, 2009 at 3:18 PM

It is so obvious even rush and santelli got it right.

Hope it gets the point that the President has to come clean and let the heads roll.

It will be a bipartisan head rolling.

Its a freaking mess.

getalife on March 17, 2009 at 3:20 PM

Keemo on March 17, 2009 at 3:12 PM

I’m surprised even one reporter asked.

ladyingray on March 17, 2009 at 3:23 PM

getalife on March 17, 2009 at 3:20 PM

The Precendent’s head needs to be the first to roll – he signed the bonuses into law!

ladyingray on March 17, 2009 at 3:23 PM

ladyingray on March 17, 2009 at 3:23 PM

I have no idea where this is going.

All I can say, it stinks.

getalife on March 17, 2009 at 3:26 PM

Its my understanding that large parts of AIG are still profitable.

Its the bank insurance, and insurance they allowed on derivitives which are killing the company…

So, you have a division which is profitable, and a lot of that Executives pay is based on performance, why should HE not get paid?

Your painting with a very broad brush.

Romeo13 on March 17, 2009 at 2:36 PM

What difference does the profitability of certain divisions of a company make, in a fascist economy? The profitability of a company has little to do with its success when the government runs things. In fact, excessive profitability will get you in trouble with the Democrats much faster than abject failure, which gets you subsidized.

I have the same understanding of AIG that you mentioned – not all of the company’s undertakings are disasters. It can’t be stressed enough that when the government runs private industry – the model of government called “fascism” – this does not matter. Political considerations inevitably outweigh efficiency or fairness. It is politically *impossible* for anyone – Obama, Democrat congressional leaders, Republicans – to tell the public some of AIG’s activities are profitable, or explain that these bonuses are contractually obligated, or run down the entire list of AIG executives and traders to show how some of them might richly deserve their bonuses, or remind angry voters that failing to compensate AIG’s top talent will cause them to further damage the company by leaving to find other employment. It’s not just “difficult” to say these things – it is impossible. An angry mob of taxpayers who feel they have been defrauded are not going to sit down with copies of the company’s fourth-quarter earnings reports and make a calm, reasoned judgment. Very few of those taxpayers have the time or qualifications to read those quarterly reports anyway – and neither do their elected representatives.

If the government’s ownership of 80% of AIG means nobody should get a bonus, shouldn’t the government also set the company’s compensation policy overall? Why should anyone get a big salary, especially if they work at a job most taxpayers wouldn’t understand? Should the government collect at least 80% of AIG profits until that huge bailout is paid back? If so, what incentive does anyone at AIG have to maximize profits? The AIG bailout cost about $100,000.00 per American taxpayer, with interest on the deficit spending factored in. Wouldn’t it have been more efficient, and better for the economy, to let AIG fail and cut every taxpayer a check for a hundred grand? Of course, the very idea is utterly unthinkable – give the “wealthiest Americans” who pay most of the taxes the same $100k as the lowest tax bracket, never mind the “working poor” who don’t pay any taxes? An outrage! And just handing money over to taxpayers reduces the power of politicians – unacceptable!

Welcome to fascist America 2009, where the more wrong you are about economics, the louder your voice is heard; the truth is politically impossible to speak; failure is subsidized on an epic scale; and success is guaranteed to make you a target.

Doctor Zero on March 17, 2009 at 3:32 PM

Not only did Dodd author the protective amendment, AIG was his largest campaign contributor. But all of that doesn’t matter a jot!

We need a photo collage of the inside of VA hospitals. Except the couple they just caught, uh “under remodeling”.

Put that collage with Hussein’s picture and the headline “Veteran Insurance Scandal”

There ya go.

dogsoldier on March 17, 2009 at 3:34 PM

Doctor Zero on March 17, 2009 at 3:32 PM

Good points, Doctor Zero. By the way, do you mind answering my previous comment:

peter_griffin on March 17, 2009 at 3:08 PM

?

