So much for I only knew about this last Tuesday”. And this was the guy Democrats said we had to have beceause his brilliance was such that we should over-look his tax problems?
Treasury Secretary Timothy Geithner told CNN Thursday his department asked Sen. Chris Dodd to include a loophole in the stimulus bill that allowed bailed-out insurance giant American International Group to keep its bonuses.
In an interview with CNN’s Ali Velshi, Geithner said the Treasury Department was particularly concerned the government would face lawsuits if bonus contracts were breached.
Geithner told Velshi Thursday he takes full responsibility for the situation.
After spending most of a week denying he even knew about it prior to last week. I don’t think Geithner understands what taking “full responsiblity” really means (or should mean). Oh, and see Goodwin’s quote below.
Disgust is a bi-partisan concept. Michael Goodwin again:
Ronald Reagan’s famous line that “government is the problem” kept going through my head as the AIG hearing demonstrated the dangers of Washington’s role in the economy. The very people, Republicans and Democrats alike, who can’t balance America’s budget now claim the expertise to run banks, insurance companies and automakers.
If we let them, we’re dumber than they are.
Al Qaeda having difficulty establishing sleeper cells in the US? Not a problem – let the Attorney General help:
European justice ministers met with Mr. Holder earlier this week and pressed for details on how many Guantanamo prisoners the U.S. planned to release domestically, as part of any agreement for allies to accept detainees. Mr. Holder said U.S. officials would work to respond to the questions European officials have over U.S. Guantanamo plans.
For “people who can be released there are a variety of options that we have and among them is the possibility is that we would release them into this country,” Mr. Holder said. “That process is ongoing and we’ve not made any determinations or made any requests of anybody at this point.”
Seriously, anyone – sound like a better option than keeping Gitmo open and these prisoners there until and unless another country can be found to take them?
Even AP seems to be figuring it out. Here’s an analysis by AP’s David Espo discussing the AIG debacle:
Which goes to the crux of the Democrats’ current political problem.
Gone are the days when they could merely bludgeon the Bush administration and promise to seek bipartisan solutions to the nation’s economic problems.
Now, in control of the White House and Congress, they are struggling to come up with an explanation for what no one in either party seems moved to defend.
You can’t help but snicker a bit, can you?
Here’s about as succinct a summary of the Obama administration to date that I’ve seen:
President Obama still enjoys the popularity that comes with not being George Bush, especially in a city top-heavy with Democrats. But his initial response to the global calamity that he found on entering the Oval Office has not inspired popularity’s more sober elder brother, confidence. Large constituencies, notably business, are voicing their scepticism openly. The President’s much-vaunted $787 billion stimulus package is being widely interpreted, even by some of those (such as Warren Buffett, America’s second-richest man) who openly supported Mr Obama for the presidency, as a serious failure.
And I don’t foresee it getting much better. Of course the summary comes to us via the British press (Simon Heffer) who have the luxury of being once removed from the situation and therefore have the ability to be somewhat more objective than much of our own media.
For instance, the much more perceptive analysis of the AIG mess:
Conscious that he has made mistakes, and conscious especially of the increasing perception that he is simply throwing cash at unreformed institutions in the hope that something will happen, Mr Obama is trying to raise his game. He had a soft target two days ago, when he joined in America’s outrage at the paying of bonuses to executives of AIG, the sinking insurance giant now buoyed by public money. This provoked further attacks on him from the Right. Why was he using US taxpayers’ money to bail out a company whose main investors were French, German, Swiss and British banks? And wasn’t he merely jumping on the bandwagon of attacking the bonuses to distract attention from his own policy failings – creating a bogeyman in the same way that Gordon Brown and Harriet Harman did with Sir Fred Goodwin last month?
And of course, we’re witnessing how poorly that’s turning out (you know there’s a political problem when the CEO of AIG comes off as a more sympathetic figure than Barney Frank and Chris Dodd).
Heffer says that instead of concentrating on what ails us financially, Obama has another much broader agenda:
Instead he has been trying, on a broad front, to fulfil the reformist ideal that informed his election campaign. Rather like a would-be government in Britain that talked of “sharing the proceeds of growth”, the candidate who wanted to redistribute wealth now, as President, has no wealth to redistribute. A $3.6 trillion budget showed little sign of addressing the problem of stimulating demand. Both big corporations and small businesses feel overtaxed, their competitiveness hampered, and incapable of creating jobs at a time when they are desperately needed. Mr Obama’s green agenda, which was also a significant part of his election promises, entailed higher taxation that will retard the economy just when it needs to grow. His greatest ambition – of starting a national health service – seems impossible in the present climate. As he seeks to move forward on this broad front Warren Buffett himself has attacked him, saying that his first three priorities should all be the economy. Paralysed by inexperience and a Blairish desire to be liked, and hampered by inadequate senior staff, he is now finding that even some of his own party in Congress feel he has gone too far in the socialist experiment. Mrs Pelosi admitted at the weekend that a second stimulus package – which leftist Democrats are calling for, to the horror of much of the rest of America – was not yet on the cards.
