Today's
Feature
Blunt
Supports Recouping Taxpayer-Funded Bonuses
Washington, D.C. –
Southwest Missouri Congressman Roy Blunt issued
the following statement after voting to recoup
taxpayer-funded bonuses given to executives of
corporations receiving government assistance:
"The message sent by the
House today was far from ideal but certainly
needed. Failing businesses need to realize they
are spending borrowed money and they must stop
giving insulting taxpayer-funded bonuses to their
executives."
Blunt also commented after
White House officials said President Barack Obama
was no longer considering billing veterans for
treatment of service-related injuries as a
cost-cutting measure:
"The Obama
Administration’s mere consideration of
billing veterans for treatment of service-related
injuries was not only insulting; it was a
discredit to the service of our men and women in
uniform. President Obama was under intense
pressure to abandon this thoughtless proposal and
I was glad to join these pro-veterans groups to
help keep the promises made to our
soldiers."
AIG’s Bonus Blow-Up:
The Essential Q&A
by Sharona Coutts, www.ProPublica.com
Monday marked six months to the
day since AIG’s first bailout, but it
wasn’t until news of executive bonuses over
the weekend that public fury truly focused on the
hemorrhaging insurer.
President Obama told Americans
he was "choked up with anger" over
bonus payments to executives at AIG’s
Financial Products office whose bad bets pushed
the company to the brink of collapse. The
administration is worried about public anger
turning against it, not just the company.
In some respects, the sudden
anger is mystifying. After all, there’s
nothing new about the bonuses except that a
portion of them – $165 million – were
actually paid on Friday. Contracts instigating
the bonuses were made a year ago, and
they’ve regularly been in the news in recent
months.
And the amount involved is
dwarfed by the tens of billions that flowed to
banks and hedge funds.
AIG’s plan to pay bonuses
have been public knowledge for more than a year.
Why is this blowing up now?
Since its first bailout back in
September 2008, AIG has had a lot of bad press.
Nothing, though, has hit the public nerve like
this latest scandal. The public seems to have had
enough of junkets, bonuses and bailouts.
Perhaps it’s just politics
– a distraction from other, more complicated
problems, like the billions of taxpayer dollars
that have flowed to banks and hedge funds, which
have been overshadowed by the current rage. The
controversy threatens to engulf Treasury
Secretary Tim Geithner, who’s quickly
becoming the target for partisan rancor over the
bonuses.
Here’s a timeline of the
main events. Judge for yourself.
What’s the
justification for the bonuses?
Several commentators have
weighed in – reluctantly – on the side
of paying bonuses. Andrew Ross Sorkin of the New
York Times argues that the employees of
AIG’s Financial Products division are the
only folks capable of defusing the bombs they
built, referring to the $1.6 trillion in notional
value of credit default swaps still on AIG’s
books, according to the company’s recent
Securities and Exchange Commission filing.
That’s a lot of money, and
what’s worse, the instruments themselves are
highly complex and difficult to unwind. The swaps
are a form of insurance that financial players
buy to protect against potential losses. In
return for regular payments, AIG took on the risk
of those losses, a bet that turned out all wrong.
Warren Buffet famously set about disbanding the
packet of CDSs he bought when he acquired
Berkshire Hathaway in 1998. The exercise took
four years and cost over $400 million and
involved a much smaller portfolio of swaps than
AIG still holds.
On the other hand, some traders
told The Wall Street Journal that even very
complex derivatives can be unwound by
"pretty much anyone with an understanding of
derivatives."
Sorkin sees another reason
– less sympathetic – to keep the
bomb-makers on the payroll.
"A.I.G. employees
concocted complex derivatives that then wormed
their way through the global financial system. If
they leave — the buzz on Wall Street is that
some have, and more are ready to — they
might simply turn around and trade against
A.I.G.’s book. Why not? They know how bad it
is. They built it."
Is it true that AIG is
legally bound to pay the bonuses?
Lawyers interviewed in a bunch
of outlets agree that AIG is legally bound to
honor the contracts, and attorneys working for
the Fed reportedly believe that breaching the
contracts would just lead to even costlier
lawsuits.
However, that doesn’t
preclude negotiations, and Attorney General Cuomo
thinks AIG is crying crocodile tears when they
say they are helpless to stop the payments:
"We know that AIG was able
to bargain with its Financial Products employees
since these employees have agreed to take
salaries of $1 for 2009 in exchange for receiving
their retention bonus packages. The fact that AIG
engaged in this negotiation flies in the face of
AIG’s assertion that it had no choice but to
make these lavish multi-million dollar bonus
payments."
Federal Attorney General Eric
Holder is now working with Treasury to figure out
their legal options.
What are the options for the
government to make good on their money?
There’s a range of ideas
floating around. President Obama ordered Treasury
Secretary Geithner to take all legal steps to
block the bonuses. The problem is the payments
have already been made.
A bipartisan group in Congress
is drafting legislation to tax the bonuses, a
measure they say would recoup 91 percent of the
money. There are no details as yet, and
representatives conceded that the law would be
difficult to draft. House Majority Leader Steny
Hoyer, D-Md., said there might be "issues
relating to the ‘equal protection
clause’ in the Constitution that forbids
laws that affect certain groups differently.
Rep. Barney Frank, D-Mass.,
chairman of the House Financial Services
Committee, said that as owners of the company,
the government should demand that the bonuses be
rescinded.
Why didn’t anyone
complain when the Bloomberg financial news
service reported in January that bonuses would be
forthcoming?
