Missed Opportunity

Today I learn of yet another instance where compensation restrictions that could have prevented the AIG bonus blowout were ignored!

Senator Ron Wyden said on Tuesday that the furor surrounding AIG's bonus payments could have been avoided had the Obama White House and members of Congress simply backed legislation that he and Sen. Olympia Snowe introduced more than a month ago.

In an interview with the Huffington Post, the Oregon Democrat noted that during the crafting of the stimulus package, he and his Republican colleague from Maine introduced a provision that would have forced bailout recipients to cap their bonuses at $100,000. Any amount paid above that would have been taxed at 35 percent. The language made it through the Senate, but during conference committee with the House, it was inexplicably removed.

"The reality is, had that legislation been passed it would have been a very strong disincentive to anybody paying out bonuses in the future," said Wyden.

AIG Bullsh*t!

I'm sure everybody has heard about this fiasco by now! This situation is infuriating on so many levels, I don't even know where to start!

Let's start at the obvious place, AIG itself. Do these Wall Street people ever learn a lesson? It was excessive greed that got them into financial trouble and they continue to reward that greed with taxpayer-funded bonuses. The head of AIG, Edward M. Liddy, and the US Treasury tried to justify this outrage by stating that AIG was under contract to pay these bonuses and might be sued if they were not paid. To combat this argument, I give you this...

On March 15 NPR reported the union of the employees of the San Francisco Chronicle agreed with management to renegotiate its contract to allow the company to fire workers without regard to seniority, work longer hours than the contract called for, and take fewer paid days of leave.

Contracts can be renegotiated! You may say, "Well the union had no choice, as the paper was on the edge of bankruptcy." Well, AIG is in the same place.

The worst excuse I have heard is, "We cannot attract and retain the best and brightest talent to lead and staff the AIG businesses... if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury." Can you believe this? If our current economy and the fate of AIG is the result of "the best and brightest talent" we could only hope they would quit if they didn't receive their undeserved bonuses!

Bonuses are for performance. Any contract that grants executives bonuses whether or not they deliver, even when they drive their corporation off the cliff, is a violation of the corporate board's obligations to the shareholders. Such contracts should be renegotiated, surely as a precondition for receiving public funds, which brings me to the next part of my rant...

Is anyone buying the politicians' bullsh*t outrage? First off, Obama says that Tim Geithner, Treasury Secretary, has "stepped in and berated them (AIG), got them to reduce the bonuses following every legal means he has to do this". Yet Geithner himself tied his own hands back in February when he successfully fought against more severe limits on executive pay for companies receiving government aid. He resisted those who wanted to dictate how banks would spend their rescue money. And he prevailed over top administration aides who wanted to replace bank executives and wipe out shareholders at institutions receiving aid.

The Bush administration, the Obama administration and Congress had numerous opportunities to attach limits on executive pay to legislation authorizing bailout money, and everytime, they refused or watered it down. They easily could have put conditions on the bailout money. They could have capped salaries and bonuses. They could have taken these companies into bankruptcy, where the executives would not be legally entitled to their salaries or bonuses.

Now the Obama administration is trying to make them pay back the $165 million in bonuses as a condition of receiving the next $30 billion in federal aid. Who are they kidding? Let me see if I understand this, if AIG gives the government $165 million, they get $30 billion in return! Where can I make that kind of deal? Can AIG just have it deducted directly from the $30 billion?

I've really tried to be patient with all of this, but I think it's time to stop screwing around and nationalize these institutions, kick out the "best and brightest talent" and start over! I don't think the American taxpayer can endure much more of this!

The Crisis of Credit Visualized

Here is a great video that I think does an awesome job of explaining the current bank implosion. This is a must watch!



The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

The only thing I would add to this is that it leaves out the governmental impact. Everytime a home was sold, the property would be reassessed, meaning higher tax rates that were then transferred to state capitals and thus borrowed against in the form of bonds. The bonds were then used for public works, deferred maintenance, and other projects. The federal, state and local governments wanted additional revenue streams and wanted more home owners to buy bigger and more expensive homes causing homeowners to get into greater debt.

Politicians kept quiet.

There Is No "Trickle-Down" Economics!

How many times does this have to be discussed? How many different ways does this have to be presented? Just recently Brit Hume of FoxNews was making the classic argument that the top 5% of income earners pay like 60% of the taxes and that the share of income taxes paid by the higher income people over the years has not gotten smaller under the Republicans, it's gotten larger. Blah, blah, blah!

Well, no crap! The reason for this is simple, Americans are earning less and less each year. The median household income over the last 30 years hasn't kept pace with the economic output of this country.

The Reagan-style free economy is not great for most Americans, eventually. Bubbles and credit expansion can only hide the truth only for so long.

Even by then, was it difficult to see through the rosy numbers? Why does this graph have no political impact?