Moon of Alabama Brecht quote
March 16, 2009

A New 'Paulson Plan'

AIG is practically blackmailing the U.S. government to pay out undeserved bonuses and unnecessary retention money. This while still not saying who the $170 billion the taxpayer gave it has been going to. Yes, they revealed some numbers yesterday but those were a. already known and b. make up only some 60% of the total. Where is the rest?

The hapless or nefarious (you decide) bailout of the big banks and bondholders may finally start to create some movement against it.

What's really driving this forward -- and what makes it such a dangerous moment for the White House -- is the jarring image of the administration's impotence.

This will make it very difficult to get any new stimulus or bailout program through Congress even if it would makes sense and may be needed.

Luckily for the administration the public, while watching the AIG show, misses the real robbery.

Most of the money used for the general bailout is coming from the Federal Reserve and is not under control of Congress. The new version of the Term Asset-Backed Securities Loan Facility (TALF) will put another trillion Fed/taxpayer money at risk. The program will lend to banks and hedgefunds to buy up 'asset' backed papers (bundled consumer and loans, commercial real estate loans etc.). It allows for great profits for those bank entities with the Fed taking 90% of the risk (also here):

Through the program, an investment fund can put down $5 to $14 for every $100 it plans to spend, borrowing the remaining $95 to $86 cheaply from the Fed. It agrees to buy highly rated securities issued by lenders that the Fed deems eligible collateral for the loans.

The aim is said to be to create more consumer lending, but I see no signs that consumers are willing to borrow more. Saving rates are going up as people become more frugal.

I suspect the more likely but unspoken real aim of the program seems to move 'toxic' assets from the banks balance sheets by subsidizing the buyers of these assets with the default risk transfered to the  Fed. Consider:

Wall Street dealers, including J.P. Morgan Chase & Co. and Barclays PLC's Barclays Capital, have created vehicles to participate in the TALF that would allow investors in the program to circumvent many of the restrictions laid out by the Fed. The vehicles resemble collateralized debt obligations, or CDOs, and use some of the financial engineering that was partially responsible for the collapse of the credit markets.
Under the new proposal, a bank such as Barclays or J.P. Morgan would set up a trust to buy securities with money borrowed from the Fed. The trust would then sell investors securities in the trust. Those securities would give returns similar to the TALF loan, but without the strings attached. The dealers say they could create markets for these derivative securities to trade, and a presentation by Barclays says they may be rated by credit-ratings companies and listed on the Irish Stock Exchange, a home for many CDOs.

It is not yet clear to me how this would work but the instruments used here are the same that created the current mess in the first place - it is insane. Can anyone explain how this is actually to work?

I read it like this:

The asset backed papers bought for a likely too high price with the Fed money will be sliced and diced by 'vehicles' into CDO tranches with each tranche carrying a different default risks. But who will then buy the risky parts of those CDO's and take the first losses? My best guess is that the most risky CDO parts will stay as collateral for the Fed within those 'vehicles' while the less risky parts will be sold off. Eventually the 'vehicles' will default on the Fed loans and the Fed is left with worthless paper as collateral.

A complicate scheme which will give the investment banks lots of fees, allows overpayment for toxic assets and transfers the risk of the overpayment to the general public. What's not to like with that.

Last year the Paulson plan to heal the banks balance sheets was to buy up toxic assets for too high prices and later Geithner planed similar schemes. Both planed to use treasury money for this and the general scrutiny about these programs prevented their implementation. But now the Fed will be abused to implement this.

To be able to subsidize this the Fed will need to create more unsterilized money. The bill for the losses the Fed is sure to take on this scheme will later have to be payed by the taxpayers through massive inflation.

So while the public is now waking up to the sideshow of AIG bonuses, the big money continues to be moved out through the backdoor.

Posted by b on March 16, 2009 at 14:08 UTC | Permalink


Sorry b, but I can't think of anything but that I'm getting it in the keister from these jerks!

I don't care how they define it, it's thievery and in a big way. The freaking AIG bonuses? Because we might get sued? Fuck-'um, let 'um sue and the state can counter-sue that these were the very people responsible for this freaking car-wreck of an economy, and they should give back any thing they "earned."

Why do I feel Wall Street is playing a game only they can win? It seems the rules are always dictated by the big banks and the public is yanked along behind. Kind of like a cart being pulled by wild asses...

NPR did a piece on Sacramento's tent city, the public official interviewed said that it was gonna take, " tough love" to deal with the problem, either moving the people or just kicking them down the road. This might work so long as it's only 400 people, but if more tents continue to pop up, what will the officials do?

A few of the posted charts comparing past economic downturns are very telling, I'm sure most of you have looked at them, and they show the bottom is likely to be deeper than this. And if you looked at the link Uncle $cam posted on OT 9-08 last night regarding naked short selling... Fuck it, it's all a scheme to steal more money and these arrogant fucks think they need even less regulation...

I think it's time for a mob to descend upon Wall Street, grab all the bastards, and lock them in four-foot by four-foot cages along the street to be spit upon (from 9 a.m. to 6 p.m.) or to have rotten fruit thrown at them. Imagine the money to be made selling fruit and phlegm inducing drinks(like chocolate milk.)

Sorry, my animal brain is starting to do more of my thinking (or is that less of my thinking?) I'm sure the trout van's headliner and dashboard would like it if I stopped listening to NPR while I'm driving.

Hang in there y'all, this too in time will pass... Hopefully.