We have talked about this in the past, I hope this does not come across as a repetition. It is a critical point: (housing created this mess) v/s (unregulated CDS feeding off of a boom created this mess). I am still analytically dissatisfied …

peter_griffin on March 17, 2009 at 3:37 PM

Cons should be happy.

This should help you get back in power and destroy the economy or what’s left of it.

Sadly, for our country, this is the last chance to save it and fix our broken government but it’s not looking good.

So enjoy, be happy for your party but remember they are part of this disaster.

getalife on March 17, 2009 at 3:38 PM

Welcome to fascist America 2009, where the more wrong you are about economics, the louder your voice is heard; the truth is politically impossible to speak; failure is subsidized on an epic scale; and success is guaranteed to make you a target.

Doctor Zero on March 17, 2009 at 3:32 PM

It is indeed scary. In fact, this brings us back to politicians in general. It is a class whose importance is grossly exaggerated overall, while, in fact, they are the ones who know LEAST about the analytical framework of these issues. I would be much more comfortable letting Bernanke make these decisions than any Dem or Repub pol.

I have asked this point previously : why not get rid of the politicians and instead, have a group of apolitical analytically equipped folks make these decisions?

peter_griffin on March 17, 2009 at 3:45 PM

Bottom line : here is the flowchart that I see working out:
boom –> industry in boom is insured –> CDS-ed –> boom turns to bust –> run on banks –> bank dies

peter_griffin on March 17, 2009 at 3:08 PM

You know, that makes quite a bit of sense.

hawksruleva on March 17, 2009 at 3:47 PM

Sure,I read too much trying to find the truth because you can’t believe what they are telling you.

getalife on March 17, 2009 at 10:49 AM

Have you read this?

If one could force a required reading list on the American people (or at least anyone who votes) this would have to be on the list.

Buy Danish on March 17, 2009 at 3:48 PM

MB4 – you may be right that Obama/Rahm are happy that Rush and some of us are “defending AIG” (actually, I think we’re defending AIG’s right to go into bankruptcy, but that’s revisionism.)

Sadly, this latest round of political misdirection may come at the cost of further damaging a company that’s 80% owned by the U.S. taxpayers.

And if Summers, Obama, Dodd really wanted to fix it, they could just change their next $30 billion to AIG into $29 billion for AIG.

hawksruleva on March 17, 2009 at 3:55 PM

I have asked this point previously : why not get rid of the politicians and instead, have a group of apolitical analytically equipped folks make these decisions?

peter_griffin on March 17, 2009 at 3:45 PM

Because people, by their nature, are politcal. They have friends, opinions, and beliefs. People are inclined to act on the basis of those friendships and thoughts. Invariably, even IF you could find apolitical people (or govern via computer models – which are also opinionated, of course), you’d have winners and losers being chosen by the appointed folks/software.

That’s why the invisible hand of the market is so helpful. It naturally chooses the winners and losers, lifting up the successful, and eliminating the unsuccessful. No group of people can be as judicious as the millions of people in the market, choosing in their best interests.

hawksruleva on March 17, 2009 at 3:59 PM

hawksruleva on March 17, 2009 at 3:55 PM

Or claw it back now with the 80% stake that the nation has.

sethstorm on March 17, 2009 at 4:03 PM

hawksruleva on March 17, 2009 at 3:59 PM

Yet we still have plenty of regulations.

It moves at a speed slower than required, and does not provide for any transition for those displaced.

sethstorm on March 17, 2009 at 4:05 PM

Yes BD.

Snowe said the provision to stop these bonuses was dropped.
There is plenty of bipartisan blame to go around and think some bipartisan head rolling is needed.

