This was the first piece I have seen that is beginning to cut through the AIG bonus smokescreen. The bigger issue here is that the AIG “rescue” was hastily assembled by Hank Paulson just prior to his leaving. Mr. Paulson, the former CEO of Goldman Sachs, arranged this bailout that we learn a large portion of that AIG money went to Goldman who Mr. Paulson has substantial holdings and investments in.
The number of Secretary Treasurers that have come from Goldman is absolutely criminal. The Federal Banking system, which is privately owned, works in concert with the Treasury and is incestuous in appointing people to run it. The President and our representatives take these people’s advice as if their interests were the same as the people’s. They are not. Their money is used to sponsor those politicians and thus the entire system is CORRUPT. Congressional hearings? A JOKE. Bailout bills? FOR THE BANKS, NOT FOR THE PEOPLE. Even when the people are obviously against these bailouts, they are passed regardless. Why?
Our system is corrupted, that’s why.
Treasury Preserves Bank Payday as AIG Rescue Floods Wall Street
By Mark Pittman and Christine Harper
March 24 (Bloomberg) -- The U.S. Treasury Department preserved a payday for five banks that was worth almost 200 times the bonuses handed out at American International Group Inc. through a government rescue.
As part of a bid to prevent the insurer’s failure, the U.S. settled derivatives and loan contracts worth $32.7 billion with Goldman Sachs Group Inc., Merrill Lynch & Co., Societe Generale, Deutsche Bank AG and UBS AG. That’s about half the $66.7 billion that those companies, the five biggest beneficiaries of loans and capital infusions for AIG, said they spent on pay and benefits last year for employees, some of whom created or traded toxic subprime assets that proved deadly for lenders.
The bonuses paid by AIG and the banks were allowed under a congressional exemption from compensation limits on companies getting government rescue funds. The Treasury staff requested the exception to avoid lawsuits over agreements signed before Feb. 11, Secretary Timothy Geithner said last week.
“Government assistance is a privilege, not a right,” Geithner wrote in an article published in the Wall Street Journal yesterday. “When financial institutions come to us for direct financial assistance, our government has a responsibility to ensure these funds are deployed to expand the flow of credit to the economy, not to enrich executives or shareholders.”
My Comment: Note how this administration is very talented at SAYING what you want to hear, but it is their ACTIONS that are disconnected from their moral preachings.
The $165 million paid to employees of New York-based AIG represents 0.0014 percent of the $11.6 trillion committed by the government to combat the credit crisis, according to data compiled by Bloomberg. The $32.7 billion is 0.3 percent of the total federal loans, guarantees and cash. Nine out of the top 10 recipients of the insurer’s bonuses agreed to give the money back, New York State Attorney General Andrew Cuomo said yesterday.
My Comment: Note how this article which correctly points out the flow of funds to Goldman and others turns around and minimizes the AIG bonus money.
The payments from AIG helped the banks offset losses in other operations. Goldman Sachs reported a fourth-quarter loss of $2.12 billion in the three months ended Nov. 28, its first since going public in 1999. The firm reported net income of $3.22 billion a year earlier.
The government cash paid out by AIG may have prevented the banks from defaulting on their own trades with investors and other lenders. Federal Reserve Chairman Ben S. Bernanke and Geithner’s predecessor, Henry Paulson, said in September that had the insurer gone bust, the financial industry would have seen a cascade of bankruptcies.
My Comment: This is their systemic risk excuse. It is a Red Herring, a part of the diversion. Yes, there is systemic risk, the Fed and the Treasury not only allowed it to develop, they created it and are in fact the systemic risk. The very best thing that could have happened for America would have been to let the systemic risk take down those who took the risk. Would that have meant higher unemployment? In the short term yes, but in the long term NO. Thus, the “leaders” are still making decisions for the short term, not for the long term health of our Country. Quite the opposite.
The second article I ran across this morning falls right in line with the fraud and misrepresentation by our own Fed and Treasury who are attempting to use this crisis to expand and grab more power. Remember who they serve. They DO NOT serve America or its people, they serve the central banks. The central banks purpose is to EXTEND CREDIT – that is exactly what they say, listen to them, but keep in mind that their credit is your debt.
Geithner to Call for New Powers to Avoid AIG Repeat (Update1)
By Julianna Goldman and Rebecca Christie
March 24 (Bloomberg) -- U.S. Treasury Secretary Timothy Geithner will call for expanded government powers to deal with failing non-bank financial institutions such as American International Group Inc., an administration official said.