Posted by: David | Mar 16 2009 15:12 utc | 1

The thing i find most frustrating in opinion pieces like this one is the lack of attention paid to credit card interest. The Mayor of Denver talks about the relationship of the increase in gasoline cost to the foreclosure rate for lower income families. Should you throw in the typical interest rate on the credit card debt for this economic class you begin to see where the bullies are lurking in finance. bstr

Posted by: bstr | Mar 16 2009 15:42 utc | 2

B, I'm not sure that there's any longer any "practically" about the blackmail being practiced. The whole argument about "retention payments" being necessary because these financial shysters are the only guys who know how the system works, etc, is outrageous. The banks can just not make these 'retention' payments, and I'm sure any of the claimed 'contractual' issues involved in that could be handled.

What was the nature of those contracts, anyway? Why should I and my fellow US taxpayers pay these obscene sums?

Actually, the whole crew of these financial shysters think they're necessary because they're the only ones (as of now) who have a clear idea of where all the financial bodies (i.e. toxic assets) are really buried, as you note. But we taxpayers are now the major stakeholders so that can no longer be kept as 'proprietary' information that only the (former) Masters of the Universe are allowed to see and to understand. They should be forced to divulge all the info they have, under oath and under threat of serious consequences for perjury. Based on that info, the attorney general can decide whether to prosecute them for their past misdeeds-- yes, the direct opposite of performance 'bonuses'.

And based on that info, too, the Treasury and other branches of the USG can decide how to proceed forward, most likely through bank nationalization, the creation of new, clean banks, etc.

Posted by: Helena | Mar 16 2009 15:49 utc | 3

I am surprised at the apparent lack of citizen concern over this issue. Even the right wing bad writers club got together to "tea bag" each other, making public something they have been doing for years behind closed doors.

I can see former employees selling rotten fruit to be used against their former bosses :-) Great visual.

Posted by: Intelvet | Mar 16 2009 15:52 utc | 4

It seems that it is forgotten that we, the people of the USA, have an interest in the preservation of the system because our past work is incorporated in the prices of the stock market, bonds and US dollar. We don't want a destruction of the system because we are the system. We have to tolerate the shysters and banksters because that is the way the system works. The alternative, previously and egregiously practiced, is a Jacobin reaction with the guillotine and everything attendant, and let us remember that Robespierre and Saint Just and all the other virtuous politicians ended up with their heads chopped off. So there is nothing strange about our behavior, we don't want a greater mess, we don't want a depuration of the system that will bring with it another though new set of shysters and banksters and politicians and lobbies. There is such a thing as original sin. The consequences of it are for all to see.

Posted by: jlcg | Mar 16 2009 16:15 utc | 5

They are called "Robber Barons" for good reason. Having bought both political parties, there are no real American Progressives to oppose their pillaging.

They make their money by outsourcing jobs and taking the skim off the new financial derivatives sold to their Marks.

Since the Barons also own the media, news on the financial meltdown is a best an amalgam of denial and bizarre. Only slightly less weird than CNBC is the President stating Happy Days Are Here to citizens that have lost their homes and 50% of their pensions.

Posted by: VietnamVet | Mar 16 2009 16:49 utc | 6

meanwhile, TARP proves unpopular and ineffective:

Banks scramble to return bailout funds

Those that didn't first refuse TARP funds now feel tainted by having accepted them. They seek to give money back to Treasury to distance themselves from bad publicity and unwieldy rules.,0,3702302.story>LA Times

Posted by: Tangerine | Mar 16 2009 18:03 utc | 7


We the people are NOT the system. The wealth of the stockmarket is as much illusion as america's fiat dollars are; that we participate in this farce, doesn't make it any less of a farce and as I said we are not the system.

The big bankers, corporate greedheads and others of their ill ilk have for generations set the population up, only to take us down when they felt good and ready. Can anyone shed a tear for Warren Buffet's loss of paper wealth when he can still buy and sell most of us several times over?

I'm a reasonable person (well at least in my head I am) – I don't want to execute any of these bastards, but I would like to shame them, give them all a perp-walk, complete with spittle and fruit, then toss the buggers in the crowbar hotel for several years as a lesson to future assholes. Nobody needs to die, or should. Too easy...

What I don't understand is how much blatant malfeasance has taken place, both on Wall Street and in Congress, yet the outcry about the skullduggery (as opposed to the whining about losing wealth) is so soft as to be more of a mew.

The recent post regarding TV personalities pointing the finger at each other is an example of the current silliness. So our media should have done more to keep us aware. Right... So people are up in arms about what this corporate paper should have, or shouldn't have done; what that TV freak should have said or didn't say. Cripes we bicker about who should have told us while the creeps who actually have been grabbing all the money laugh and buy drinks at the club, safely insulated by their front-men and our infighting.

America has so much REAL wealth (resources, people, infrastructure) that I can't even understand why we've let these corporate creeps continue to sell-off our country to the highest foreign bidder without much more than a whimper during the past 25 years. Feces!

b-thanks for this post, you do a great job and it's nice to have a safe place to vent. Let me buy you beer.

Posted by: David | Mar 16 2009 18:05 utc | 8

The outrage of DC politicians about these bonuses is staged. Opportunities to restrain or forbid such bonuses were included in each of the several bailout bills Congress debated. They were promptly deleted on the excuse that irreplaceable people would promptly quit without their usual bonuses, costing the financial industry their most skilled people during a major crisis.

Besides, these bonuses amount to 3% or so of the bailout money. That leaves 97% that is NOT being discussed. It just goes out the door.

AIG is an irrigation barrel, feeding money right out of two dozen hoses at the bottom as soon as money is put in at the top. The hoses lead to banks and sovereign funds in China, Japan, Europe, Saudi Arabia and offshore banks in the Cayman Islands (which is where America's corporate giants put their tax-haven monies).