Doubt it will happen.

getalife on March 17, 2009 at 4:12 PM

hawksruleva on March 17, 2009 at 3:59 PM

Actually, I have mentioned software in a previous post – having computers take votes on important bills. The problem is: too few people will actually be knowledgeable enough on these bills. I am not sure about how computer models can be opinionated – because we normally arrive at them in a similar way as we arrive at any scientific theory: we assume a set of axioms, and once you agree with them, the rest follows via the language of mathematics. Of course, if you don’t agree with these axioms, it’s an issue. But at least I would be more willing to trust a computer model (if I agree with its axioms) than a pol. What about polling on axioms instead of politicians? LOL

peter_griffin on March 17, 2009 at 4:15 PM

This doesn’t have to be over. If AIG were to declare bankruptcy, there are provisions under bankruptcy law to examine cash disbursements for the last 90 or so days – maybe even up to one year. Anything deemed to be a preference could, in theory, be pulled back into AIG. Since the American taxpayers hold a two year note with AIG, which I hope this administration secured with the assets of AIG, the taxpayers would, in theory, be in a higher security position that the foreign banks and the employees of AIG.

Unfortunately, this administration would have to deal every government whose largest financial institution received these funds. And, we’ve seen how well this administration has handled matters with foreign governments, both friendly and not-so friendly.

Hundreds of thousands of companies have gone bankrupt. Rules have been laid down and adhered to for countless years now. This result occurred because the government continues to run interference against the legal process for resolving insolvency.

Neo-con Artist on March 17, 2009 at 4:22 PM

My parents see ING Direct commercials and think it’s them. I try telling them they’re not AIG, but it’s no use. I wonder if this is a problem for them.

MrX on March 17, 2009 at 4:33 PM

My parents see ING Direct commercials and think it’s them. I try telling them they’re not AIG, but it’s no use. I wonder if this is a problem for them.

MrX on March 17, 2009 at 4:33 PM

It is. Actually, consumer trust is something that is very difficult to build, as any businessperson would attest to, and unfortunately, equally easy to break. Given that the whole CDS mess has killed this trust, it will take a long time for the “general public” to start believing the banks and mortgage companies again. Just look at how difficult it was for tech companies to stop the bloodshed after 2000.

peter_griffin on March 17, 2009 at 4:39 PM

peter_griffin on March 17, 2009 at 4:39 PM

If you’re talking about the folks decimated by the offshoring as well, the bloodshed only has increased.

Forcing people to bow to business interests that decimate their own livelihoods makes for a desire for one thing – vengeance.

sethstorm on March 17, 2009 at 4:43 PM

If you’re talking about the folks decimated by the offshoring as well, the bloodshed only has increased.

I don’t buy the outrage about offshoring – even Obama mentioned in a speech recently that the average American worker can never compete with someone in Bangladesh if we go *solely* by hour rates. So how do we compete? We offer services that these companies cannot buy elsewhere, in other words, offer skills like genetic screening, new materials for computer chips, etc, by making use of our enormous research infrastructure. If we just look at labor (and some IT functions are just that), we can never measure up at the price point.

peter_griffin on March 17, 2009 at 4:50 PM

I have asked this point previously : why not get rid of the politicians and instead, have a group of apolitical analytically equipped folks make these decisions?

peter_griffin on March 17, 2009 at 3:45 PM

On the American Legion thread, I suggested asking for the mass resignations of congressmen, and replacing them with a temporary congress of ex-military personnel who have logistics experience, ordered to produce a balanced budget by 2012 and then stand for re-election. Of course, it’s not going to happen, but it would be fun to make the Democrats who caused this crisis go on the record and explain why they should be the only people involved in the financial meltdown who suffer absolutely no consequences for their failure, and why they don’t think the military brass who can win wars on shoestring budgets aren’t better qualified to straighten out Obama’s incompetent budget.

In a politically controlled economy, the last people who would be consulted for advice on a banking crisis are banking experts, just as the last people allowed to weigh in on energy issues are the people who run oil companies. Almost all of the economic power in America is now concentrated in the hands of a president with less private sector experience than almost any of his predecessors, and the exact same people who caused the housing market to melt down. Has any American politician ever been disqualified from an aspect of economic or foreign policy by his abject failures? Jimmy Carter isn’t laughed off the stage when he puts forth his opinions on foreign or domestic policy, Bill Clinton is not hooted out of the room when he talks about national security, and names like Gorelick pop up throughout Democrat administrations like inoperable tumors, no matter how much they stink of blood and failure.

