Watching AIG CEO Edward Liddy get grilled by Congress this afternoon, I had to feel a bit sorry for him. Mostly, I was just unimpressed with the quality of questions that were posed to him. Mr. Liddy took over at AIG last September as the size of the company’s financial problems were becoming clear. He clearly is not responsible for the failure of AIG and yet many congresspeople, like Rep. Steven Lynch (D-MA), treated him as if he were a common criminal and a total incompetent. I understand populist anger about the retention bonuses that were paid out, but people should get their facts straight before they blast a man who has agreed to take on the thankless task of trying to save AIG from bankruptcy.
On the other hand, some congresspeople, like Bill Foster (D-IL), were thoughtful enough to ask why it was important to have people familiar with the toxic contracts in charge of winding down those contracts. In other words, why would AIG want to pay someone who was responsible for creating the mess to clean up the mess? And that is the heart of the controversy we’re experiencing over AIG bonuses. AIG was contractually obligated to honor these bonuses and was likely to lose in court if they refused to pay them. But the reason they agreed to pay them in the first place was because they needed people familiar with the crime scene to clean up the crime scene. All of this was decided in January 2008, well before Mr. Liddy took over as CEO. All he did was honor those decisions.
Now, it is pure political gold to criticize a decision to pay millions to people that performed miserably and that ruined their company and the national and global economy in the process. But a lot of this criticism is self-defeating. The American taxpayer nows owns about 80% of AIG and has a compelling interest in the return to health of this major insurance corporation. We will lose our investment if AIG fails. Most majority stockholders are smart enough not to destroy the brand name of their company by making incessant criticisms of their company’s performance and competency. This is not the case, apparently, for our Congress members. They would rather score cheap political points than safeguard our investment.
The CEO of AIG can best serve the American people by returning his corporation to profitability quickly and by selling off their assets at a decent price. Nothing that happened today on Capitol Hill is going to make his job easier.
It might make everyone feel better about themselves to complain about a few hundred million dollars in bonuses, but the company has a couple of trillion dollars of potential risk to the taxpayer. Whatever makes them less of a risk should be our foremost concern.
I don’t absolve people for being politically tone-deaf. But I don’t think we should praise people who are politically smart but economically stupid.
You think Geithner is gonna take the fall on this one? Seems like all the grumbling and “outrage” is pointing somewhat in that direction.
nah. We’ll move on to some other outrage shortly.
Maybe I’m reading too much into the media treatment of this, then. They really seem intent on painting this as a major blow to Obama’s air of competence. Even the coverage on tpm this week gives an impression of major failure, with Obama in a position where he has to do something dramatic to restore confidence.
Maybe the townhall in CA will do the trick. I like the way Obama has been using live events to restore balance to the public commentary; the press can shout “blood in the water!” all they like, but then he goes and addresses 80,000 people and we see what’s what. That’s a great thing about star power–unlike, say, all the huge protests and demonstrations at the outset of the Iraq invasion, the press can’t ignore a massively popular president.
But when do we stop giving out handouts to Wall Street? As Peters asked at the hearings today, Why Is It Okay to Abrogate UAW Contracts But Not Wall Street’s Contracts?
I’m not so sure on that, Boo. Republicans are clearly expecting Geithner to take the hit on this, and the Village is already acting like this is Obama’s Katrina.
My personal animosity towards Geithner aside (I really do find him incompetent, he’s one of the people that got us into this mess as NY Fed chairman, why should we think he’s capable of getting us out?) if Obama is stuck defending Geithner too much and for too long, it’s going to possibly imperil the rest of his agenda.
I look at it this way, here’s a clear opportunity to get rid of Geithner and start taking some real action on reforming the financial system, including nationalizing and breaking up any of these “too big to fail” companies like AIG.
The problem is – if Geithner goes, who’s going to replace him?
Remember – his replacement has to be confirmed by the Senate.
What are the odds that we’ll get someone new in who is going to be better than Geithner given those constraints, and what are the odds that we’re going to get someone in who is just as bad, if not worse? I think with the way the Republicans are now, the odds of getting someone into that seat who is willing to do the right things in this environment are somewhere between zilch and nada. Instead, someone who doesn’t want to do the right things will get the position, they’ll do the wrong things, it will fail, and we’ll be right where we are now.
I’m really hoping that Geithner takes this as a wake-up call – the Paulson/Geithner/Summers/Bernanke plan has failed. It’s time to do something new. Some of his buddies are going to take a fall, but if he doesn’t do something fairly radical, ALL of his buddies are going to fall and anything good he’s ever done in his life will be overshadowed by the fact that he was the idiot who destroyed the American economy in all of the future Econ textbooks.