The Obama folks know all this, and have no choice but to go along with trying to fill the AIG barrel.

If America does not make good on the fraud that was perpetrated on these investors by Wall Street's merry pranksters during these eight years just passed, these investors will cease all future investing in America, and America will once again be a nation of small farmers, but quick.

Like all modern corporations, our government answers to its investors first.

That ain't you.

Posted by: Antifa | Mar 16 2009 18:19 utc | 9

Have to laugh, though. Societe Generale and Deutsche Bank are among the biggest beneficiaries of the AIG bailout.

Death to the empire!!


Posted by: slothrop | Mar 16 2009 18:23 utc | 10

yes - death to the empire & away with all parasites(away with all pests as the chinese used to say)

Posted by: remembereringgiap | Mar 16 2009 18:37 utc | 11

b, you have honed in on where the real looting is taking place - the Fed. The TALF and all the other alphabet soup of lending facilities as well as the Maiden Lane off-balance sheet special purpose vehicles is how the Fed is "sidestepping" the law and congressional oversight to load its books with the time-bomb of the real writeoffs. While the media is intentionally focused on the distractions such as the AIG bonuses the scale of the massive looting via the Fed is obfuscated.

Why do you think 60 Minutes did such a puff piece on Bernanke? No questions where asked about Bernanke's prognostications and his credibility. This is the guy who claimed "no recession" and that "subprime was contained". No questions where asked why the lack of transparency on the Fed's balance sheet. No questions were asked as the extent of the Fed's commitment to "restore the financial markets". This seems to be to convince the public that recovery is on the way and prepare them when it will become known despite all the obfuscations that the scale of the looting which will be in the tens of trillions that it was all done keep the economy afloat and to prevent an economic armageddon.

I remember writing to Josh Marshall at TPM some months ago that if he wanted the core of the scandal of the biggest heist in US history he should dig into the Fed's activities.

When the story is written of this period it will turn out that the Fed was the most instrumental player in the creation of the credit bubble and was used as the vehicle to loot the American people to an extent that was unimaginable.

Posted by: ab initio | Mar 16 2009 18:47 utc | 12

David @8 : you are the system you exist within a relation of values, you drink the water, breath the air, move along highways, live in a building built according to a code. You are the system. I also find the system disgusting but short of killing myself I have to live within it. Al this whining about how bad the system is without taking any measure, just writing about it is disgusting, thinking about someone else fixing it, not being responsible for it, always relying on another's effort, pure and simple intellectual colonialism.

Posted by: jlcg | Mar 16 2009 19:10 utc | 13

@Antifa #9

It's been apparent to me and I suspect others, that this was the plan all along, and Obama wont stop it. We're being hollowed out like a pumpkin, our seed spit into our face. In other words, I suspect this whole thing was engineered to hollow out America from the start.

And America will be left like the Coyote-Road Runner cartoons in that, it will be forced into momentary suspended animation, before the fall.

And if my hypothesis is true, I fail to see why they wouldn't already have plans at the ready for the fall out. If you get my drift.

Posted by: Uncle $cam | Mar 16 2009 19:46 utc | 14

If this comment sent into TPM is true then those fuckers at AIGFP really need some serious jail time.

Posted by: Sgt Dan | Mar 16 2009 20:50 utc | 15


yes, just complaining about it is tiring. accepting the situation is what? better? no one should ever raise their head and say "wait just a damn minute"?

I do not pretend to know the answer, I am not even sure of the question. what I find here are rather intelligent people with varied backgrounds attempting to dissect and document how things work.

It is possible for us to do something and many do. some work on campaigns, others write prose or paint, some sing or make music. all are ways to share some of the knowledge accumulated here and other places with those who are ignorant, incurious, or too busy to even think about these things.

we all do what we can, no one is the messiah...not even slothrop.

yes, we have to live within the system but to admit that you can not make it better is to give up and let the other greedheads have their way with you. I am not yet ready for that.

Posted by: dan of steele | Mar 16 2009 20:51 utc | 16

no. in the US this was done twenty years ago. Reagan. When they stopped investing in their people. when they stopped protecting their workers, their industries. when they started paying people with credit, cheap consumer goods and cheap petrol, which they did not produce themselves, not with wages. when they brainwashed people into thinking they were better off without a state, when they outsourced their industries for the cheap consumer goods, when they went to war for the cheap oil. when they thought capitalism did not have to be checked anymore, when they thought the lessons of the 1930's no longer applied, when they thought communism was dead.
in China this was done, when they made a deal not to spend the money they earned but to invest it into the US state. so that the US could go to war without raising taxes.
all those pieces of paper are nothing without consensus that there is some binding value.
now this house of cards has fallen down. and the rule still applies: when you need money to go to war and fail, you risk a revolution.
the US can go to isolationism and try to live off the land. or they have to pay up.
there are some people who remember the 1920's, the last one I heard said "I do not want to see another war"

Posted by: outsider | Mar 16 2009 20:56 utc | 17

@Tangerine @7 - meanwhile, TARP proves unpopular and ineffective: Banks scramble to return bailout funds

Sure - but ask when the banks want to repay - 3 to 5 years from now. If the want to be released from TARP restraints that is easy to do. Pay back the Treasury money you got now. Then you are released.

they do not want that - the only want to release the restrictions on their own pay.
@Antifa @9 - The Obama folks know all this, and have no choice but to go along with trying to fill the AIG barrel.

Bullshit - the Obama folks are the enablers here. They could choose a different path.
@ab inito - @12 - When the story is written of this period it will turn out that the Fed was the most instrumental player in the creation of the credit bubble and was used as the vehicle to loot the American people to an extent that was unimaginable.

