Monday, March 16, 2009

 

"...full of sound and fury, signifying nothing"

Just because I understand political posturing doesn’t mean I have to like it…or respect the source for engaging in it. The flail over AIG’s multi-million dollar bonus payout is Exhibit A.

Obama: AIG Bonuses an 'Outrage' to Taxpayers

“President Obama today blasted the plan of insurance giant AIG to pay millions of dollars in bonuses to traders who helped bring the company to the brink of ruin, calling the payments an "outrage" that violates "fundamental values" and underscores the need for financial regulatory reform.”

(BTW - Do you think the President is referring to all those financial regulatory reforms he never introduced (but probably meant to) while a member of the Senate Banking Committee)

An accompanying caption at washingtonpost.com helps explain why this is probably just populist preening:

“American International Group is giving its executives tens of millions of dollars in new bonuses even though it received a taxpayer bailout of more than $170 billion dollars. The Treasury Department determined that the government did not have the legal authority to block the current payments by the company. A white paper prepared by the company says that AIG is contractually obligated to pay a total of about $165 million of previously awarded "retention pay" to employees in this unit by Sunday, March 15.”

As part of my job, I get involved with assessing potential acquisitions (which collectively wouldn’t even amount to a rounding error compared to the US investment in AIG) and each time we get serious about a deal, we contract out for some high-priced “Due Diligence” work. The legal and financial aspects of the work necessarily involves reviewing – among other things – employment contracts. There should be a couple of worn-out carpets if such "Due Diligence" wasn't performed on AIG.

I don’t expect President Obama or Secretary Geithner to be conversant on all the details of such work; especially as it should have been done before their watch. And if someone didn’t whisper in their ear that the matter had been vetted by Mr. Geithner’s own Department, then they are being ill-served by their fellow government employees. But I suspect they knew all this and just decided to rant away.

I’m guessing the March 15 date was important because it was contractually set up to comply with tax regs requiring the payment of accrued compensation within 2 and ½ months after year-end for the expense to be deductible for the previous year. And once the funds are paid out (and I’m guessing the fortunate employees here were at the bank deposit window first thing today), good luck getting AIG to to get the money back from these same employees. In other words, unless Mr. Geithner’s Treasury Department is wrong, Mr. Obama’s sound-clip order to Treasury to “pursue every single legal avenue to block these bonuses and make the American taxpayers whole" sounds like just a wasteful diversion of US Treasury assets.

Side Note: Of course, had AIG been allowed to go into bankruptcy, accrued compensation claims would have been limited to $10,000 per employee. Instead, the US is just a shareholder in a company that has ongoing contractual requirements – no matter how stupid such contracts may look in retrospect (and you’d think a Harvard Law grad might remember that from his Contract Law days).

Comments:
I believe the bonus payout excesses at AIG are just the tip of the iceberg of what is happening with the other Wall Street bailouts including Bank of America. Working productive Americans are bailing out the same crooks that destroyed our economy along with 45% of the wealth in the world. Now the American taxpayers and our posterity will be forced to live a far lower standard of living with reduced prosperity and opportunities due to the accumulated national debt to fund the bailouts and once again we will pay the price.

Washington has bailed out the banks, Wall Street & their Washington special interests and much of the cost is added to the national debt to by paid by this and future generations while real estate and investments continue to fall. I believe Washington plans to monetize the debt in future years while they tax and destroy our remaining wealth by depreciating the dollar.

To stop this wealth attack, the Campaign to Cancel the Washington National Debt By 12/21/2012 Constitutional Amendment is beginning now in the U.S. See: http://www.facebook.com/group.php?gid=67594690498&ref=ts
 
The dollar may very well be depreciated by government actions but it won't be because Washington plans it - they're just not that clever.
 
Post a Comment

Links to this post:

Create a Link



<< Home

This page is powered by Blogger. Isn't yours?

Preview on Feedage: maryland-conservatarian
Add to Windows Live iPing-it