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Workers Party Protest Draws More Press Than People – Update: It’s a tie!

Update 2: Welcome Michelle Malkin readers. As you already know she is invaluable to all of us … especially those of us in talk radio. In face the face of constant assault, she remains strong. While you are here take a look around. We are heavy on video, as we try to carry the conservatarian torch in a very blue New England sea.

Connecticut’s Working Families (ACORN, labor unions, etc.) tour of the homes of AIG executives in Fairfield county flopped harder than a Wall Street “dead cat bounce.” This from this morning’s Hartford Courant:

As it turned out, the tour consisted of brief, uneventful visits to just two homes — Poling’s and that of James Haas, another AIG employee who had already pledged to forfeit his bonus.

A third bonus recipient’s home, belonging to Jonathan Liebergall in New Canaan, was dropped from the itinerary mid-tour because the bus was running behind schedule. Liebergall, too, has said he will return the bonus.

But the best part was the turnout … by the media. Because you cannot make this stuff up. Let’s see if you can figure out who the media sympathizes with.

From “Nice Deb” … and so typical of the now dying media. And they still cannot figure out why they are going out of business …

aig-protest-smaller

Here’s what the AP reports (Emphasis mine):

A busload of activists representing working- and middle-class families paid visits Saturday to the lavish homes of American International Group executives to protest the tens of millions of dollars in bonuses awarded by the struggling insurance company after it received a massive federal bailout.

About 40 protesters sought to urge AIG executives who received a portion of the $165 million in bonuses to do more to help families.

As “Nice Deb” asks …

While the tea parties, (which are popping up all over the country, drawing hundreds and even thousands of people every week), are attracting scarce attention from the media, a motley troupe of 40 ACORN malcontents that go by the name of the Connecticut Working Families Party attracted dozens of reporters from around the world

Meanwhile Connecticut’s Tea Party drew more than 300 in Ridgefield.

rtp-03-21-2009-16-js-150x150 rtp-03-21-2009-02-js-150x150rtp-03-21-2009-19-js-150x150

Temple Of Mut has taken a look at some of the people in Connecticut Working Families …

Thanks so much to Linda for pointing this out to me this morning.

Update: Oops … it’s a tie. This from the Hartford Courant this morning, paragraph 4:

“Now that we have had a chance to see your community,” Jackson read before an international throng of about 40 journalists, “we would like to invite you to visit ours.”

Now this … all the way down in paragraph 14 …. paragraph 14!

Roughly 40 activists boarded the bus in Hartford, joined it in Bridgeport or followed it in other cars, according to organizers.

Oh brother!

Update: (Steve) Thanks for the link Michelle!

Shocked … Shocked I Tell You

Last night President Obama told the world he was shocked … actually “stunned” … that AIG execs got bonuses. Here’s how CNN reports the story tonight. Read more

Wall Street Witch Hunts

Democrats in Congress usually have a “thing” for privacy rights.  Listening in on international phone-calls were one end of the conversation is a known or suspected terrorist?  That’s bad.  However, not all such intrusions are equal.

McCarthy-esque intrusion into the lives of folks working on Wall Street?  Wielding  the tax code as a weapon against employees who allowed the offer of retention bonuses to convince them to remain in AIG’s employ that they might carry the government’s water?  How about a fishing expedition into the remuneration of Merrill Lynch employees by Andrew Cuomo?  That, it would appear, is hunky-dory to the high mavens of privacy rights and civil liberties, death threats and hate-speech concerns notwithstanding.

Update (Jim): I would say its unusual when Dave and Chris Matthews actually agree on something.

httpv://www.youtube.com/watch?v=qWvo0pRJGFg

Banana In The Tailpipe

I read this story about the protest in front of AIG. Here is a link. As I view the images of the people in the street and the employees looking down at the crowd I am overcome with a feeling of sadness. I am struck with the notion that we have all been duped. We have all fallen for the “banana in the tailpipe.”

As a nation we have collectively experienced something called inattentional blindness. Inattentional blindness is the concept that you are not able to see what is actually there. You are so focused on one thing that you fail to see what is going on around you. Here is an example.

httpv://www.youtube.com/watch?v=Ahg6qcgoay4

Everyone has been manipulated to focus your attention on these bonuses and to vilify the people that are accepting these bonuses. Put away your anger for a second and look what is happening to our country.