Geithner, who testifies today before the House Financial Services Committee on AIG’s rescue, is expected to focus on the need for new tools for financial institutions other than banks, similar to those that the Federal Deposit Insurance Corp. has for winding down failed lenders and insuring consumer bank deposits, the official said.
The authority would allow the Treasury, in collaboration with the Federal Reserve, regulators and the president, to step in and more easily combat problems at systemically important institutions on the verge of failure, said the official, who spoke on the condition of anonymity. AIG has received $182.5 billion in government bailout funds, according to the Government Accountability Office.
“We must ensure that our country never faces this situation again,” Geithner is expected to say according to excerpts of his testimony obtained by Bloomberg News. “To achieve that goal the administration and Congress have to work together to enact comprehensive regulatory reform and eliminate gaps in supervision.”
The expanded powers, which require Congressional approval, could help monitor risk and detect problems across an array of financial-services firms to prevent shocks to the global economy such as the one caused by the collapse of Lehman Brothers Holdings Inc. in September.
It would also ensure proper accountability when taxpayer funds are provided to institutions in extreme circumstances, like AIG, which is now 80 percent owned by the government. The authority would provide the government with various tools including the ability to break contracts on executive compensation commitments, like those at the center of the furor over the insurance-giant’s $165 million in bonuses.
Regulators should be able to safeguard the entire financial system as well as monitor the health of specific institutions, Geithner said. This oversight should cover “all institutions and markets that could pose systemic risk” he said, according to the excerpts.
President Barack Obama has made regulatory reform a central component of his economic agenda in an effort to combat the worst financial crisis since the Great Depression. Geithner will speak about the effort more broadly when he testifies again before the committee on March 26.
A key element of Obama’s financial regulatory overhaul is expanding government powers to deal with systemic risk, which under the resolution authority also addresses the politically explosive issue of bonus compensation at troubled institutions.
The president tasked his economic team to come up with an outline that he’ll take to London next week for a summit of the Group of 20 industrial and developing nations, where regulatory reform will be a major topic of discussion.
The resolution authority would send a signal to the international community that the U.S. is working to address the global systemic risks posed by non-bank financial institutions that are in imminent danger of bankruptcy, administration officials said. The federal government’s responses last year to the impending bankruptcies of Bear Stearns, Lehman Brothers and AIG were complicated by the lack of a regulator to help wind down such institutions that aren’t regulated by the FDIC.
My Comments: The Fed is the systemic risk. They have rules NOW that could have easily kept this bubble from ever forming in the first place, yet they do not enforce them. Why?
It is because they have no intention of enforcing rules that slow financial bubble growth because that’s how the central bankers, their real bosses, profit. Glass Seagal? What’s that? It was getting in the way and it was removed. So too will any real attempt to limit credit, which is your debt – at least until the power is removed from the central bank and corporations and their money are removed from YOUR government.
Karl Denninger did a couple of pieces on these subjects. His technical knowledge is good, but follow the money… it all leads to the central banks, the real center of power and they intend to not only keep it that way, but to add to it.
Here are Karl’s articles, both good reads:
More Misdirection By The Fed and Treasury.
Lawlessness Begets Lawlessness.
And here’s the media’s attempt to further calm the uproar over AIG bonuses:
AIG Pay Uproar Not Worth 1% of Our Time: David Pauly (Update1)
Commentary by David Pauly
March 24 (Bloomberg) -- Do the math: $165 million (the size of the headline-grabbing bonuses paid to some American International Group Inc. employees) is what percent of $183 billion (the amount of government bailout money that has gone to AIG)? It comes out to 0.09016 percent.
Yet the uproar from the White House to the streets of Manhattan and Connecticut suggests the payments will be the ruin of America. Congress is even considering a possibly illegal bill to tax the bonuses after the fact.
People rightly object to the AIG bonuses on principle. But there’s an overriding principle here: Keeping the world credit system from collapsing and causing global depression.
President Barack Obama and U.S. lawmakers should be working full-time to assure the success of government programs to shore up the banks, quarantine the toxic securities that hang over the markets and help out honest homeowners. Treasury Secretary Timothy Geithner, who testifies today before the House Financial Services Committee, will call for expanded government powers to deal with failing non-bank financial institutions such as AIG, an administration official said.
And there it is again. To prevent it from happening again, simply give the ones who created the mess more power. That’ll work… for them.
Ahh, poor bankers. They need more trillions and more power, don't you dare take away their bonuses, they are the best and brightest and those bonuses are needed to retain them or else free enterprise will fail and we will all experience constant sorrow, especially the poor, poor bankers.
O’ Brother Where Aren’t Thou - Constant Sorrow: