Forget AIG Bonuses - The Next Bailout is Here

[balantz]

Published on Thursday, March 19, 2009 by The Progressive
http://www.commondreams.org/view/2009/03/19-13


Forget AIG Bonuses - The Next Bailout is Here

by Ruth Conniff


Democrats from Andrew Cuomo to Barney Frank to Barack Obama are demanding that the 418 AIG employees who received bonuses give them back. Sure, it's outrageous that the very people who drove AIG off the cliff, along with a whole lot of other financial firms, walked away with million-dollar bonuses paid with taxpayer bailout money. But as the Wall Street Journal opinion page points out, "Taxpayers have already put up $173 billion, or more than a thousand times the amount of those bonuses, to fund the government's AIG 'rescue.'"

And there is more to come.

The Obama Administration is putting the finishing touches on another big bank bailout. Called the Public Private Investor Partnership (PPIP), it is the brainchild of the Treasury Secretary from Wall Street, Tim Geithner. Under the plan, the government will give our money to hedge fund managers to buy "toxic" assets for more than they are worth. The banks that created these toxic turkeys will use the money from the sales to recapitalize themselves. Everyone comes out ahead except, of course, the taxpayers, who are essentially funneling money to hedge funds to buy bad assets for more than they are worth. The other bonus for the banks in this plan, as Yves Smith points out, is that they get to avoid giving the toxic assets any real market value. Less transparency and more transfers of wealth from taxpayers to hedge fund managers.

So much for the "free market."

Yves Smith writes: "This is what readers ought to be upset about. The AIG bonuses are rounding error, and a done deal. This (the PPIP) is billions to avoid price discovery . . . "

$750 billion, to be precise--plus what remains of the $700 billion bank bailout Congress already approved.

Smith reports that the bailout will likely have two parts: a subsidy to the hedge funds that buy the bad assets, and another one for the banks that sell them, to make up for the low prices investors are willing to pay. It's socialism for bankers and hedge fund managers.

- clip -

And speaking of bankruptcy, Liddy told Congress that had AIG gone bankrupt and been put into receivership, the contracts that awarded those bonuses would have been void. Bankruptcy would have saved the taxpayers not only $165 million in bonuses, but also the latest $30 billion in AIG bailout. Liddy pointed this out to the Fed a month ago, according to Brad Sherman, Democrat of California, in the Washington Post.

Begging Barney Frank not to subpoena the names of the executives who got bonuses, Liddy read aloud a death threat from an outraged citizen who would like to strangle AIG execs with piano wire.

The Obama Administration and Congressional Democrats are responding to outpouring of anger.

But the truth is, the bonuses to greedy execs are just a sideshow. It's the government's willingness to give away hundreds of billions of dollars in yet another massive bailout that people should be shouting about.

© 2009 The Progressive

[JDPriestly]

1. We should buy the assets and put the managers and traders in these

companies in jail for fraudulent securities transactions. There is no way that they caused these losses without violating laws. We should also put Bush and his crew in jail for failing to watch this situation. Paulson knew very well that something had gone wrong that would cause irreparable damage, that, in selling the derivatives, misrepresentations were made about the value of the securities and what was backing them up.

They should put these people in jail and then find out where they have hidden the money that they obtained through their fraud.

[pleah]

2. I knew the bonuses were a smoke screen!

MFPOSCSB!

[Turbineguy]

3. OK. The money was stolen

First they changed the laws so they could steal the money. Since it was legal to steal the money, they don't have to give it back and what's more, they're not going to. Now when this whole mess started, we could have jumped in and saved the situation for about $200 million. That would have halted the collapse in its tracks and when the Democrats got into power they could have changed the laws back again and the stealing would have stopped and over time the situation could have been corrected with relatively minor adjustments.

That would have been the ideal thing.

That did not happen of course. Since this started, 5 million ordinary Americans have lost their jobs. Those who had a pension plan going, have lost 1/2 to 2/3's of their pensions. Trillions in home values have evaporated. When this is over it's possible that 10 million Americans, perhaps more, will have lost their homes altogether.

This bailout is going to continue for some time until the economy is rebalanced. The names of these plans will change from time to time. It is the middle road since we now have this or an economic collapse to choose from.

In the end, we will have to get back to work doing productive things (not exchanging pieces of paper), making things that people need or want.

At the end of the first Bush Administration, the Reagan Revolution had doubled the national debt. At the time it seemed an impossible problem to overcome without either devaluing the debt by by making the dollar worth half as much or simply defaulting. In the end we made the economy grow.

Those of us who voted against the republicans don't feel we deserve this. Those who voted for the republicans didn't understand that this would be the outcome of their folly.

But whether we deserve it or not we're getting it.

Elections (even the stolen kind) have consequences.

[Fire1]

4. Buying assets for more than they are worth? Isn't that how this

housing shit started?? Love the irony!

[balantz]

5. Exactly! We are the ones the administration should be investing in. n/t

[mdmc]

6. PPIP should include a credit card or tax break for all taxpayers

PPIP should include swaps for individual taxpayer credit card debt. Even a token $1000.oo credit card debt "swap" (payoff) for each taxpayer. Taxpayers would also be offered an alternative $1000.oo tax credit toward their what they owe on their 2010 federal income tax.

Either way. Yuck. Beat.