  1. We are creating class warfare: Look at the picture of the AIG employees staring down at the protesters in the street. The angry mob has arrived. Most of Congress and the President are feigning outrage over these bonuses, fueling this firestorm of anger directed toward employees of a “private company.”  From “tax the rich”, to “greedy Wall Street” this is just the latest in a series of attacks on the evil, wealthy, producers.  
  2. Punitive Taxation: As Dave and Jim note a bill has been passed in the House that would tax bonuses paid to AIG as well as a host of other banking executives, at a rate of 90 to 100 percent.  The government is selecting a tiny sub-set of our population and deciding to impose an exorbitant tax on them. Surely, the constitutionality of this is at least in question, but, think about what our founding fathers might say about this. Ironically, it’s likely that some of the same protesters in front of AIG today are people that support the growing list of grass roots tea parties. And yet the Boston Tea Party was a protest of the punitive tax and tariffs that the British Crown had placed on tea. It was a protest against government taxation, not an angry mob seeking revenge against its fellow citizens. And consider this: what if Congress decides at some point to tax all persons that drive foreign cars at 90%? Don’t laugh. If the car companies are nationalized (not entirely unlikely), it could very well be next move by an overreaching government and would be equally insane.

How many more wrongs will it take Congress to make this right? If Washington never bailed out AIG we would not be talking about bonuses, and we would not be talking about the money that AIG has contractually paid to foreign banks. Instead they bail out AIG and three bad laws later we are looking at imposing a 100% tax on less than 200 people.

Stop directing your attention at these executives. It is useless. Start directing your attention toward the politicians that HAVE CREATED ALL OF THIS. Stop marching in front of AIG and Goldman, start marching in Washington. Start marching in front of the office of your representatives.

AIG weekly recap – history, bonuses, Congress and outrage

I certainly hope that this will not turn into a weekly feature, but the amount of news, sound bites, and heated rhetoric pouring in from every direction resulted in Jim and myself electing to take a knee for the past 48 hours when it comes to posting AIG articles.

That said, we’re slowly putting our toes back into the water and I’ve put together a recap for you to absorb this weekend. That way, you can get all fired up about it again on Monday morning.

History
AIG Financial Products (AIGFP) is a small division of AIG born in the late 1980s. The idea was to use AIGs strong credit rating and get involved with derivative trading – usually the purview of financial institutions – and make profits that would be split between AIG-proper and AIGFP. Even though derivative trades normally took years to pay out, AIGFP received profits up-front, with AIG holding most of the risk.

In the late 1990s, AIGFP got involved with credit default swaps (CDSs) by insuring the corporate debt of financial institutions like JP Morgan. AIGFP was hedging, treating the CDS business as they do other insurance lines of business. They bet that very few customers – like JP Morgan – would default on their corporate debt.

After AIGFP got rolling, the Republican Congress enacted, and President Clinton signed, the Commodity Futures Modernization Act into law in 2000, attached t0 – get this – another one of those huge omnibus budget bills that nobody seems to read. Not designed to weaken regulation, the act made the system more complex and opened doors to other ways of trading derivatives like credit default swaps.1

Many of the credit default swaps AIGFP made deals on included collateralized debt obligations (CDOs) with a high percentage of sub-prime mortgages. Yes, those sub-prime mortgages.

In March of 2005, AIGFP employee count had grown to about 400, and the New York attorney general was investigating AIG-proper’s accounting practices. Hank Greenberg, who ran AIG since the late 1960s was out, and the credit rating of the corporate giant was downgraded.

With their credit rating lower, and lots of the CDOs tied up in sub-prime mortgages, AIGFP was about to get squeezed – really hard – from both sides.

In late 2005, AIGFP pretty much got out of the CDS business due to the risk, but they could not undo the billions of CDOs already on the books.

With their credit rating lowered and the mortgage crisis hitting hard in late 2007, AIGFP was getting phone calls from investment firms like Goldman Sachs demanding billions to cover losses from mortgage-backed securities the AIG CDSs had insured.

The dominoes started to fall, AIGs credit rating declined, more phone calls came. Even when the writing was on the wall, AIGFP CEO Joseph Cassano and AIG CEO Martin Sullivan put on a consolidated front – the investments were solid.

AIG continued to loose billions. Cassano was gone by April 2008 and Sullivan by late June. A new CEO – Robert Willumstad formerly CEO at Allstate – was hired in June, but was gone by September and replaced by Edward Liddy when the government injected $85 billion in cash – with billions more to follow – to help save AIG while taking 80 percent ownership of the company.

passicco-aig1It’s important to note that Liddy was called out of retirement by the new owners – the federal government – to guide AIG out of the mess it was in. His salary is one dollar per year.