Dead on right. The line “paralyzed by inexperience and a Blairish desire to be liked, and hampered by inadequate senior staff”, strikes home. It is a particularly lethal political combination which we’re seeing displayed in spades. It is no longer a comedy show, it has become a horror show. And with the move by the Fed to buy back long-term bonds, the horror is only deepening.
And we’re stuck looking to Timothy Geithner, Barack Obama and Chris Dodd for salvation? Lord help us all.
[HT: Joel C.]
Our congratulations go out to the Obama administration on their latest foreign policy and trade triumph. Last week, apparently without consultation, they did away with a NAFTA pilot program which allowed Mexican trucks to deliver goods to certain areas of the US. Mexico has responded:
Mexico has released the list of U.S. products that will see tariffs of 10 percent to 45 percent. The move is in retaliation for the U.S. scrapping a test program allowing Mexican trucks to deliver goods beyond a U.S. border zone.
Among affected goods are certain fruits and vegetables, wine, juices, sunglasses, toothpaste and coffee, according to a government statement. Most tariffs are 10 percent to 20 percent, with unspecified fresh products subject to a 45 percent charge. The tariffs will apply to $2.4 billion of goods and take effect today.
Just what you need in a down economy – punitive tariffs for political stupidity. And there won’t be a solution anytime soon:
Talks to diffuse the first [self-inflicted -ed.] trade dispute of President Barack Obama’s administration can’t begin until the U.S. has a Commerce Secretary, Economy Minister Gerardo Ruiz Mateos said.
So far I’m really not at all impressed with the status of the “better relations” throughout the world promised by the Obama administration.
Oh, and for an encore, how about this little goodie:
Energy Secretary Steven Chu on Tuesday advocated adjusting trade duties as a “weapon” to protect U.S. manufacturing, just a day after one of China’s top climate envoys warned of a trade war if developed countries impose tariffs on carbon-intensive imports.
Mr. Chu, speaking before a House science panel, said establishing a carbon tariff would help “level the playing field” if other countries haven’t imposed greenhouse-gas-reduction mandates similar to the one President Barack Obama plans to implement over the next couple of years. It is the first time the Obama administration has made public its view on the issue.
“If other countries don’t impose a cost on carbon, then we will be at a disadvantage…[and] we would look at considering perhaps duties that would offset that cost,” Mr. Chu said.
So, the Fed, for the first time since the 1960s, is buying back long-term bonds as part of it’s new policy, announced today, of buying back $1.2 trillion in securities to pump out cash into the economy.
With the country sinking deeper into recession, the Federal Reserve launched a bold $1.2 trillion effort Wednesday to lower rates on mortgages and other consumer debt, spur spending and revive the economy. To do so, the Fed will spend up to $300 billion to buy long-term government bonds and an additional $750 billion in mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac.
On top of this, short-term interest rates are already at 0%. The fed has one monetary policy tool left–massive increases in the money supply–and they’re using it with a vengeance. This purchase of $300B in treasury bonds will be a signifigant increase in demand, pushing treasury prices up, and yields down. The 10-year note’s yield dropped to 2.5% in the aftermath of this announcement.
Our fundamental problem is still that the banking sector has their balance sheets all out of whack, and the Obama Adminsitration still has no apparent plan for clearing up bank balance sheets via recapitalization, or…well…anything else. Now, theoretically, that much new money being created would lower mortgage rates signifigantly. I wouldn’t be surprised to see 20-year fixed rates at 5% or less.
This action, however, opens the door for massive inflation. The inflationary implications of this move are so huge, that there’s simply no way the loans could be anything but a money-loser for the banks, because a 5% mortage rate may well be far below the rate of inflation. That will kill banks already weakened by their bad loan portfolios.
This is an extraordinary gamble of the Fed’s part. If this new money doesn’t stimulate a signifigant increase in demand for money, then we are going to have a huge pool of money chasing a very small pool of goods. The market knows it, too, and understands the inflationary implications. The dollar cratered in the FOREX market today, and analysts aren’t excited about the long-term implications:
Bernanke’s view that currency devaluation may be beneficial to economic growth speaks for itself,” writes Mr. Merk. “But even if there are no active efforts to debase the currency, we are cautious about the U.S. dollar. That’s because we simply do not see a viable exit strategy to all the money that is being thrown at the system.”
“[W]e simply do not see a viable exit strategy to all the money that is being thrown at the system” because there is no viable exit strategy. We are either going to have serious inflation, or the Fed will have to tighten up so severely at some point in the near future that it will kill economic growth anyway.
In “Texas Hold ‘Em” terms, this is the equivalent of the Fed going “all in”. We’ve essentially reached the limits of our monetary policy tools with this action.
Jennifer Rubin at Commentary magazine’s blog rounds up the latest info on who knew what about the AIG bonuses. It’s not pretty, but, of course, we knew it wouldn’t be.
