How to stop AIG's bonuses

http://www.huffingtonpost.com/william-black-tom-ferguson-rob-johnson-walker-todd/how-to-stop-aigs-bonuses_b_175351.html

By William K. Black, Thomas Ferguson, Robert Johnson, and Walker Todd

AIG's decision to pay out at least a hundred and sixty five million dollars in bonuses takes the bank bailout program's abuse of the public trust to a whole new level.

This act simply cannot be allowed to stand. The only question is how to stop it.

"Sanctity of contracts" has for some time been TARP's equivalent of Harry Potter's magic wand, the thing you waved to make difficulties disappear (for financiers, of course; if you are an ordinary worker with a pension contract, by contrast, the magic doesn't work for you). AIG clearly takes the Treasury, the Federal Reserve, and the Obama administration for fools, who can be counted on to roll over yet again at the first whisper of the magic words. There is no reason for agents of the people of the United States, whose money AIG plays with, to be so sheep-like.

Remember that this is a firm that is 79.9% owned by the United States government. It is therefore quite possible to abort this outrage by decisive exercise of public authority. Within existing law, there is more than one way to do it, but a direct solution is readily at hand: Firstly, the US trustees in charge of the firm must immediately instruct the corporate treasurer to make no payments of any bonuses. They also need to order him to issue stop payment orders on any checks that fly out the door at the last minute, as with Merrill Lynch. Then the trustees need to split off the derivatives unit from the rest of the firm and separately incorporate it. This step leaves AIG's other businesses free to operate as usual. If the recipients of the bonuses refuse to waive them, then the derivatives unit should at once be thrown into bankruptcy, terminating all obligations to pay them. Right now, press reports suggest that the firm's top management waited until the last minute to inform the government of what was happening. AIG CEO Edward Liddy, accordingly, should be asked to resign at once, for the sake of public confidence and to send a clear signal that gaming the system is unacceptable. It is also past time for an investigation of the validity of AIG's past accounting and securities disclosures and its executive compensation program by the Office of Thrift Supervision, the Securities and Exchange Commission, and the FBI.

This leaves open the question of how to deal with all other obligations of the derivatives unit, including the notorious credit default swaps. We, like most independent analysts, are mystified by the determination of the Federal Reserve and Treasury to keep paying these off at 100% of their face value. But that's an issue for tomorrow. Today the task is to stop a grotesque abuse before it is too late. The path we outline here would do it, without throwing markets into turmoil. Nothing less than public confidence in the United States government as a whole is now at stake. [emphasis added]

See the link (also at sig) for their credentials.

is-- apparently-- that the AIG crooks can afford more and better lawyers.

The only reason these jokers aren't charged with fraud is because Mr. Obama still doesn't have an executive branch up and running, and that which is running is running under Reaganomics rules. Under the circumstances, they should have their assets frozen, the rating of the company should go to D, and then chicken feathers and roofing tar should be brought to their mansions at night by the light of pitchforks and torches and appropriately applied to their persons. --ondelette

when I received word of it in my email.

I also just signed this one:

http://fixcnbc.com/join (also in sig)

which is a by-product of an open letter by a group of mostly progessive economists, and such who are "requesting" that CNBC get on the right track and hold their "base" (Wall Street, etc) accountable, instead of merely providing them with PR.

Glenn, I think you are a wedge splitting up the "bloc" that once was the indomitable M$M.

The "revised" reporting from today could imply that without your persistence, they would try to maintain the status quo.

We cannot ask for more than that from you... although we still have much greater expectations about how the press should report more pro-actively, rather than merely as a reaction to your posts. At least that's how it appears.

Scientician gets right to the heart of the matter...

Happy B'Earthday, Glenn... and Congratulations on another successful trip around the Sun.

I suppose, to be fair, that it should be a "sleeping" thing, since Pedinska's whole point was that she was not fully awake in the middle of the night.

Being even older than Pedinska, and female, too, I can understand her plight. Half-awake, one doesn't think to look first. Nor does one wish to wake up fully, since sleep is so precious, and it's difficult to fall back into it.

Frankly, I'm all for everyone sitting, since if a man's excuse for not replacing the seat is that he's also half-asleep, then I must wonder how he can manage to hit the target. ;~)

If I can't manage to convince my husband that the seat needs to stay down at night, Derbig's wife won't be the only known around these parts as efficient with a pistol.

The choice I make between the 38 and the one filled with water will depend largely on how cold and wet I am after I discover his perfidy.

-- Pedinska

...but what if every time you sat down and the seat wasn't there... you just threw a glass of water on him, no matter what he's doing? Awake or asleep, doesn't matter.