Replacing Geithner won’t get us to the stage of “doing something new” – it gets us right back to where we were two months ago when Geithner was confirmed. Any new guy confirmed by this Senate isn’t going to do anything radical until the plans that help his buddies on Wall Street have been proven to be failures. Right now our only hope is that Geithner and Obama have seen enough proof and realize it’s time to change direction on this plan full of fail. If that doesn’t happen, Geithner’s going to continue to tailspin until he needs to be replaced and then we have to start over again, and hope that the new guy can actually learn a lesson.
(And yes – all of this IS an object lesson on why the Senate needs to be abolished and replaced by something less stupid).
Geithner isn’t going anywhere, nor should he. The outrage on this issue is phony inside and out. The first clue to us all that this was a trumped up media invention was that there was bipartisan agreement on the levels of outrage. Whenever that happens you can be sure of one thing: minimal political risk. When the political risk is low, everyone gets to pile on with impunity. But it has been particularly embarrassing that Democrats have allowed this tempest to distract from the core issues of healthcare, energy, and education reform in Obama’s budget. Instead of lobbying hard in the media on the heart and soul of what Obama was elected for we have instead proved for the 8 zillionth time that overpaid executives are still overpaid. Well done!
I’m with Booman here – a new outrage will replace this outrage for the perpetually outraged by next week.
Last night on Maddow’s show, Weidner of Market Watch was discussing the difficulty of getting a competent outsider (there are plenty of them) confirmed by Congress. Congress and Wall St are joined at the hip. Or maybe the brain would be a better way of saying it.
The revolving door between government and the private sector has been going on for most of my adult life (I’m a senior) and I don’t see it stopping anytime soon. I’ve seen it in land use and environmental arena, US Attorneys’ offices, SEC, etc. Whatever area you work in, you can find your own example of people learning how the system works from the inside and at taxpayers’ expense, then using that expertise against the public interest and for enormous personal gain.
Exactly – I didn’t see the bit on Maddow’s show, but it’s obvious to anyone who has watched politics for any length of time that corporate and government interests are completely intertwined in this country. Hell, Eisenhower was warning about this back in the 1950’s.
I wish it were different, but the only opportunities we have to change it happen by voting people out of office and getting better people into office. In the interim you have to work with the elected officials you have, not the ones you wish you had.
Right now, Geithner has a better shot of doing something real than anyone who might replace him. If Geithner wises up, he has a shot to fix things. If he doesn’t, he’ll be replaced. But when he does finally get replaced, unless we’re living in a post-Apocalyptic financial wasteland by that point, the new guy will start over doing the same cautious “don’t ruffle any feathers” bullshit that Geithner is trying to do, because that’s the kind of guy that is going to get confirmed by the Senate.
The revolving door being discussed right now over on dKos in Orange Clouds’ diary. He/she focuses on food and agricultural issues.
And how exactly is AIG supposed to make money when they are 1.5 trillion in the hole?
I’m outraged because I see it as rewarding failure. And outsized rewards at that. What could one guy do, aside from managing not to get fired yet, to justify giving him 6.4 MILLION over and above his (I’m sure) generous salary.
The bailout money was supposed to go to shoring up the company. I don’t see the bonuses as accomplishing that.
That bonus money goes into the individual’s pocket. It doesn’t do a thing to help the economy or the company. It’s just hideously unfair, immoral and unethical.
So, yeah, I’m pissed off.
And I can’t help but think of the number of people who could have been salaried with that 6.4 million.
Oh yeah, and another reason I’m really pissed off: They didn’t pay those bonuses from profits made by the company. No, they paid those bonuses with taxpayer monies that were given to them. Which makes it seem like legally-sanctioned robbery to me.
Steven Lynch is a tool. He got elected to a safe dem seat years ago because he won in I think, a 4-way primary against 3 progressives. He was the one conservative dem or DINO so the liberal vote was split and he crawled in.
That said, I agree with SusanD. The whole bonus thing is a symbol of everything that is wrong with the Wall Street mess and the f*cked up priorities that they have parleyed for at least the last 2 decades.
Why should the taxpayer bail out gamblers who lost on their bad bets? Sadly it is because pension plans and municipal govts. got all hot and excited over the market and put their money into those bad bets too. That’s my understanding of it all, and econ. is not one of my strong suits.
