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?

US Defense Spending vs The World

I want to take this time to put in perspective just how much we spend on defense. If you look at the chart below, you'll notice that we outspend everybody in the world by several times over! Is this really necessary considering all that money did nothing to stop a few terrorists on 9/11. I think to realistically attack the national debt, we are going to have to look towards the Pentagon to do some serious cutting. It was Dwight Eisenhower (a Republican) who warned us of a "military-industrial complex" when he said

"This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence - economic, political, even spiritual - is felt in every city, every State House, every office of the federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources, and livelihood are all involved; so is the very structure of our society."

High Speed Rail Confusion

Let's clear up this high speed rail thing for Mr. Jindal of Louisianna. If he's going to complain about something, he should probably make sure it really exists in the first place.

The Stimulus Plan includes two provisions modeled after the Act that finance high-speed rail development. First, the Stimulus Plan provides a $2 billion grant for high-speed rail projects that will remain available until September 30, 2011. The grant will be distributed among applicant states, interstate compacts, public agencies having responsibility for providing high-speed rail service and Amtrak for capital projects associated with inter-city passenger rail services reasonably expected to reach speeds of at least 110 miles per hour. The Secretary of Transportation will have discretion to award grants based on an extensive set of criteria, including the legal, financial and technical capacity of the applicant to carry out the project; compatibility with relevant national plans; and anticipated economic, environmental and transportation effects.

Above is a map from the US Dept. of Transportation showing high-speed rail designations. Do you notice something missing from it? Yup, you're right, nothing connecting Las Vegas!

Too little spending?

Let us, for a moment, believe the Republican's revisionist history that FDR's New Deal was a failure and didn't work and it was WWII that got us out of the depression. Well then, looking at the graph below, an argument could be made that it failed because it didn't spend enough and it took the massive amounts of deficit spending for the war effort to really lift the economy.

Privatized Profits, Socialized Risk