I think you’ve got to have regulations on market activities – the temptation to monopolistic practices, or abuse of consumer trust, are too great. This is simply a recognition of human nature. The problem is that we deny human nature by allowing politicians to become direct actors in the economy. We cling to some ridiculous fiction that they’re somehow less corruptible than the private sector, when the reverse is closer to the truth – the only thing they know how to do is enrich themselves by wielding power, and the only skill they all have in common is the ability to raise money and get elected.

There will always be a bigger constituency for looting a profitable company than protecting it… a rational structure for government would account for the human nature of the voters, too. No possible system of government truly distributes wealth evenly, although governments are very good at distributing misery. Money is even more corrupting in a fascist system. A private-sector fat cat forced to spend his money within the private sector produces at least some value – even if he buys a yacht, the people who build yachts make money. In Obama’s America, the fat cat can hand a million bucks to Barney Frank, Chris Dodd, or Obama himself and get their undivided attention, plus far more than a million dollars’ worth of market distortions or bailouts. Eventually Barney Frank will use that money to buy a yacht, but not before he does a trillion dollars worth of damage to the banking industry.

Doctor Zero on March 17, 2009 at 4:53 PM

Doctor Zero on March 17, 2009 at 4:53 PM

But the trillion that you say was damaged, does not really disappear, right? Say the trillion that was used to bail out all the banks, really paid for the CDS’-es they promised, and finally were forced to pay back as the foreclosures hit the market. In effect, they are paying for the homes given to unworthy customers (for whatever reason). So, in effect, it is ensuring that these homeowners keep spending, which will help re-trigger the economy. I am not convinced you made an analytical case that this trillion is going into a black hole.

peter_griffin on March 17, 2009 at 5:04 PM

The AIG bailout was for the purpose of supporting European banks. To disguise this they are making a big fuss over the bonuses. the reason that they supporting the European banks is the knowledge that when there is a revolution, a different group comes to power. As far as the socialists are concerned, what good is making America socialist if they lose Europe to laisser faire capitalism.

darktood on March 17, 2009 at 5:20 PM

darktood on March 17, 2009 at 5:20 PM

You are forgetting one important nugget of information : AIG is a huge source of insurance for large parts of China. Given that China buys most of our debt, I think that fact played a significant role in saving AIG.

peter_griffin on March 17, 2009 at 5:28 PM

peter_griffin on March 17, 2009 at 4:50 PM

Or you save your own nation’s industries and don’t try to kill them off. Save our own first, then help others.

sethstorm on March 17, 2009 at 5:34 PM

If we just look at labor (and some IT functions are just that), we can never measure up at the price point.

Unless you make it inhospitable for them to try stealing from our nation.

sethstorm on March 17, 2009 at 5:35 PM

If you’re talking about the folks decimated by the offshoring as well, the bloodshed only has increased.

Forcing people to bow to business interests that decimate their own livelihoods makes for a desire for one thing – vengeance.

sethstorm on March 17, 2009 at 4:43 PM

Ah, but that’s the beauty of a truly free market – it can’t “force people to bow” to anything. Only the government has the power to force people to bow. Businessmen would obviously love to have that power, but as long as politicians don’t sell it to them, they can’t have it.

How should we stop all that evil “offshoring” anyway? Forbid it by law? Think that would be a smart move for a country that sells huge amounts of intellectual capital to the rest of the world? Instead of building an economic East Germany and shooting anyone who tries to escape over the wall, why don’t we follow peter_griffin’s suggestion and offer competitive value that makes businesses want to stay here? It’s not as if we can’t be competitive with Bangladesh, absent interference from governments and their proxies, the labor unions… and it’s not as if American businessmen wouldn’t rather keep their labor in America, if it’s feasible to do so.

On the other hand, if Obama implements the rest of his business-killing agenda, or passes some anti-businesss atomic bomb like Card Check, the exodus of American business overseas will intensify. If he manages to target AIG executives and traders with extra-constitutional retributive legislation or tax hikes, the exodus will begin next week.

