Chaos at AIG

[Ben Kenobi]

Interesting statement ... but other than this bare assertion, nowhere in the article are there any facts suggesting that Obama or members of his administration knew about the bonuses "for months."

Who needs facts? You railed on Bush for the same thing.

[DinoDoc]

Interesting statement ... but other than this bare assertion, nowhere in the article are there any facts suggesting that Obama or members of his administration knew about the bonuses "for months."

A November SEC filing by the company details more than $469 million in "retention payments" to keep prized employees.

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

[Darius871]

A November SEC filing by the company details more than $469 million in "retention payments" to keep prized employees.

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

Well, at least technically there's a difference between "inquiry notice" and "knowledge." Do you really think letters from some pissant Congressmen end up right on Obama's desk, or even Geithner's for that matter, when there's a thousand other things going on? Much less perfunctory filings to the SEC, which isn't even under direct executive control?

That said, it wouldn't surprise me if Obama knew, but from Liddy's testimony today it's almost without question that Geithner did, since he sat in on many of these conversations while running the NY Fed. Certainly other Fed representatives at the AIG board knew, as did Bernanke himself, but knowing their penchant for secrecy that's not proof of who they told in D.C. and when. A more detailed chronology on who was privy to what is needed and Liddy promised to have one drafted and sent back to the committee.

[DaShi]

And if Obama did know, then Congress should consider impeachment.

[Arrian]

Ok, best I can figure it, this mess was made by the Treasury, which ultimately is on Obama.

Congress was set to be more restrictive wrt bonuses, but the Treasury people (exactly who, it's unclear) pressured them to take a softer line. And Congress (being Congress) ultimately gave in. The government (Treasury, at least) knew about this particular round of bonuses some time ago. Only once it blew up in the media did Congress & Obama start grandstanding about it.

Boo.

-Arrian

[The Mad Monk]

Dodd passes the buck...

Dodd Blames Obama Administration for Bonus Amendment (Update1)

By Ryan J. Donmoyer

March 19 (Bloomberg) -- Senate Banking Committee Chairman Christopher Dodd said the Obama administration asked him to insert a provision in last month’s $787 billion economic- stimulus legislation that had the effect of authorizing American International Group Inc.’s bonuses.

Dodd, a Connecticut Democrat, said yesterday he agreed to modify restrictions on executive pay at companies receiving taxpayer assistance to exempt bonuses already agreed upon in contracts. He said he did so without realizing the change would benefit AIG, whose recent $165 million payment to employees has sparked a public furor.

Dodd said he had wanted to limit executive compensation at companies that got money from the government’s financial-rescue fund. AIG has received $173 billion in bailout money. His provision was changed as the stimulus legislation was negotiated between the House and Senate.

“I did not want to make any changes to my original Senate- passed amendment� to the stimulus bill, “but I did so at the request of administration officials, who gave us no indication that this was in any way related to AIG,� Dodd said in a statement released last night. “Let me be clear -- I was completely unaware of these AIG bonuses until I learned of them last week.� He didn’t name the administration officials who made the request.

No Insistence

An administration official said last night that representatives of President Barack Obama didn’t insist on the change, though they did contend that the language in Dodd’s amendment could be legally challenged because it would apply retroactively to bonus agreements. The official spoke on the condition of anonymity.

That provision in the stimulus bill may undercut complaints by congressional Democrats about the AIG bonuses because most of them voted for the legislation. No Republicans in the House and only three in the Senate supported the stimulus measure

“Taxpayers deserve better than this from their government, and this is just the latest reason why legislation must be transparent for all Americans to see before it is recklessly signed into law,� said Eric Cantor, the No. 2 Republican in the House.

The new law, approved by Congress Feb. 13 and signed into law by Obama the next week, effectively authorized bonus arrangements at companies receiving taxpayer bailouts as long as they were in place before Feb. 11. The AIG bonuses qualified under that provision.

Obama and many lawmakers who voted for the legislation, such as Senator Charles Schumer, a New York Democrat, and Senate Finance Committee Chairman Max Baucus, a Montana Democrat, are demanding AIG employees surrender their bonuses.

Schumer Letter

Schumer yesterday sent a letter to AIG Chief Executive Officer Edward Liddy warning him to return bonuses or face confiscatory taxes on them. The letter was signed by Senate Majority leader Harry Reid, a Nevada Democrat, and seven other senators.

