Wednesday, March 18, 2009

A.I.G. on his Face

Up until now I’ve refrained from joining in the orgy of A.I.G.-bashing.

He’s the One!As everyone knows, executives at the insurance giant are under fire for being paid lavish bonuses after their company was bailed out by the government to keep it from going under. President Obama is leading the charge against all this “greed”, and the company is under a virtual siege.

So, just to be contrary, I’ll go on the record and say that those corporate titans deserved every penny that they got.

“Baron,” you say, “Have you lost your mind? These fat cats pocketed $165 million while their company went down the toilet and was rescued by Uncle Sam! How could they possibly deserve those bonuses?”

It’s simple. Those bonuses are mandated by their employment contracts, and are performance-based: the amount of the bonus depends on how much income they bring into A.I.G. Last fall they steered $173 billion into the company’s coffers, thanks to the US government’s generosity with the American taxpayers’ money.

That’s an impressive accomplishment. As corporate managers, their job is to serve their company’s shareholders, a task which they performed admirably. The bonuses are a well-earned reward.

However, now that the government is the effective owner of A.I.G., any further bailout-based bonuses are an obvious conflict of interest.

So this particular gravy train was a one-off. Sorry, guys — that’s it!

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The reason I broach this topic is that our new president, Mr. Barack Hussein Obama, received a little bonus of his own from A.I.G. His political campaign pocketed a cool hundred grand from the company during the 2008 election cycle.

According to The Examiner:

Senator Barack Obama received a $101,332 bonus from American International Group in the form of political contributions according to The two biggest Congressional recipients of bonuses from the A.I.G. are — Senators Chris Dodd and Senator Barack Obama.

The A.I.G. Financial Products affiliate of A.I.G. gave out $136,928, the most of any AIG affiliate, in the 2008 cycle. I would note that A.I.G.’s financial products division is the unit that wrote trillions of dollars’ worth of credit-default swaps and “misjudged” the risk.

The Washington Post reports a “mob effect” at A.I.G financial products division:
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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.


Now that the Wall street Journal has revealed that A.I.G. paid bonuses of $1 million or more to 73 employees, it’s time to ask if recipients of A.I.G. “bonuses,” including President Obama, will give what now ought to be taxpayer money back?

But it gets even worse. The administration is employing a bait-and-switch tactic by pounding A.I.G.’s officers for their greed and profligacy while more important issues go unexamined.

It’s relatively easy to set up rich Wall Street executives as greedy fat cats sucking the lifeblood out of the American worker. The tactic is tried-and-true, and it’s been a staple of Democrat rhetoric for well over a hundred years. Nobody ever lost votes by attacking the pig-snouted top-hatted capitalist with his cigar and his big bag of money.

But in this case the stratagem has the added advantage of distracting attention from what A.I.G. actually did with its bailout money. Here’s a report from Bob Owens:

Barack Obama’s lack of leadership in a down economy has now hit crisis proportions, as his claimed inability to block millions of dollars in bonuses for executives of bailout recipient AIG has caused even his supporters to turn on him.

But while the ire of Congress and the media focus are on the $165 million that AIG paid out in bonuses to their executives, the president is hoping you won’t notice the $100 billion in taxpayer bailout dollars that AIG paid out to other banks, including $58 billion to foreign banks and $36 billion given to French and German banks alone.

The Obama administration is allowing AIG to bail out the rest of the world with your tax dollars.

So by all means, the president is happy to have you railing at “evil” but relatively small potatoes AIG executive bonuses, as it points your outrage away from his own far more costly executive abuses.

It’s worth noting that this process — in which the government pulls money from the pockets of American taxpayers and funnels it through A.I.G. to prop up the international banking system — is one small piece of the Obama plan to create a socialist state in America.

First you destroy the collective wealth of ordinary people by devaluing their assets, assuming their mortgages, and taxing them to the bone. While you’re at it, you confiscate their firearms. Then, when they are once again helpless infants mewling and puking in their nurse’s arms, you make them into wards of the state, and the People’s Republic of America is born. The USA becomes just like Sweden, only poorer and with much less free enterprise.