At least you get it. Many even here seem to still not to see the real issue even though I spell it out in the above. The AIG bonus payment is a divergent. The real looting takes place elsewhere - i.e. the Fed.
@DoS - @16 - yes
@outsider - @17 - yep

Posted by: b | Mar 16 2009 21:51 utc | 18

Ok, so if I read this right, the Fed (us, the ppl) will act as CDSs for these toxic asset CDOs in that we will subsidize x amount of dollars on losses.

Beyond the most obvious points, the only upside is that we the ppl will reduce our exposure to these assets by a fraction: instead of 100% liability from unwinding every contract, some of the risk is being taken on by private parties. Granted, it's a very small exposure transfer but some nevertheless.

I could be wrong.

Posted by: vachon | Mar 16 2009 21:56 utc | 19

let's kick start a national campaign to dissolve the fed, so the govt can retake control of the country's money supply.

Posted by: Lizard | Mar 16 2009 22:50 utc | 20

Glenn Greenwald was the first person to cross my mind who's got the necessary expertise to thoroughly debunk Summer's bogus claim that these so-called contractual bonuses are too bulletproof for any legal team to shoot down.

Posted by: Cynthia | Mar 16 2009 23:17 utc | 21

Excerpt from Ron Paul’s 3/10/2009 interview with Alex Jones:

Alex Jones: Every few weeks they come before the banking committee and you bring up the fact that what they are doing is destroying us. What do we need to do to bring the private Federal Reserve under control?

Ron Paul: Well, there has to be an uprising by the people. There has to be enough people who will demand that their Congressmen respond, and that is building. You know, a year or two ago nobody in Washington even thought about the Federal Reserve. Today there is a lot more thinking going on and a lot more support for our position. So it is growing. And yet, we’re not on the verge of changing it. I have the bill to get rid of the Federal Reserve, that’s the major step and the ultimate step and they’ll probably self-destruct before we actually pass legislation.

But the bill that is more important in the short run is the auditing bill, the 1207 bill, because that means they have to start answering our questions. Today they are protected. They are in total secrecy and they are protected by the law. If 1207 is passed we have an audit and they have to answer the questions. And I figure if we ever get that far and get the exposure and get the transparency that we need, then people will wake up and realize, ‘why do we have them at all?’

Alex Jones: Senator Sanders grilled them, as you know, last week saying that he is supporting 1207 or a version in the Senate because, Bernanke, the private Fed chief just said, “I’m not going to tell you where the money, buddy.” I mean, that’s amazing to see our elected Congress, the most powerful branch of the government according to our founders, being told to kiss off.

Ron Paul: Right, and I know Sanders real well. He was on the banking committee with me before he went into the Senate, and I called him after that, and I believe he has now introduced my version of the transparency bill and I’ve introduced his version. So both bills exist. Mine is a little bit more conclusive, in that it removes the total authority for them to not answer questions. His is specifically designed to answer certain questions and reveal where certain trillion dollars went. They are very similar, but somewhat different in nature, so we both support each other’s bill and they’ve been introduced in both chambers.

Alex Jones: Well, public support for this and the majority of the Congress itself are saying they are angry, they don’t know where the money is and Bloomberg sued to find out and he’s been told No on their foyer. If this gets media attention I can see now way that Congress wouldn’t vote for a proper audit of the private Federal Reserve.

Ron Paul: They’re going to, if we can get it that far. It’s a good issue, like so many of our issues, we bring different many factions together, liberals and conservatives, under the constitution. Because, if you’re a good honest liberal like Bernie Sanders, he is an honest person but is very, very liberal. He calls himself a socialist, but he agrees on the transparency issue.

So this whole idea that we expose them to bring populists, libertarians, constitutionals, liberals, socialist all together and think, “If we can’t do this, what’s left of representative government? There’s nothing left.” So it’s a good unifier, I think it’s a great issue.

Posted by: Rick | Mar 16 2009 23:24 utc | 22

b, I draw your attention to a comment on Roubini's blog by London Banker - a former central banker and market regulator. His recent comment dovetails with what I have been writing to my elected representatives and media reporters and bloggers for many months ever since the Maiden Lane creation by the Fed to hide the Bear Stearns transaction. What the Fed is doing is creating phony structures to provide a seemingly "legal" facade to obscure their fraudulent activities which are being intentionally overlooked by Congress and the Administration.

Deja vu all over again. I wrote the following 15 months ago. It looks like this dead cat bounce is yet another set up, but I suspect the next listing of this wreck will flood steerage. The last lifeboats, well stocked with comforts for the few passengers invited, are quietly loosing themselves and rowing for safety.

If there is a difference now, it is that I no longer attribute to "cock up" what is transparently a "conspiracy". The looting of the Federal Reserve, the US Treasury and the assets held in custody for the investors in the rest of the world are too well organised and too well orchestrated to be anything else. Lehman Brothers, the Reichstag Fire that secured the Paulson Plan's $700 billion largesse and the unreviewable powers of the Federal Reserve, opened my eyes to what I would rather not see or believe.


The Fed - and the other central banks that went along with this scheme - have just made the most monumental cock up in central banking's brief history. They have launched one lifeboat too many, with the others (SuperSIV, No-HOPE) still bouncing around on the waves nearby as the ship lists and settles deeper. By throwing the life boats into the surf before telling the passengers the scale of the threat, they have ensured that most of the passengers stayed listening to the band too long. Now the passengers are confused, distrustful and doubtful that the brass is determined to save the ship rather than their own skins.