The whole thing is perfect fodder for populist revolt except that it’s so much more complicated than it seems.
the banks’ attitude seems similar to a junkie explaining that withdrawal will kill him, and he promises not to OD anymore, so can he have some, please.
and he’s a teeny bit sorry that he’s sold the family jewels for stash, sending millions into the poorhouse.
he’ll try harder in the future to just live within his own means, if he could just borrow our childrens’ future earnings for one last go-round. hell, i betcha we could move those SUV’s off the docks!
aww, poor guy… don’t you just intuitively know that’s what your descendants would want?
you felt sorry for ed liddy.
fascinating.
Really. The guy’s suit costs more than I earn in a year! BooMan has extraordinary empathy, above and beyond Christ-like compassion. <dry snark>
well, I feel sorry for Alberto Gonzalez.
For god’s sake, the man was just doing his job! why is is such a big deal?
and how is Liddy in any way comparable to Abu?
oh, I’m sorry. I guess I just don’t understand how hard bit is to be an executive.
I’ll be quiet now and go back to trying to save my city’s essential services. You know, the ones that the mayor wants to cut because aig and goldman lost all our money in bad bets.
so, so, so very very very very very very deeply sorry to have offended, booman. my values are all fucked up. you’re right. liddy deserves some sympathy. poor baby.
You didn’t offend me, you said something that doesn’t make any sense. How is Liddy in any way anything like Abu? Do you have an answer?
Like AGAGAG, he is an incredibly unsympathetic character. Watching you express sympathy for him is like me expressing sympathy for the other. that’s all.
You shoulda seen the other names I was pondering. AGAGAG seemed the least over-the-top.
I don’t feel sorry for Liddy. He was, as you noted, brought in to “save AIG from bankruptcy.” Instead of being a pass-thru to who gets taxpayer money first, he should have been considering how much and why.
He should have been acting as tho AIG is officially bankrupt because it technically is. That means negotiating partial payments with debtors and investigating how anyone ever agreed to employee bonuses that aren’t based on, um, performance… or retention… or anything other than keeping your mouth shut when the Feds come calling. Contracts based on fraud and conspiracy to commit fraud don’t have to be honored.
The head of AIGFP is still getting a million bucks a month and a London apartment even after being forced to resign! That is so obviously hush money on a scale that implies mass graves! These Masters of the Universe weren’t incompetent. They didn’t drink their own kool-aid and believe in the ever-expanding bubble of greater and greater value. They are con men… scam artists… pirates… and Liddy fell in with them, thick as thieves, instead of evaluating the mess and calling the cops.
This situation has driven me beyond outrage into out-right rage, complete with fantasies of murder and mayhem. The only thing that could placate me now is seeing some of these guys frogmarched!
LORD!!! All of this foofaraw over AIG and not a WORD about its CIA roots!!
Not in the media and not even in the leftiness blogs.
What?
Too tinfoil hat fer ya?
Wake the fuck up.
This is just Enron redux.
Google [AIG + CIA] and read a few of the 839,000+ posts on the subject.
Here’s a quickie to whet your appetite, From as far back as 2001. Note well the presence of Frank Wisner Jr, one of the few people to emerge unscathed from the Enron debacle from around the same time. CIA connection? His father was Frank Wisner Sr., the CIA operative who founded “Operation Mockingbird” which was the beginning of the current almost totally co-opted mass media position in the United States, a situation that is…as I keep trying to get through your thick skulls…the linchpin of the pickle into which the U.S. has fallen over the past 50+ years.
Read on.
The system has become rotted through, from the inside out. Deep inside. All we are seeing is the surface evidence of this rot when one or another of the tentacles of the PermaGov gets a tad too greedy.
AIG isn’t the problem. neither was Enron and neither is the whole financial system per se.
The CIA and the rest of the PermaGov is the problem.
Bet on it.
And it is now a cancer so metastasized within said system that I fear the patient is doomed.
We have one last chance here, it appears to me. I have no doubt that Barack Obama understands full well the depth of this problem, and I also have no doubt that he is not a willing player in it. He is, however, an astoundingly wise political player and knows that this problem cannot be attacked head-on for fear of killing the patient (and/or killing the doctors as well), so he is attacking the symptoms as they arise in the hopes of reforming the system from the inside.
I wish him luck.
It’s all of our mortal asses in the balance now.
Here on the so-called “best and brightest” levels of political understanding?
It’s time to wise up.
This isn’t just incompetent high-level hustlers taking their cut…”dipping their beak” as Francis Ford Coppola so eloquently put it in “Godfather II”…this is systemic. And we have to understand that fact.
Pulling the AIG bonuses?