But if that really is our future, ponder this: Among the largest contributors to Barack Obama’s presidential campaign were Goldman Sachs, Citigroup, JP Morgan Chase & Co., Morgan Stanley, Bank of America, Wachovia, and Lehman Brothers.

These are hardcore capitalist-pig enterprises, the fattest of the fat cats. Why in the world would they bankroll the Socialist-in-Chief?

Are they really that stupid?

Or could it be that the wealthiest and most influential managers of the American banking and finance systems see an opportunity to turn a tidy profit by joining the Great Socialist Enterprise?

Hat tips: Holger Danske and Fausta. Thanks to Vlad for his help when our satellite connection went out.


Henrik R Clausen said...

No need to worry, there's a trillion dollars of bailout money entering the system as of today.

The dollar, predictably, plunged.

Anonymous said...

Interesting stuff, Baron. Thanks for posting, and I love the photo.

Roy Lofquist said...

AIG is an insurance company. It got hit by unusual and unforeseen events. If seven major hurricanes make landfall in the US this year a number of large insurance companies might fail. And no, they can't sue the weatherman.

Anonymous said...

These are hardcore capitalist-pig enterprises, the fattest of the fat cats. Why in the world would they bankroll the Socialist-in-Chief?

It's a well-known feature of the socialist governments of Europe that they implement regulations and work rules that only large, public companies can afford, insulating them from competition, and in return the companies support the socialists for reelection.

Also, don't underestimate the social conformity demanded by NYC liberals. Anybody working at these companies who really were capitalists would soon be mercilessly hammered down until they shut up about economic conservatism or they convert to liberalism.

Henrik R Clausen said...

Randian, that's actually a feature of the European Union more than of the governments themselves.

The role of governments in Europe is mainly to implement EU legislation. It provides us with some 80-85 % of the laws passed in our parliaments.

Oh. We forfeited our rights to say 'No', too...

Captain USpace said...

Good one. The Wall Streeters were fooled by the magic talk of 'The One'. Let's pray he only gets one term.

They thought they could buy his loyalty, they were wrong.

The Wall Streeters and AIG people who got the huge payouts, weren't really getting 'bonuses'; it really is just 'deferred compensation'. They get a base of about 250-300k, but then they get a million or 10 later as a 'bonus'. If AIG had made a lot of money in that division instead of losing tons, their 'bonuses' would have been much bigger. At those levels even when they lose money they get BIG 'bonuses', it's just deferred compensation.

If companies can't pay what the market demands for that type of employee, then they can't hire them, and then can't be in that particular line of business.

Let AIG go bankrupt. Eff'em! But if they get bailout money to stay in business and pay their debts to other firms, they have to pay the compensation they owe their employees too. Period.

I think Pedro Martinez and Tom Cruise make too much also. So let's then limit how much the studio or the Yankees can make, and then tell them and the theaters what to charge for tickets.

Let's just outlaw 'being rich', except for politicians of course.
here’s an absurd thought -
our God of the Universe
hates ALL rich people

unless they are Democrats
who have the right to be rich
All real freedom starts with freedom of speech. Without freedom of speech there can be no real freedom.
Philosophy of Liberty Cartoon

Henrik R Clausen said...

Letting AIG go bankrupt would have immense implications for the financial and monetary system worldwide. It is, in other words, "Too big to fail". Some may want to rephrase that into "Too big to bail".

There's a dilemma here, though. AIG failing would take down a lot of European financial institutions, too, and I really not want that to happen.

The alternative, however, is to trumph up AIG (and others) on debt, which is future taxes, or on higher taxes right now, which isn't exactly feasible.

I'm concerned that our monetary system, as such, is failing. That would be one heck of a disaster!

Anonymous said...

Why in the world would they bankroll the Socialist-in-Chief?