One person did. Rep. Elijah
Cummings, D-Md., told Bloomberg he was
"extremely disappointed – but not
surprised – to learn that AIG will be
awarding bonuses to the very division that drove
the company into the ground."
But other than that, there was
very little official response to that story.
That’s one of the mysteries of this scandal
– why didn’t Geithner act earlier? A
House Financial Services subommittee invited the
treasury secretary to today’s hearing on AIG
bonuses, but Geithner declined to attend.
Didn’t Geithner sign
off on the bonuses before he became Treasury
secretary?
The bonuses were agreed to in
March 2008, long before the company came to the
government for help. However, Liddy said at
today’s hearing hearing that Federal Reserve
Bank Chairman Ben Bernanke knew of the deals
months ago.
As we wrote earlier, committee
members requested that Liddy provide them with
minutes from all meetings with the Federal
Reserve Bank, and the New York Fed, where the
bonuses were discussed.
Liddy could not recall whether
Geithner, as former president of the NY Fed, was
present at earlier meetings about bonuses.
Geithner’s handling of the bonus issue is
increasingly under partisan attack. Today, Rep.
Connie Mack, R-Fla., called for his resignation.
Did AIG renege on an earlier
promise not to pay retention bonuses?
AIG agreed with New York
Attorney General in October that "no funds
will be distributed out of the $600 million
deferred compensation and bonus pools of
AIG’s Financial Products subsidiary."
Strictly speaking, it seems,
AIG did not violate the words of that agreement
– the latest bonuses came from a different
pool of funds – but it certainly seems that
the company violated the spirit of the agreement.
Why is New York Attorney
General Andrew Cuomo investigating?
Cuomo subpoenaed AIG for a list
of the names of who received bonuses and how much
they got. Although there is no official criminal
investigation under way at this stage, Cuomo has
repeatedly warned AIG that he will take further
action "pursuant to New York law."
Which law, specifically? In his
letter to Liddy on Monday, Cuomo implied that the
payments could constitute "fraudulent
conveyances under New York law."
That offense applies to actions
taken with an intent to "hinder, delay or
defraud either present or future creditors."
Haven’t other companies
getting a bailout also paid bonuses?
Yes. Merrill Lynch – which
was bought by Bank of America – paid $3.6
billion in bonuses last December, and Bank of
America is fighting Cuomo’s attempts to find
out who the money went to and how much they got.
JP Morgan is giving bonuses,
but the firm must allow shareholders to vote on a
proposal to tie bonuses to long-term stock
performance, following an SEC ruling on March 9.
Wells Fargo cancelled bonuses
to "a handful of top executives." But
the bank raised their salaries by a hundred
grand, to $700,000.
There are already reports of
other bailed out banks, such at Citi, looking for
ways to get around restrictions on bonuses.
Letter to the
Editor.
Opinions expressed are not
necessarily those of the Mornin’ Mail.
Well I see that Obama is just
like the rest of the washington crowd. Remember
he was going to get rid of earmarks and yet he
signs one bill after another that are loaded with
billions of dollars of earmarks. That is change?
Oh yes, remember, he was just
going to tax rich people, but it is ok to tax
smokers to the tune of sixty cents a pack. I
guess he thinks all smokers are rich. Yes, Obama,
you are just like the rest of the Washington
crowd, but you sure fooled us when you were
running for the top job in the country.
Since I am on my soap box, I
would like to comment on the City of Carthage
wanting to raise our taxes by 1/2 cent.
Don’t you know we are in a recession and we
sure don’t need any more taxes. You are just
like the Washington crowd, none of you care about
the people you are suppose to help.
Rudy J. Mueller -
Ash Street
artCentral
art notes from the Hyde
House
Time has quickly flown, and we
are at the threshold of a new exhibition here at
Hyde House Gallery. Opening March 27th is a new
show entitled "SOUL FOOD" with a
wonderful new group of photographs by fine art
photographer Mary Ann Soerries. Mary Ann is known
for her beautiful florals, and she explores a new
compositional concept of displaying her beloved
subjects as "food" for the soul! A
graduate of New York Institute of Photography,
Rocky Mountain School of Photography: Field
Workshops, and numerous seminars, Mary Ann
creates traditional film based photography.
According to the artist, "My photography
flows from a respect for nature and love of
flowers--- a love I inherited from my mother who
always found room in the vegetable garden for
beautiful flowers. Each nature portrait is a hymn
of praise for the beauty of creation. I love
seeing the tiny details and intricacies of nature
emerge through my enlargements. Seeing with new
eyes, it happened to me one day, now beauty
abounds!" Ms. Soerries lives and works in
Joplin and her many exhibitions include the
Cellar Art Gallery in Kansas City, Spiva Center
for the Arts, Powell Gardens Botanical Gardens
Gallery, Midwest Gathering of the Artists, juried
shows in Parsons, KS and Pineville, MO artwalks,
Tulsa Garden Show, Ft. Smith Art Center Photo
Competition, Photospiva multiple years as well as
former shows at artCentral. Her work has been
featured as cover photos on Raleigh URBAN HOME,
Spring 2008 and Charlotte URBAN HOME, Spring
2007. I think all local viewers are ready for
some lovely spring florals to gaze upon, and we
aim to please! The artist’s reception will
be held at 6:00 pm here at Hyde House, and this
show remains until April 12th during regular
weekend hours. In addition to Soerries work in
the Main Gallery, we will feature additional work
by local artist Lora Waring in the Member
Gallery, and I will tell you a bit about
Lora’s work next week.
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