In October, Gerry Pasciucco was brought in to lead AIGFP and try to figure out the tangled mess of derivatives with the remaining employees. I include his photo (right) just so readers can wonder about the Che T-shirt.

Retention bonuses
In early December, members of Congress knew about AIGs retention bonus program that seems to have been effective on Sept. 22, just after Liddy came in as CEO. The SEC knew about the retention bonus program by late September, within days – if not just before – the first $85 billion bailout.

The following is from a letter (PDF, 2KB) written on Dec. 1 from Rep. Elijah Cummings (D-Md.), the full PDF is courtesy Salon.com and an article by Glenn Greenwald on March 19. It indicates that the day after Liddy came to AIG, the retention bonus program was put into place.

There is no way Liddy put this program into place in eight business hours, it was planned by former CEO Sullivan or Willumstad.

cummings-liddy-1Why pay retention bonuses and who are the employees getting them? There is much confusion about who is getting the retention bonus cash, but my speculation is employees who were managing AIGFP into the crisis are gone, and employees who were brought in to extract AIG from almost $2.7 trillion in exposure were asked to stay and offered retention bonuses.

From Hinderaker at Power Line, with my emphasis…

  • All of these payments, as to AIG’s troubled financial products division, are retention bonuses, not performance bonuses.
  • The money is not going to anyone responsible for the implosion of AIG–those people, who were in the credit default swap area, are gone.
  • These retention bonuses were promised to AIG employees who are responsible for winding down the company’s financial products division. At the beginning, this division had a potential exposure of $2.7 trillion. Winding down AIG’s book of business in this area was a dead-end job, and there was a great likelihood that the people responsible for the work, who knew the most about the products involved, would take jobs elsewhere.
  • In late 2007 or early 2008, AIG made a deal with these employees: if they would stay at AIG until specified conditions were met, i.e., either certain business was wound down or a given period of time had elapsed, they would receive a specified retention bonus.
  • As to all of the employees involved, they satisfied the terms of the bonus by wrapping up a portfolio for which they were responsible and/or staying on the job until now. As a result of the efforts of this group, AIG’s financial products exposure is down from $2.7 trillion to $1.6 trillion.

If you were one of the 400 employees in a dead-end job trying to untangle a $2.7 trillion dollar problem would you stick around? Those employees – with knowledge – could possibly take off without the retention bonus program. My interpretation was if they stayed for specified periods of time they would get a certain retention bonus. The longer they stayed, the greater the bonus. Yes, some may have stay only for a certain period of time, but they stayed long enough – per contract – to get a retention bonus that was paid last week.

Now, if you were still at AIG and trying to work out the remaining $1.6 trillion problem, would you stick around as AIG corporate security advises you how to protect yourself? Maybe you’d feel OK about a United States senator suggesting you commit suicide? Screw the $1.6 trillion, I might walk.

But Edward Liddy isn’t walking. During the theatrical presentation on the Hill the past couple of days, Liddy was crucified by some members of Congress who refuse to acknowledge that Liddy was brought in to clean up the mess after the fact. Liddy is a man who knew what was coming, walked in and took it like a professional. I’m not sure if he will succeed in leading AIG out of this mess, but for darn sure he knows that Congress doesn’t care one whit about him.

What happens to that $1.6 trillion if – let’s say – half of the employees quit? Just wondering…

The theatrics of outrage
Outrage this week comes from every American and politician froma coast to coast, but Senator Chris Dodd (D-Conn. & Iowa) is getting the brunt of it. I actually feel bad for the guy since he’s so disliked everywhere. But I want Connecticut to have a glimmering shade of red in the future so I want him gone from office too.

Wyndeward recently commented…

Chris Dodd would appear to be being cast in the Lou Costello role — the hapless peanut-vendor who just doesn’t seem to “get” it, while Barack Obama, among others, takes the Bud Abbot role — the slick, smooth-talking manager who leads his hapless counter-part around the infield legislation, manipulating the senior senator from Connecticut to their own ends.

First Dodd said he knew nothing about the clause that protected the retention bonus program – big mistake – then he said he knew about it but it was not his idea and did not know why it was there. Then he said it was the Executive Branch and we finally learn that it was Treasury Secretary Timothy Geitner who demanded the change.

Now Dodd has suggested – and Congress is already working on – a bill to selectively tax the AIG employees who received retention bonuses.