Luring in the shorts yesterday just to ramp the market today must have seemed real cute to Ben and Hank. They probably still giggle about how much fun they had watching the shorts get hammered on August 17th when they "surprised" the market (with the exception of a few close friends) with the 50bps discount cut. Playing that game again with the bait and switch of yesterday's 25bps cut and today's announcement of the liquidity auction (selectively leaked again) will convince anyone previously giving them benefit of the doubt that the game is rigged. The secret, anonymous nature of the auction proposal must further undermine any trust in fair outcomes.

I fear that today with this scheme they have damaged all credibility and all authority we might have vested in them. We will no longer queue patiently and listen for instructions because we no longer trust them to ensure we are all in the lifeboats in the order expected, women and children first. We can see first class passengers are getting a whisper here and a wink there and a guiding hand up to the boats with their jewelry boxes in hand. Pensioners, steerage and crew are being invited to wait in the lounge where the curtains are drawn, the drinks are free and the band keeps playing.

Monday will tell. Will we all sit placidly waiting to see if a secret auction to plug secret holes of secret magnitude at secret banks will right the ship? Or will we rush en masse for the few remaining places in the lifeboats?

I have a very bad feeling about this. It isn't how central bankers are supposed to behave.
Reply to this comment By London Banker on 2007-12-12 16:41:34

I still think negative real interest rates create unpleasant side effects of sustaining uneconomic business models that drain the future productivity and savings capacity of a country, continually impoverishing it over time to benefit the elite who created the imbalances and unprofitable businesses (financial engineering, real estate boom, etc).

That said, it doesn't really matter much what the central banks do because at base the problem is one of corruption in accounting standards, government expenditure on unprofitable military adventures, skewed taxation which has reduced taxes on corporations and the wealthy while massively increasing government revenues from the middle class and poor (from taxes and stealth taxes like fees, fines and excise duties), executive incentives which reward destroying jobs, and other excesses of the past 25 years of Anglo-Saxon corporatist thinking.

The monetary antics we are observing are worse than rearranging the deck chairs on the Titanic. They are refolding and relaying the lap blankets on the deckchairs for the comfort of first class, while the engine rooms and steerage compartments steadily immerse in the cold, dark waves of credit implosion and housing collapse/unemployment reality.

The central bankers are racing each other to see who can lay the most blankets, tucking them securely around the knees of their lard-assed bloated banks to keep them comfortable. Meanwhile the waters are inexorably rising, and the blankets will not provide lasting security when the decks flood.

Regulatory and fiscal measures are going to be needed before this disaster finishes playing out. The sooner politicians and regulators start focusing their attention below decks on the pumps, repairs and evacuations that could actually save the economic ship and many more of its passengers, the better for us all.

Monetary measures cannot fix a non-monetary problem. They can only delay adjustment. Monetary laxity will prove harmful if other, needed measures are not pursued because the banks, politicians and others assume the central banks have things under control so that they can carry on "business as usual".
Reply to this comment By London Banker on 2007-12-18 06:31:15

Posted by: ab initio | Mar 16 2009 23:26 utc | 23

Larry Summers is right in thinking it's an outrage that top managers of zombie banks are pocketing tens of billions of bailout dollars in the form of bonuses. But he couldn't be more wrong in saying that Washington has no other choice but to let these corporate welfare queens scarf down these bonuses like pigs at a trough, simply because these bonuses are wrapped in such airtight contracts that it'll be next to impossible to make them null and void. Sorry, but I don't buy this argument for a moment. The moment that these troubled banks were put on Federal Life Support was the very same moment that all of these so-called contractual bonuses lost their legal standing in the eyes of the law.

Granted I'm no legal eagle by any stretch, but reason alone tells me that the vast majority of courts across America will have no trouble determining that these contracts are no longer legally valid, thus making these bonuses null and void. It's simply hard for me to believe that these bonuses have any kind of legal leg to stand on. So for Summers to try to convince us otherwise indicates that he's not standing up for the American taxpayers. Instead, he is standing up for a few crooked bankers who stand to gain big from these monstrous bailouts to the detriment of the many and the economy as a whole.

And right-wingers of the Church of Limbaugh couldn't be more wrong in thinking the Obama Administration is chock-full of peace-loving socialists who would rather use diplomacy than bombs to settle disputes around the world and who would rather see America as a nation with a strong and vibrant middle class than a nation full of only haves and have-nots. No one needs to look any further than the likes of Richard Holbrooke and Dennis Ross and the likes of Tim Geithner and Peter Orszag to know that Obama is palling around with some of the most hardened neocons and neolibs America has to offer.

So if Obama's neocons don't drown America in a bloodbath of wars, then his neolibs will sell Her down the river at the port of Banana-Republic-Land. And so there's no reason in the world for anyone to worry about Obama making America a more socialistic and democratic sort of nation. If anything, Obama will hand over America to military and financial elites, giving them the freedom to turn our largely economic and social democracy into a financial oligarchy propped up by fascism.

Posted by: Cynthia | Mar 16 2009 23:38 utc | 24

Alex Jones & Ron Paul. Alone again....naturally.

Posted by: slothrop | Mar 16 2009 23:47 utc | 25

Slothrop: Alex Jones & Ron Paul. Alone again....naturally.

You are wrong, they are not alone.

Posted by: Rick | Mar 17 2009 0:00 utc | 26

Fucking conspiracy charlatans.

Paul's politics are grotesquely rightwing, lockean state of nature fantasies. It's hardly surprising he appeals to 20 and 30 something pampered bourgeois males.

Alex Jones is an carnival barker.