Doctor Zero on March 17, 2009 at 5:37 PM

Ah, but that’s the beauty of a truly free market – it can’t “force people to bow” to anything. Only the government has the power to force people to bow. Businessmen would obviously love to have that power

They had it at one time in full and now are trying to keep from losing what was clawed back in the 1980s.

Force is force whether it be by gun or practicality.

sethstorm on March 17, 2009 at 5:40 PM

Unless you make it inhospitable for them to try stealing from our nation.

sethstorm on March 17, 2009 at 5:35 PM

They are trying to run a business. If they steal money, they will be tried and convicted (just like Enron was). If you look at the balance sheets of these tech firms, they are some of the most open and cleanly run companies (compare that to car makers, for example). If they offshore the support desks, that’s because it is a function that anyone can do. If, on the other hand, the function was something that *required* fundamental knowledge of engineering, then the offshoring could not have happened in the first place. Take an example: irrespective of how people scream about software outsourcing, the best of software architects are hugely in demand in our country, and they practically dictate their fees. Bottom line : if you are really good in what you do, AND not a lot of people can easily do what you do, you WILL have a market in this country.

peter_griffin on March 17, 2009 at 5:43 PM

Doctor Zero on March 17, 2009 at 5:37 PM

I don’t see them clamoring for bringing jobs to our nation. I see them trying to evade.

When they can work with the nation and make good on the promises of jobs for US citizens that were once offshored to come back on a more permanent scale – they can have their tax cuts and have deep ones.

sethstorm on March 17, 2009 at 5:43 PM

peter_griffin on March 17, 2009 at 5:43 PM

Then why did Dell and IBM have to return their call centers to the US?

Just kill off offshoring until it can’t be abused like it is now.

sethstorm on March 17, 2009 at 5:46 PM

sethstorm on March 17, 2009 at 5:43 PM

Seth: I don’t agree with your axiom, it’s based off of a false premise. Businesses do *not* exist for the purpose of creating jobs for citizens. If you look all the way back to how corporations were created (way back in Boston, I believe), they were temporary organizations created by the *people* to get a certain project done. Nowhere in that was a promise to give people jobs. How many jobs does Google create? Very few, if you compare it to a labor intensive industry like automobiles. The deal is: a lot of companies (specifically in the tech area) do not need much labor resources – so the whole blue-collar labor movement is undergoing a sea-shift. Unless we evolve, we will be left behind. Thanks to American research promise, we are coping pretty well.

peter_griffin on March 17, 2009 at 5:49 PM

Then why did Dell and IBM have to return their call centers to the US?

Just kill off offshoring until it can’t be abused like it is now.

sethstorm on March 17, 2009 at 5:46 PM

I am intimately familiar with the tech industry, so I know exactly why these call centers were returned. Here are the reasons:

(1) some of their businesses, specially the laptop business, were facing challenges which required more skilled people to respond to customer questions : which brings back my previous point : if you have skills that distinguish you from the worker in Bangladesh, you *will* be hired

(2) a lot of call centers in India are actually getting pretty expensive, at the point where it is not that great a business proposition anymore. Again, *market* forces offshoring to die a natural death in some cases, *not* the government

(3) Even while IBM brought back *some* data centers, it is currently in the process of acquiring an IT company called Satyam based in India, so it definitely believes offshoring to India is still a net gain.

peter_griffin on March 17, 2009 at 5:54 PM

Doctor Zero on March 17, 2009 at 5:37 PM

Doubtless, policies definitely have a role in offshoring. But there is also the standard of living equation. While education in US have remained sub-par, college graduates in India and China have ballooned, while those places still have low living standards. Hence, *some* offshoring will make sense even if the business laws were equally competitive.

peter_griffin on March 17, 2009 at 6:08 PM

peter_griffin on March 17, 2009 at 5:49 PM

The idea is to promise that if government lowers taxes, US citizens will get jobs that would have been offshored – or get jobs that were once offshored but now returning.