PFFFFTTTT!!!
They’ll just find another way to steal the money.
Reforming the CIA and the other Intel orgs?
JOB ONE!!!
Bet on it.
Otherwise…we’re through.
Bet on that as well.
Later…
AG
Michael Ruppert is nuts.
That doesn’t mean that he is wrong, Booman. Read the rest of the 800,000+ posts on the subject. William Burroughs’s definition of a paranoid? “One who is in possession of all the facts.” Think about it.
I will guarantee that the sub-surface construct that is holding the entire rotted so-called “financial” system…which is in itself part of a larger,equally rotted-out system that is primarily maintained in place by an intel-infiltrated media system…is rife with CIA assets.
When Madoff went down? No mention of his intel connections, either. (Google <Madoff + Krongard + CIA> for a primer in that area, if you so desire.) Enron? Same deal. (Google <enron + “Frank Wisner”>.)
Those people on the leftiness blogs who absolutely refuse to see the spooks for the trees in this financial forest? I can only come to the inescapable conclusion…inescapable because the information is so easily accessed and so vast in its scope…that they are either totally mass mediia-hypnotized or are themselves intel disinformation assets.
I can only hope and pray that you are of the former persuasion.
Later…
AG
The left presumably once they closed the business they ran. That was they job they were retained to do and AIG is about $1 trillion smaller than it was.
Did they need to get retention bonuses to stay? Should they have gotten it? I say no but I wasn’t there either.
The AIG CEO was trying to make a point of his own, but it got overshadowed by congressional grandstanding.
His point was this. That AIG wants out of the derivatives business, and that they are shutting it down and selling off the pieces. From their perspective, they want to get a decent price for the stuff they do have. But their problem is that if the employees of that division all leave, then they have a huge mess on their hand as they would have a disorderly shutdown, and that could have repercussions in other businesses. So the idea is that they give the guys retention bonuses if they stay until their work is complete and their business unit is shut down.
It is analogous in a sense to what Circuit City recently went through. Once they announced they were shutting down, everyone realized that they ought to be looking for new jobs. But Circuit City needed these folks to stick around until everything was neatly wrapped up, the paperwork dealt with, and the lights turned out, so they offered their core people bonuses if they would stick around until the bitter end.
Now if AIG were closing down a different business unit, I suppose people would care less. But ultimately I don’t know how you balance the need to have an orderly shutdown of the derivatives business unit with the public desire to not hand out bonuses to the very people that helped to create the problem in the first place.
the Circuit City analogy is an apt one.
There are no good reasons to have those that created the mess be involved in “cleaning” it up, unless one wants records obscured, changed, and shredded. While spreadsheets and post-it notes created by others are difficult to deal with, sloppy record keeping practices is no reason to keep people who have interest in either proving themselves to have been right or in entrenching themselves into milking the system further, on the basis of some mystical irreplaceable “talent”. Presumably these instruments are no longer being created so the job is not to create and sell them anymore. If they are so complex as to require the originating person to interpret, they are also instruments that would not stand any third party scrutiny including arbitration or judicial review. In which case, one has no worries. Record keeping may be sloppy, but as long as any arrangement is designed to outlive (3 to 5 years for these CDS’s?) the originating person’s career (there’s always the proverbial getting run over by the bus), they should be serviceable by any competent other person. Management paying retention is just further proof that the organization hasn’t a clue what managing things are about. Under that logic one should bring Rumsfeld back in to extract the military from Iraq.
Booman Tribune ~ Comments ~ On AIG
…or al capone to audit his own taxes…
“I was just unimpressed with the quality of questions that were posed to him.”
Understatement of the year.
What has happened doesn’t matter. What we do about it does greatly.
I heard almost no questions about the progress they’ve actually made and credible evidence they will turn this around. Lots of fixing blame, not fixing the problem
There was a time when I might have agreed with you.
I’m past that time.
Let them rail. It made me feel better.
And the one thing I’ve learned over the years is that congress calling a CEO to the table and yelling at him makes NO difference to the value of that company or, in reality, to the actions of the company. Most people in America think Congress is composed of blowhards who like to hear themselves talk.
And in fact – every person I talked to this morning who saw the hearing thought that Liddy came off smelling like a rose. And each of those persons believed him that AIG was going to work its way out of this mess and eventually pay us back. So being yelled at only did him good in the eyes of the educated public that I know.
“And each of those persons believed him that AIG was going to work its way out of this mess and eventually pay us back.”
I wonder when we turned into a nation of gullible fools? Maybe it’s always been this way.