Posted by: slothrop | Mar 17 2009 0:14 utc | 27

sloth: while ron paul and alex jones are certainly problematic sources, your crude response highlights the difficulty of talking about the federal reserve sans conspiracy. rick is right, the wingnut and the barker not alone, and their appeal when they talk about issues like the fed resonate with more than just 20 and 30 something pampered bourgeois males

so, two questions: 1) how do you talk about the failure of a private, centralized banking system run haywire without getting mired in the murky waters of conspiracy theory? and 2) is the kind of legislation Paul and Sanders support a feasible move against a very entrenched institution?

Posted by: Lizard | Mar 17 2009 2:15 utc | 28

The fed needs to be audited, sure. But not for the reasons Paul gives. Paul's version of capitalism is victorian. Satanic mills and 9 year old coal miners.

Posted by: slothrop | Mar 17 2009 2:26 utc | 29

So if Obama's neocons don't drown America in a bloodbath of wars, then his neolibs will sell Her down the river at the port of Banana-Republic-Land. And so there's no reason in the world for anyone to worry about Obama making America a more socialistic and democratic sort of nation. If anything, Obama will hand over America to military and financial elites, giving them the freedom to turn our largely economic and social democracy into a financial oligarchy propped up by fascism.

Ding, ding, ding! We have a winner!

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin (1802)
3rd president of US (1743 - 1826)

Posted by: Uncle $cam | Mar 17 2009 3:26 utc | 30

Helena 3)

In my state the budget deficit is in excess of $8,000M.

The Governor and Legislature have proposed a new budget
that balances by converting roads to toll roads, failing
to build any new capital construction except one big $4.3B
Obama Plan porkbarrel for the elite real estate owners, oh,
and basically dumping all the poor and insane on the street.

No state layoffs, no reduction in salaries and the state
pension retirement funds still are paying at 10% interest.

Now you can say 45 hedge fund analysts at AIG don't deserve
$145M in their contract bonuses, but what about 45,000 State
workers pluckily showing up for 'work' every day, even though
there is zero capital program, and massive client downsizing,
and 'wearily' plodding to the bank with their paychecks that
earn 10% on layaway for ***life-long retirement pensions***?

The banks are a diversion! The States and Fed bureaucracy is
sucking down $4,000B every year from your taxes. Every year!
The average administrative overhead and profit exceeds 90%!!
Even the worst run charities don't have a 90% burn rate, and
the financial companies actually achieve a -8% burn rate in
most years, you bunch of ingrate morons!

It's the $4,000B every year crooks in government!!!!!!!!!!!

Posted by: | Mar 17 2009 3:31 utc | 31

The hedge funds are sore because Joe Average had the chance to make a one way leveraged bet (on houses) and just walk away if it went sour. They merely want the same opportunity with a half-dozen more zeros behind it.

Posted by: PeeDee | Mar 17 2009 4:07 utc | 32

Slothrop, Paul's version of capitalism is victorian. Satanic mills and 9 year old coal miners.

Gee whiz, and to think I thought all of the “little Eichmann's” died in the Twin Towers.

The point of my post was not to highlight Ron Paul or Alex Jones. The point of the post was to highlight HR 1207 – Audit The Federal Reserve and also to highlight the fact that it is important that people of different political persuasions focus on ideas and not ideologies, people or personalities. The controlling elite will not be defeated with division.

I visit MOA for good ideas/knowledge from those on the political Left, those near the center, and those on the political Right. I am registered to vote as an Independent and have voted mainly for 3rd Party political candidates for as long as I can remember. In this instance, I happen to like Ron Paul's views on the economy and the “Fed”. In no way does Ron Paul support Satanic mills and 9 year old coal miners. Unfortunately, too many on the Left (and some here at MOA) automatically assume that someone on the “Right” (a member of the Republican Party for example) is their enemy, just as too many on the Right automatically assume that a person on the Left (or a member of the Democratic Party for example) is their enemy. Slothrop, do your snide remarks mean you are against HR 1207 because Ron Paul introduced it? Have you even read any part of HR 1207? It is easy to play like Ward Churchill and call anybody or everybody working in or near the U.S. financial system or government “a little Eichmann”. For an example where such tiny thinking leads - I was almost expecting that you or someone on the loony Left would personally attack b with a similar slur after his recent thread progressed on Power Grid Monitoring highlighting the possibility for abuse with this technology and other advanced technologies. Yeah, b is working for “big brother”.

Slothrup, if your closed mind represents what is “Left”, then I am glad that I am not of the Left. You, like Ward Churchill, probably do harm for whatever your cause with every word you write.

Regarding Uncle $cam's #30 post about Thomas Jefferson letter of 1802 – hey, maybe that old time “victorian” capitalism that Slothrop is complaining about is better than what we have. Anyways, I agree with Uncle, Thomas Jefferson's letter on banking looks like a winner today!

Posted by: Rick | Mar 17 2009 5:16 utc | 33

Rick: i appreciated the Paul/Jones exchange--that legislation should be a goddamn rallying cry/focal point of our discontent.

i hope soon, domestically of course, that elements from both sides of the U.S. political spectrum will start getting together. i've got a few republican friends and we see eye to eye on plenty of stuff, but that's because we aren't blabbing ideologues. personally, i'd like to see folks from both sides abandon their camps and pitch a new tent. if the past 50 odd days haven't exposed a sickening degree of continuity between administrations, totally discrediting both parties rhetorical stances, i don't know what it's going to take. probably panic when they collapse the tent on our stupid heads.