Because they have nothing against socialism. They know how beneficial a thoroughly corporatist state is going to be for big business - especially now that the last president has made a succesful start for an even bigger federation by signing the Nafta-agreement with Canada and Mexico

Well - nobody reacted, there was no protest to speak of, so a North-american federation without the last trammeling articles in the American Constitution can go on as planned
The disarmed citizens of the USA will not know what hit them..Same as the citizens of the countries in the EUSSR by the way, who are about to be throttled by millions of EU-laws that have been silently cooked up for them in Bruxelles..not to speak of the taxes they are going to exact, later on..

X said...

In the past people have said that Europeans should leave before it gets too late to escape the "inevitable" collapse of civilisation this side of the Atlantic. I've alwayus reacted with scorn to that suggestion -I even called it cowardice once or twice. There are reasons to stay that are not immediately apparent but which are very powerful for me.

Well now, apparently, I have another much more obvious reason. Even if I wanted to leave I can't, because there's nowhere else to go.

Unknown said...

There was a term coined for this collusion bettween capitalism and "socialist"represion in the 1990`s. It was "market Stalinism". It was ment to describe the Chinease system at the time. If one looks at the cold war it is clear that the West and capitalism won the ecanomic battle. But when you look at the ideological battle it is clear that the West lost. Western capitlism trumphed but Western liberal democracy was clearly routed from 1968 onwards.It is therefore logical that a combination of capitlist ecanomics and Bolshvik political methods should charicterise the present. The blend of thease two eliments will vary from place to place but they will probably prevale in what was the old "first" and "second" worlds at least for a time.Weather thay can co-exist in a stable fashon over a longer term is anuther question.As long as this composit system servives it will prove to be highly benificial for those who run it and extremly unplesant for the rest of us. I have for some time noticed confident American commentators on the net talking about spinless"Euro Weannies"and felt an uncomftable sense of dejave about the things British people once said of the continent.We had a saying "it couldent happen here". That saying disapred in the 1970`s around the same tima as"its a free cuntry init" allso disapred.Americans may soon learn how easy it is to lose poltical freedoms.

Henrik R Clausen said...

The 'bailout' trillion is indeed working. The dollar is plunging, decreasing the value of existing savings and transferring wealth from citizens to the State. Once again.

Henrik R Clausen said...

The Wall Streeters were fooled by the magic talk of 'The One'. Let's pray he only gets one term.

They thought they could buy his loyalty, they were wrong.

Unfortunately, I don't think that's true. The AIG bonus thing was just so blatant that Obama had to do .. something.

As far as I know, most of his advisors are, in fact, Wall Street people. Noone from the auto industry, noone from farming, lots of people from High Finance.

Anyone got a detailed breakdown and grouping of the backgrounds of his advisors?

Taxing the AIG bonus is small potatoes compared to what else goes one. Throwing around a trillion, just for the sake of 'bailout', stinks.

But there's something more dangerous at stake here. Suppose the Federal State starts buying up risky mortgages, as I heard it would. If the 'owner' can't make the rates, the government gets to take over his house. That could quickly make the Federal State own million of homes that were supposed to be private.

Now, what would happen if the Federal State uses this property as collateral on State Securities? And if the Federal State eventually, which seems plausible, will have to enter default on those?

Yup. Foreign investors would come to own millions of US homes.

I hope I'm wrong about this. Please correct me.

X said...

Already happened in the 80s with Japan.

Henrik R Clausen said...

For those celebrating the 90 % tax on the AIG bonuses, here's a tough one:

It's probably unconstitutional.

Yes, I agree that these bonuses, based on AIG getting bailout money are completely unethical. Yes, I think the people getting them should have declined part or all of that money. Voluntarily. But retroactively confiscating their bonus against their legal rights constitutes mob rule, with the US Teleprompter-in-Chief gave in to pressure instead of upholding the law.

For what is more valuable, a stack of deflated greenback or the US Constitution?

Here in Denmark I'm fighting for our Constitution to be respected. If I had a choice similar to the above, it wouldn't exactly be a hard choice for me.