The big picture
Goodness, we’re talking about $165 million in bonuses paid out to employees and AIG has gotten $170 billion from the federal government since September. We’re talking about less than one-tenth of one percent here for the retention bonuses. This group of employees seem to have successfully negotiated AIG out of $1.1 trillion in exposure in the past seven or eight months.

Is this a Congressional diversion to take the eye of the people – and the media – off the real problem?

When we started bailout-palooza we went in for a few billion, and we’re now in for a few trillion.

Resources

1700-plus words… I don’t think I spelled anything wrong…

Appendix

1 The act would again permit single stock futures contracts, allowing investors to treat stocks like commodities and resolving the disputes between the Commodities Futures Trading Commission (CFTC) and the Securities Exchange Commission (SEC) as to which regulating body would regulate the market.

As a side note, the act included language excluding energy commodity trading from regulation by the CFTC or the SEC. This allowed Enron to launch EnronOnline, their Web based commodity trading application that was the companies downfall. Sen. Phil Gramm (R-Texas) worked with Enron lobbyists to include the language in the omnibus bill.

They Did It … Update – Bill Congress for commercials

Talk about Mr Smith goes to Washington. Shep Smith jumped ugly on Congress … and Chris Dodd. It is an amazing performance and worth watching for sure. Enjoy.

Video now up  … sorry about the delay. New software today, still working out the kinks.

httpv://www.youtube.com/watch?v=sjymMNP_hJY

He went on to call today’s hearing into the AIG bonuses before the House Financial Services subcommittee a distraction and suggested that Fox bill Congress for all of the needlessly lost commercial time covering the hearings live.

It’s a distraction only if you lose sight of the big picture but well worth reporting, at least the way Shep did today. As we have been saying for two days … Congress is at the heart of this whole bonus boondoggle and the meltdown of Wall Street as well.

Update: Here’s the video of Shep condensing the AIG hearings down to a complete distraction from the banking crisis … and Fox News … “Fox should bill congress.” Enjoy.

httpv://www.youtube.com/watch?v=utdA0vGCOX8

Oh what a tangled web we weave …

First make a law … then implement it … then express outrage when it is … mix it up and you get

The $165 million AIG bonus flap that has caused outrage around the nation has its roots in a provision of Connecticut labor law that political leaders say needs to be changed.

The embattled insurance giant, which has received about $170 billion in federal bailout money, has said it is legally bound to pay the bonuses because of a provision in the Connecticut Wage Act. Many of those receiving the bonuses work for AIG’s financial products unit in Wilton.

If AIG failed to pay the bonuses, under state law the company could be forced to pay a double penalty, legislators said.

“The state of Connecticut should not be used as the scapegoat or the excuse for AIG to pay these outrageous” bonuses, said House Republican leader Lawrence Cafero of Norwalk.

Read the whole story to hear the outrage from all of the lawmakers … ummm … who wrote and passed the law.

Dodd Under Fire For Allowing Bonuses-Video-Update: Dodd Responds

The NY Times is reporting (paragraph 16) that Chris Dodd included an exemption for bonuses like the ones given AIG in the February stimulus bill …

I thought about adding this to Steve’s post on the Democrats going after Rob Simmons but this story is becoming bigger by the minute.

The administration official said the Treasury Department did its own legal analysis and concluded that those contracts could not be broken. The official noted that even a provision recently pushed through Congress by Senator Christopher J. Dodd, a Connecticut Democrat, had an exemption for such bonus agreements already in place.

Note, that’s the Obama administration throwing Dodd under the bus. This is not going to help Dodd’s sinking poll numbers which, as even the Wall Street Journal now notes, has made Dodd as target …

Already, a growing anti-industry backlash presages a tough re-election fight for Mr. Dodd next year — a remarkable development given his popularity in a solidly Democratic state. Former Rep. Rob Simmons (R., Conn.) on Monday said he would challenge the senator in 2010, proclaiming in an interview that “it’s time for a change.”

With polls showing the men almost tied, there are signs Mr. Dodd may be staking out a newly populist stance, pushing for limits on executive pay over the objections of the White House and rattling markets by musing about nationalizing banks.

Interesting stance on Dodd’s part, populism, given his willingness to veto restrictions on Fannie Mae in 2005, his noted bonus exemption provision in the stimulus bill,  and then there’s this ..

But the Countrywide controversy has come at a bad time. It emerged in June that Mr. Dodd, who received two mortgages from the firm, was in a special program for “friends” of Chief Executive Angelo Mozilo. Mr. Dodd said he didn’t seek, nor was he aware of, receiving any special rates or terms.