How about keeping things so that there can be a way up from the bottom of IT?

peter_griffin on March 17, 2009 at 5:54 PM

Interesting that you quote them with a NASSCOM lobby member caught in a Enron-style scam.

Even more interesting is that it is (to IBM via Project Match) wages. They just want to evade US Citizens in their home country; Project Match being a sop to citizens willing to sell their souls.

sethstorm on March 17, 2009 at 6:10 PM

sethstorm on March 17, 2009 at 6:10 PM

Seth: you are talking in sound-bytes instead of engaging in a debate. Please give me *facts* to show why a company (like IBM) should *not* outsource. Even if you look at a so-called old style American car company like GM, they import tons of parts manufactured in China. Here is one industry that the least outsourcing : finance sector. See where they went. On the other hand, IBM eked out a profit even in these troubled times. Here’s what you don’t understand: unless companies are profitable, they will never be able to survive, and hence will always lose jobs instead of employing more people. How do tech companies remain profitable? By outsourcing/offshoring some of their functions.

Please feel free to refute what I said, but do so with actual facts or figures.

peter_griffin on March 17, 2009 at 6:17 PM

Here is one industry that the least outsourcing : finance sector.

They were already well-distributed; no offshoring needed. I deal with those in that sector that do not make a point of offshoring itself to India or China (Bank of America, HSBC, etc.). They’re still doing quite well.

I understand that they have a need to profit, but to sell one’s nation short is getting very close to the line of treason. They can profit while staying domestic, they just don’t want to make the effort of making a good case to Washington. Instead, they sell out part and parcel and scream “Racist! Xenophobe!” when you call them out(see Cafferty’s “thugs and junk” speech).

The less evasion they do, the more trust they’ll regain.

sethstorm on March 17, 2009 at 6:41 PM

I understand that they have a need to profit, but to sell one’s nation short is getting very close to the line of treason

So the finance sector did not sell the country short? By creating the flaky bodies call credit default swaps and distributing them all across the financial network? What are you talking about?

peter_griffin on March 17, 2009 at 6:45 PM

I mean, even in terms of populist speak, you cannot get away with saying that the financial sector did not sell the country short and should not be tried for treason.

peter_griffin on March 17, 2009 at 6:46 PM

peter_griffin on March 17, 2009 at 6:46 PM

That last reply of mine was meant at all business, save for the first sentence.

sethstorm on March 17, 2009 at 6:50 PM

sethstorm on March 17, 2009 at 6:41 PM

By the way, I would strongly advise you to get your material from someplace other than Cafferty. I dislike populist journalists like Cafferty or Lou Dobbs, irrespective of their political color. Please give me facts and figures.

peter_griffin on March 17, 2009 at 6:50 PM

sethstorm on March 17, 2009 at 6:50 PM

You still have not answered how a tech company can make out profits and grow (which is its fiduciary responsibility to its shareholders) without outsourcing. I will be happy to debate your plan, but please give me a plan first. After being associated with the tech industry, and the razor thin profit margins they have on their products, I believe you have to outsource to get money for R&D. Please convince me otherwise.

peter_griffin on March 17, 2009 at 6:54 PM

peter_griffin on March 17, 2009 at 6:50 PM

Jack’s a hoot but hates the Clintons while Dobbs is unhinged but likes the Clintons.

Dobbs is bragging because he said there will be no depression.

Both critics of government and rightly so.

getalife on March 17, 2009 at 6:57 PM

Democrat Sen Dodd (CT) put the bonus provisions in the Stimulus (AIG is based in CT, Dodds home state) and President TelePrompter signed the bill into law. Geithner was the chief architect of the bailout.

President TelePrompter gave AIG $30 Billion 2 weeks ago-with no mention of bonus problems. not a peep.

Now, he wants the bonus money back?

Wow!

He doesn’t have a clue how to run a company or a nation. Some things they just don’t teach you at ACORN…

Worst president ever!

TN Mom on March 17, 2009 at 7:37 PM

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