Posted by: Lizard | Mar 17 2009 5:52 utc | 34

Ian Welsh: Another Giveaway? The Sad Truth about the Geithner TALF Plan quotes SEIU: Statement of SEIU Secretary-Treasurer Anna Burger on Secretary Geithner's latest TALF proposal

Washington, DC --Treasury Secretary Geithner's plan to invite private equity and hedge fund investors to a fire sale of bank assets is a return to the very same policies and practices that triggered the financial crisis in the first place.
Each of these programs could cost taxpayers up to $1 trillion. If the private firms make a profit from the deal, they keep all of it. If they end up losing money, they are only on the hook for the nickel or two of equity they put in. The taxpayers would then assume the rest of the losses. Even worse, subsidizing the purchase up to 19-to-1 will drive up the price of the assets, which would be yet another gift to the same banks that caused this crisis while at the same time putting taxpayers at a much greater risk of bearing huge losses.
Some start to get it - this is the real racket with the loot in the trillions not mere billions or millions like in the AIG payments.

Posted by: b | Mar 17 2009 6:40 utc | 35

Much to my dismay, Peter Orszag, like Tim Geithner, is a neolib through and through. Case in point: Peter Orszag was not only an advisor to the Russian Financial Ministry at the dawn of the Russian Oligarchs who became instant billionaires, but he also was an advisor to the Central Bank of Iceland just before Iceland went bankrupt under a mountain of debt. So it's bad enough having Tim Geithner, a Rubin protege, oversee the near-endless slew of bank bailouts, but having Peter Orszag, another Rubin protege, oversee the stimulus packages makes it even worse.

Don't know what anyone else thinks about this, but I find it screwy beyond belief, bordering on Bizarro World, that the very people who got us in this financial mess are the very same person who are in charge of getting us out of it. And talk about getting screwed from both ends! First Bush's neocons screwed our national security, and now Obama's neolibs are screwing up our economy.

Posted by: Cynthia | Mar 17 2009 7:47 utc | 36

Over at WRH, someone posted a link to a piece comparing AIG's bonuses to the Goldman Sach bonus package and I think there should be more righteous indignation about the billions spent at GS in bonuses then the multi-million dollar AIG scam.

Give back the bonuses

Think of it this way: If half the employees of AIG (not technically a Wall Street broker, but a mega-insurance company that played fast and loose in the Wall Street arena) had lost their jobs in, say, January 2007, there is a high probability that AIG would have lost less money in 2008 than it did, and at least a reasonable chance that the government would not now own 79.9 percent of the firm. A very high proportion of Wall Street revenues go back to employees in the form of pay; get rid of some of your "talent," and you might well reduce your losses and dependence on the government dole.

If that kind of live-by-the-market discipline seems harsh, well, it's precisely the way that Wall Street for decades has demanded that public companies—and even governments—conduct themselves. Indeed, some investment firms have recognized that they have no business paying traditional Wall Street bonuses this year. UBS, after accepting nearly $60 billion in aid from the Swiss government, has announced that its bonuses will be 80 percent lower this year than last. Back in November, the top executives at Goldman Sachs also announced that they would receive no bonuses for 2008.

How much did Goldman pay in bonuses? Hard to tell but this gives is the lowest number I found... US$2.6 billion

WALL Street bank Goldman Sachs is paying out US$2.6 billion ($3.8 billion) in bonuses.

Earlier this year it was forced to accept an almost US$10 billion lifeline from the US government after falling prey to the economic crisis, reported the Daily Mail.

It also posted its first loss since going public nine years ago.

The payout, worth around US$82,000 per employee, was confirmed as the Wall Street bank blamed 'extraordinarily difficult operating conditions' for a fourth-quarter loss of US$2.12 billion.

It still achieved a US$2.32 billion profit for the full year to November.

This was sharply lower than last year's $11.6 billion, reported the Guardian.

The firm defended the practice of paying out such bonuses, arguing it helped the bank to 'attract and motivate' the best people.

But not all the Goldman executive class will be taking home the big bucks, at least not this year:

in the last several years, Goldman Sachs has posted some of the biggest profits and paid out some of the biggest bonuses in Wall Street history. The company’s chief executive, Lloyd C. Blankfein, received a salary and bonus package last year worth $68.5 million. Goldman Sachs paid its two co-presidents, Gary D. Cohn and Jon Winkelried, around $67.5 million each last year, more than most chief executives. All three will receive no bonuses this year.

Others forgoing bonuses at Goldman Sachs will include the chief financial officer, David A. Viniar, and the vice chairmen, J. Michael Evans, Michael S. Sherwood and John S. Weinberg.

All seven executives told the bank’s compensation committee on Sunday that they did not want to receive bonuses this year. The committee accepted their request, said Lucas van Praag, a Goldman Sachs spokesman.

“They believe it’s the right thing to do,” Mr. van Praag said. “We can’t ignore the fact that we are part of an industry that’s associated with ongoing economic distress.”

What do you think?

Posted by: David | Mar 17 2009 9:44 utc | 37

Yeah. I would say if you're a Ron Paul supporter, and find golden nuggets in the paranoiac ramblings of Alex Jones, you are as far away from the left as you can get.

Posted by: slothrop | Mar 17 2009 13:53 utc | 38

Alex Jones is an carnival barker.

hahaha... that is true, but having said that, after watching his new film, The Obama Deception some times it's only the jesters and the clowns who somehow get away with telling things that the power elite would rather you not hear.

To reiterate, yes, AJ is a fool, but like others such as Wayne Madsen, etc, there is signal in the noise, if looked at with a critical mind.

"There is a principle which is a bar against all information, which is proof against all arguments and which can not fail to keep a man in everlasting ignorance-that principle is contempt prior to investigation."
--Herbert Spencer

Posted by: Uncle $cam | Mar 17 2009 14:26 utc | 39

Yeah I am a Ron Paul supporter and did buy some gold nuggets awhile back. Made some money with that purchase. Now I think recently Jim Rogers has good advice - agriculture.