Brian Fallon, a spokesman for Schumer, said the senator “supported a provision on the Senate floor that would have prevented these types of bonuses, but he was not on the conference committee that negotiated the final language.�

A House vote is planned for today on a bill to impose a 90 percent tax on executive bonuses paid by AIG and other companies getting more than $5 billion in federal bailout funds.

“I expect it to pass in overwhelmingly bipartisan fashion,� House Majority Leader Steny Hoyer, a Maryland Democrat, told reporters yesterday in Washington.

Republican Attacks

Republicans seized on the provision in the stimulus bill to paint Democrats as hypocrites.

“The fact is that the bill the president signed, which protected the AIG bonuses and others, was written behind closed doors by Democratic leaders of the House and Senate,� Iowa Senator Charles Grassley said in a statement.

Dodd said the provision was written to give the Treasury Department enough discretion to reclaim bonuses as necessary.

“Fortunately, we wrote this amendment in a way that allows the Treasury Department to go back and review these bonus contracts and seek to recover the money for taxpayers,� he said.

Treasury Secretary Timothy Geithner told lawmakers in a letter this week that department lawyers believe it would be “legally difficult� to prevent AIG from paying bonuses.

Other Democrats who voted for the stimulus bill have ramped up criticism of AIG’s bonuses, including Massachusetts Representative Barney Frank, the chairman of the House Financial Services Committee, who told reporters, “I think the time has come to exercise our ownership rights.�

To contact the reporter on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net

http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=aT_tMXRy2vDs

[Arrian]

Glenn Greenwald and others have pieced together a timeline that backs up Dodd's claims. He's still a worthless POS, in my opinion, but for other things. In this case, he was simply weak.

I really think this one's on the administration.

-Arrian

[snoopy369]

Sounds like we should just kick all of them out and start over.

Che, you up for it

[Arrian]

The initial flash of anger I had over this is passing and I'm starting to care a lot more about the 100% payments to CDS counterparties...

-Arrian

[Imran Siddiqui]

Kind of liked this quote by Jim Manzi:

http://theamericanscene.com/2009/03/18/emotions-and-money-don-t-mix

Of course, this doesn’t sound like an irresolvable problem. In rough analogy to a shareholders committee or Board of a company, we owners, via our elected representatives, could go hire an expert to try to figure out answers to questions like this. What would an ideal candidate look like? He would be untainted by any prior involvement with AIG or any type of scandal, but would also have deep financial industry experience. In a perfect world, he would have run an enormous insurance conglomerate like AIG successfully. Oh, and he would be public-spirited enough to take this job for $1 per year; though we’d want to make sure that he had some equity, so that he has financial incentives that are closely aligned with those of the taxpayers. We could give this person real authority by making him CEO and Chairman of AIG, and charge him with getting in and cleaning up this mess on our behalf.

The thing is, we have already done this. The guy’s name is Ed Liddy. He advocated paying the bonuses as being the best course of action. Is he in the con too, or is he just incompetent? What replacement do you expect will do better?

LOLz

[snoopy369]

Or, just maybe, is he right?

[Arrian]

Heh, Manzi's got a good point there. My ire certainly isn't aimed at Liddy.

-Arrian

[DanS]

The initial flash of anger I had over this is passing and I'm starting to care a lot more about the 100% payments to CDS counterparties...

-Arrian

Best as I can tell, these are interest-free loans to the counterparties. I wonder what the schedule is for paying the money back to AIG.

[Zkribbler]

A November SEC filing by the company details more than $469 million in "retention payments" to keep prized employees.

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

You're assuming that Barack went down to the SEC and read AIG's filing and that the yokels at the Fed. Reserve and Treasury, read the letters, understood them, took them seriously, and passed the info onto Barack.

Still, last night, Barack said, "I'm the President. Blame me." He seems much more interested in fixing the problem than in running around trying to figure out who to blame.

[DirtyMartini]

From what I understand, the government fears an expensive ****storm of lawsuits.

I like that phrase...

****storm of expensive lawsuits
expensive ****storm lawsuits
****storm of expensive lawyers
****stormingly expensive lawyers
lawyerly ****storm of expense
expensive ****suit of lawstorm
exlawyerly ****suit storm
expensive suitstorm ****law