Mr. Dodd has always had good relations with financial firms — and that could be a liability in the current climate. In the past six years, he has raised $1.5 million from the securities industry, third most among senators. The industry also gave $2.7 million to his presidential campaign.

Then there’s the LA Times chiming in … and it ain’t good.

Now, of course, he finds himself in the red-hot center of the country’s banking collapse. He may be able to take credit if Congress passes new, tougher banking regulations, but, asNaftali Bendavid of the Wall Street Journal reports, the public mood toward bankers and their buddies is sour: “He also is a longtime friend of Wall Street, making him a convenient scapegoat if voters sour on the government’s handling of the economic crisis.”

Even Fox Business has jumped on the story.

httpv://www.youtube.com/watch?v=8G3-CSVSToQ

Update: Here’s an excerpt from their story over at Fox Business:

While the Senate was constructing the $787 billion stimulus last month, Dodd added an executive-compensation restriction to the bill. The provision, now called “the Dodd Amendment” by the Obama Administration provides an “exception for contractually obligated bonuses agreed on before Feb. 11, 2009” — which exempts the very AIG bonuses Dodd and others are now seeking to tax.

Dodd’s explanation:

“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,” wrote Dodd Spokesperson Kate Szostak in a response to FOX Business. “Because of negotiations with the Treasury Department and the bill Conferees, several modifications were made,” she said, without suggesting who made the change.

The provision excluding those bonus payments made it into the final version of the bill, and is law

Read the whole thing. And make sure you read Steve’s post …. Dodd’s got some big problems and George Bush won’t get him out of this one.

“Kids with their hands in the candy jar”

Art Laffer pretty much summed up the Government’s bailout of everyone from AIG to GM and Chrysler … they shouldn’t be in the business in the first place. It’s very funny. Read more

AIG Bonuses are justified and necessary, an alternate view

Like everyone else I was initially outraged over these supposed AIG bonuses. But I have changed my mind on this and they need to pay these compensation contracts.

First of all these can not be performance bonuses, maybe they are attendance bonuses or bonuses that reward poor stock performance. Either way it seems that these bonuses were designed to be compensation for these bankers. It would be interesting to review these contracts. If these are performance bonuses and they performed then you can not destroy this culture of compensation for performance. Maybe we should pay our congress people this way (omg could you imagine the corruption?).

Secondly, you may think that these guys are a bunch of crooks; after all they drove this bus into a wall. So why should we allow these crooks to continue driving the bus after this major accident? Well the answer to this is that they knew exactly what they were doing. They understood the risk and they did it anyway because they were greedy. This does not necessarily mean that they are incompetent when it comes to performing the core of their job. They have a great deal of insight into how this thing is wrapped up and we need them to un-wrap the mess. So you may ask “why are we rewarding them for their greed and irresponsible actions?” Well inside of any group of people (AIG included) there are group relations and groups of people always revert to their lowest denominator. Group empathy is a powerful force and allows a group or a crowd to do things that the individual is not capable of. Hence the phrase “one bad apple spoils the bushel.” We need to find the bad apples and eliminate them, keep the institutional knowledge and right the ship. You need to properly compensate the rest of the bushel.

My next point on this issue is that it is in your best interest to allow this company to run itself. This is absolutely not a democratically run institution and nor should it be. I will grant you the fact that because of this infusion of capital we are all investors, this investment is not by choice, and given this past year’s performance you would not invest under these circumstances. This does not give the mob the right or ability to make management decision. It is in your best interest to allow a management team run this company. I feel that as an 80% owner the government should have the voting rights to install whatever management team that they see fit and to properly compensate those individuals. Once in place investors need to allow the management team to run the business on a day to day basis and give them the freedom to make compensation decisions.

This point is a real sticky wicket because the government is the largest investor and the only possible investor. At the same time the government has no business whatsoever dictating employee compensation. So how does one straddle the line between government and investor? I am not sure but I know that the common ownership, control over the means of production (day to day operations), and the common specification of compensation, defines communism. All of you bail out complainers are doing your level best to promote communism. Congratulations!!

My last point is about Connecticut senator Chris Dodd. Dodd is considering a proposal of a bill that will tax these bonuses such that the government can reclaim 98% of this money. Well I have to say that I appreciate his creativity, though I heard this same idea on the Sound Off Connecticut show today, and I am not sure he can take the credit.  This idea is fun to think about but it is really bad and sets a precedent for government targeting a tiny set of individuals for unfair taxation. When you are the next target you’re not going to like it so much.