Treasury Secretary Timothy Geithner wants to have the government lend up to a trillion dollars to hedge funds, private equity, funds and the banks themselves to clear their books of toxic assets. The plan implies a substantial subsidy to the banks. It is likely to result in the disposal of these assets at far above market value, with the government picking up the losses.
As much as we all want to help out the Wall Street bankers in their hour of need, taxpayers may reasonably ask whether this is the best use of our money. After all, the $1 trillion that is being set aside for this latest TARP variation is equal to 300 million SCHIP kid years. Congress has had heated debates over sums that were a small fraction of this size. To give another useful measuring stick, the Geithner plan could fund 1 million of the Woodstock museums that were the main prop of Senator McCain’s presidential campaign.
The core problem is that many of our big banks are bankrupt. If they had to acknowledge the losses that they have incurred on their housing related loans (and increasing their loans in commercial real estate) Citigroup, Bank of America, and many other large banks would be insolvent. Thus far, they have avoided reality by keeping these loans on their books at inflated prices.
It’s incredible. Just as 20,000 viewers signed an open letter to CNBC telling them to listen to Jon Stewart and hold Wall Street accountable instead of mindlessly repeating Wall Street talking points, NBC doubled down.
This morning, Meet The Press host David Gregory repeated what CNBC’s Erin Burnett has been saying all along: The public is ignorant. If only the simpleton public understood what the Wall Street “experts” understand, we wouldn’t be so populist and angry.
I appeared on CNN a few days ago on a panel that included right-wing radio host Neal Boortz. You can watch the clip here.
As you will see, Boortz argues that we shouldn’t do anything to recover AIG bonuses – or bonuses at other taxpayer-subsidized Wall Street firms – because company executives “earned” the money.
Of course, those executives lost billions of dollars for their shareholders, and now that we own them, for taxpayers’, too. But we’re expected to believe that they “earned” huge multimillion-dollar bonuses subsidized by our tax dollars.
Why is the AIG bailout so infuriating? And what does Geithner mean when he says the company is too big to fail? Well, it has a lot to do with Goldman Sachs and with the consolidation of power in Washington. The real takeover, Matt Taibbi writes in Rolling Stone, has more to do with power than money.
Jane Hamsher of Firedoglake, Robert Johnson, former managing director of Soros Funds Management, and Matt Taibbi a contributing editor at Rolling Stone on the takeover of Washington. If you were pissed off before, well, brace yourself.
Last week, I wondered whether the AIG bonuses will end the love affair between the GOP and right-wing media. Well, it looks like FOX Business Network’s Dagen McDowell took that literally when she offered up this gem yesterday when discussing the tax on AIG bonuses (h/t Think Progress):
You don’t want to think if you get in bed with Uncle Sam he’s going to strip you naked, chain you to the bed, leave you there and then take nasty pictures of you and then put them on the Internet. Because that’s what’s been happening.
And what was Bill Hemmer’s response? “Thank you, Dagen, well stated.”
In the warped world of FOX, not only should AIG go unpunished for squandering $165 billion in bailout funds on executive bonuses, but our congressional leaders (Republicans as well as Democrats) should be denigrated for bailing them out. How taxing AIG bonuses is the equivalent of sexual abuse is beyond me, but clearly FOX has no regard for victims of it. Instead, they view sexual abuse as something they can use to be as outrageous as possible to boost ratings and further their agenda. Case in point, Bill O’Reilly’s harassment of blogger Amanda Terkel for highlighting his horrendous rape comments.
Both McDowell and Hemmer ought to apologize to victims of sexual abuse for trivializing their experiences. Then McDowell should be fired for using such scandalous language on what is supposed to be a business show.
Why do we keep giving out the Nobel Prize for Evil? It just gives companies like AIG an incentive to be evil. Stewart also goes after Obama for his handling of the situation and not using his “shut the f*ck up” face.
Thousands of people hit the streets in cities across the country today to Take Back the Economy and protest the $165 million in bonuses for AIG. In DC, where over 100 people demonstrated outside AIG’s office and presented the company with an oversized “reality check,” SEIU president Andy Stern told the crowd:
“We’re here today because after 25 years of corporate excess, of greed, of speculation, these corporate leaders have brought the greatest economy on earth to its knees….We own this company. And we didn’t buy it to have them hand out million dollar bonuses. And I’ll tell you this. It’s not good enough to get just half the bonuses back. We want it all back, and we want it now.”
Considering the news that Citibank is planning to blow $10 million in bailout funds on a John Thain-esque executive suite overhaul, maybe today’s protests will become a daily occurrence until these firms and Congress respond with fiscal responsibility and re-regulation.
As bad as the revelations about the AIG bonuses are for the Dems, they could prove divisive and even destructive for a Republican Party already in ruins. Greg Sargent noted yesterday at The Plum Line that we’re seeing lots of GOP leaders betraying their free market roots to condemn the bonuses. But at the same time, we’re seeing Rush Limbaugh, the so-called voice of the Republican Party, back the bonuses to the point that he absurdly compared Democratic attempts to obtain the names of bonus recipients to McCarthyism. Joining Rush, as usual, are some of FOX’s finest blowhards: Glenn Beck, Sean Hannity, and Michelle Malkin.
There is a ton of GOP hypocrisy here, considering Republicans have been trying to have it both ways on Wall Street salary caps and executive bonuses. Jason Rosenbaum has a terrific breakdown of the GOP’s faux populism over at The Seminal. It will be interesting to see whether these bonuses drive a major wedge between the Republicans and their beloved media mouthpiece.
Okay, that is a fallback position. The AIG bastards should be paying us not to be in jail, but if the Obama administration is not prepared to push the legal envelope to take back the bonuses, it can simply tell the private shareholders that the bonuses are coming out of their pocket.
This one is pretty simple. Private shareholders still own 20 percent of the company. The market capitalization is $2.6 billion. The 20 percent stake ($520 million) can easily cover the $165 million in bonuses.
So, the deal is the company issues enough new shares to cover the cost of the bonuses with the government being issued enough shares to hold its stake constant. That puts the burden of paying these suckers on the private shareholders.
Then we go after Citi, Goldman, Bank of America and the rest and tell these bankrupt banking giants that they are going to bring their pay down to earth immediately, as we make plans for their conservatorship.
In order to protect its bailout plan, the Obama administration protected the bonuses.
Back in January and February, there were some votes to try and block excessive employee compensation at financial institutions receiving bailout money. In the Senate, this took the form of the Snowe amendment, which was supported by all 58 Democrats, and also by three Republicans. In the House, it took the form of the TARP Reform Act, which was favored by 242 Democrats and 18 Republicans. Overall, across the House and the Senate, only 10 Democrats, compared to 193 Republicans, voted against legislation that might have stopped the bonuses.
Unfortunately, despite overwhelming Democratic support for limiting executive compensation, in order to save their public-private partnership bailout plan, the Obama administration worked against these limits:
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.(…)
The administration is concerned the rules will prompt a wave of banks to return the government’s money and forgo future assistance, undermining the aid program’s effectiveness. Both Treasury Secretary Timothy Geithner and Lawrence Summers, who heads the National Economic Council, had called Sen. Dodd and asked him to reconsider, these people said.