Posted by: Rick | Mar 17 2009 16:45 utc | 40

An extremely over built, overpriced housing market coupled with the fact that many home owners are living on the edge on top of a mountain of debt should cause alarm bells to go off in the heads of investors, warning them that mortgage-backed securities (MBS's) are a highly risky form of investment. So it puzzles me how those in the MBS industry got away with marketing and selling these securities as an investment tool with low risk. On second thought, though, they probably knew that MBS's were at substantial risk of default; otherwise, they wouldn't have teamed up with AIG to insure these securities against default. It goes without saying that if something is peddled as being very low risk, it can manage without insurance.

Nonetheless, having MBS's insured by AIG had the effect of making them an extraordinarily popular form of investment. After all, it's every investor's dream to be able to gamble without the burden of risk. So as MBS's grew and grew, outstripping all other forms of investment, I'm sure that many in the financial world knew damn well that if MBS's were ever to go to zero, causing AIG to go to zero, Uncle Sam would step in to bail out AIG, who in turn would bail out its counterparties, who invested in so-called "insured" MBS's. Bottom line: being part of something that's too-big-to-fail is a dream come true for AIG and especially its counterparties, but it's a living nightmare for the rest of us.

Posted by: Cynthia | Mar 17 2009 19:53 utc | 41

@Cynthia - Bottom line: being part of something that's too-big-to-fail is a dream come true for AIG and especially its counterparties, but it's a living nightmare for the rest of us.


And that's the reason why AIG should go bankrupt right now. It would clear up the minds of those who believe they can bet on "To big to fail". The current handling of AIG is planting the moral hazard that will induce the next crisis.

Posted by: b | Mar 17 2009 21:37 utc | 42

Today, Glenn Greenwald points out that the Obama administration (WH, Treasury?) has decided to blame Sen. Chris Dodd for something they administration very clearly did, namely permitting the big bonuses to continue.

What actually happened is the opposite. It was Dodd who did everything possible -- including writing and advocating for an amendment -- which would have applied the limitations on executive compensation to all bailout-receiving firms, including AIG, and applied it to all future bonus payments without regard to when those payments were promised. But it was Tim Geithner and Larry Summers who openly criticized Dodd's proposal at the time and insisted that those limitations should apply only to future compensation contracts, not ones that already existed. The exemption for already existing compensation agreements -- the exact provision that is now protecting the AIG bonus payments -- was inserted at the White House's insistence and over Dodd's objections. But now that a political scandal has erupted over these payments, the White House is trying to deflect blame from itself and heap it all on Chris Dodd by claiming that it was Dodd who was responsible for that exemption.

Jane's post documents this sequence of events without any possibility for doubt. The debate that took place over limits on executive compensation for bailout-receiving companies only occurred six weeks ago, and it is all documented in the public press. Dodd was the one fighting against the White House in order to apply the prohibition to all bonus payments, i.e., to make the compensation limits retroactive as well as prospective. As but one crystal-clear example that proves this, here is a February 14 article from the Wall St. Journal on the debate over executive compensation limits:

"The most stringent pay restriction bars any company receiving funds from paying top earners bonuses equal to more than one-third of their total annual compensation. That could severely crimp pay packages at big banks, where top officials commonly get relatively modest salaries but often huge bonuses.

As word spread Friday about the new and retroactive limit -- inserted by Democratic Sen. Christopher Dodd of Connecticut -- so did consternation on Wall Street and in the Obama administration, which opposed it."

Can that be any clearer? It was Obama officials, not Dodd, who demanded that already-vested bonus payments be exempted. And it was Dodd, not Obama officials, who wanted the prohibition applied to all compensation agreements, past and future. The provision which shielded already-promised bonus payments from the executive compensation limits ended up being inserted at the insistence of Geithner. A spokesperson for Dodd, who is now consumed by these completely unfair attacks, finally confirmed today that these provisions were inserted at the direction of Treasury officials:

"Senator Dodd’s original executive compensation amendment adopted by the Senate did not include an exemption for existing contracts that provided for these types of bonuses. Because of negotiations with the Treasury Department and the bill Conferees, several modifications were made, including adding the exemption, to ensure that some bonus restrictions would be included in the final stimulus bill."

This is so blatant, so obviously knowable. This is stupid lying. What is wrong with these people?? I'm almost embarrassed for them, except I'm so furious with them.

Posted by: jawbone | Mar 18 2009 3:00 utc | 43

Rick 40)

Iceland Revisited

And speaking of agriculture ... forget about it, unless you want to be clever:

Funny CBC news report tonight about a beautiful but decrepit 83-acre farm in Burnaby, BC, being renovated by two yuppies for $1M into an organic farm. Sigh, how lovely! This organic farm would be used to provide assistance and a 'safe place' for street people and drug addicts looking for a new life as hoe-daddys. Oh, good show! Then the announcer kind of smirked, and closed with the statement that, since the farm was not zoned multi-family, the drug addicts and homeless would be rounded up and trucked in during the day to work the fields, then dumped back on the streets at night.

The plug of tobacco in my mouth fell on the floor, and I stepped on the cat's tail throwing my boot at the TV. Turning the homeless into day labor farm workers using grants meant for human services and charitable business development, to buils a private estate means war of elites against poor has turned a subtle new page.

Slavery recast as salvation, and thank you very much for your donation... Next!

Posted by: Chichi Rarah | Mar 20 2009 4:09 utc | 44

Thanks you for the time spent on this article, I enjoyed the read. Keep up the good work. Bat Control

Posted by: Robert Shaw | Apr 23 2009 0:25 utc | 45

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