The bottom line: Dodd, after denying it, now admits he and the administration cooked up the language which afforded AIG some protection ( until the firestorm hit) to grant the bonuses.
Time magazine also reports:
Although Treasury Secretary Timothy Geithner told congressional leaders on Tuesday that he learned of AIG’s impending $160 million bonus payments to members of its troubled financial-products unit on March 10, sources tell TIME that the New York Federal Reserve informed Treasury staff that the payments were imminent on Feb. 28. That is 10 days before Treasury staffers say they first learned “full details” of the bonus plan, and three days before the Administration launched a new $30 billion infusion of cash for AIG. [Emphasis mine.–EDF]
It’s such a relief to have the “best and brightest” running the show, isn’t it?
If you are inclined to accept without question that the bonuses paid to AIG employees deserve unmitigated moral indignation, as Pres. Obama and the Democrats seem to, then shouldn’t that opprobrium cut across the board? Well, I guess some animals are more equal than others:
At least four Fannie Mae executives are slated to receive more than $400,000 in bonuses each this year as a result of the company’s government-approved retention program, The Post’s Zach Goldfarb reports.
The executives include chief operating officer Michael Williams ($611,000), deputy chief financial officer David Hisey ($517,000), and executive vice presidents Thomas Lund ($470,000) and Kenneth Bacon ($470,000).
Each of these executives earned about $200,000 in retention payments last year and salaries ranging from $385,000 to $676,000.
According to the report, such bonuses are doled out depending on how integral the employee is to the companies, as approved by the FHFA:
Fannie Mae, which suffered $59 billion in losses last year, has requested $15 billion in taxpayer assistance, and has said it expects to need plenty more.
All major compensation decisions are authorized by Fannie Mae’s federal regulator, the Federal Housing Finance Agency, which created a retention program when the company was seized last September to hold on to key employees.
Under the program, employees are eligible to receive up to 150 percent of their salary in bonuses this year, but many will receive far less than that, and some might receive zero, depending on how central they are deemed to the company’s task.
Congressman Barney Frank, one of Fannie Mae’s and Freddie Mac’s biggest supporters, and Chairman of the House Financial Services Committee which oversees the institutions, was reached for comment and had this to say about whether paying retention bonuses was really necessary:
That’s nonsensical. It’s clear they made a lot of mistakes and we need to undo what they did. If they really understood what they did in the first place, seriously, they probably wouldn’t have done much of it. Secondly, when you are trying to undo something, it is often not the case that the people who did it are the ones to put in place. People are sometimes committed to not admitting mistakes. … So that argument I think is in fact almost counter, because the argument that you take the people who made the mistake and put them in charge of undoing the mistake goes against the human impulse not to admit a mistake.
Oops! Sorry, about that. The foregoing statement was from Barney Frank, but he was referring to AIG bonuses.
This morning, ThinkProgress sat down with Rep. Barney Frank (D-MA), who chairs the House Financial Services Committee and has called for the firing of AIG executives. When asked to respond to Sorkin’s claim that only AIG employees can navigate the economy out of the mess they created, Frank dismissed it as “nonsensical”
Pigs in the House indeed.
I know this will come as a complete surprise, but some Democrats have been lying to you. But before we get to that, let’s review.
AIG was deemed dangerously insolvent a few months ago, so insolvent that it required the government to step in and save it. It was one of the “too big to fail” companies. It got TARP funds. Then, as a part of the “stimulus” bill, signed into law under the Obama administration, an attempt was made to add a provision to strictly limit such payments as those now causing the faux outrage:
Around the same time, Congress and Obama’s team were passing up an opportunity to put in place strict laws to revoke bonuses from recipients of the $700 billion Wall Street bailout. In February, the Senate voted to add such a proposal to the economic recovery bill that cleared Congress, but in final closed-door talks on the measure, that provision was dropped in favor of limits that affect only future payments.
“There was a lot of lobbying against it and it died,” said Sen. Ron Wyden, D-Ore., who proposed the measure with Republican Sen. Olympia J. Snowe of Maine. He said Obama’s team is sending mixed messages on what will and won’t be tolerated on bonuses, with the president coming out strongly against excessive Wall Street rewards but top officials not following through.
“The president goes out and says this is not acceptable, and then some backroom deal gets cut to let these things get paid out anyway,” Wyden said. “They need to put this to bed once and for all.”
They also need to “put to bed once and for all” this nonsense that they “didn’t know” until a couple of days ago. And, of course, had anyone actually read the bill that they claimed was too important to delay, they’d have actually caught this, one assumes. But it appears, at least initially, that reading legislation before it is signed is just not a priority for this administration or Congress.
And surprise, surprise, we’re finding what they did pass sucks.
While administration officials insisted Tuesday that neither Obama nor Geithner learned of the impending bonus payments until last week, the problem wasn’t new. AIG’s plans to pay hundreds of millions of dollars were publicized last fall, when Congress started asking questions about expensive junkets the company had sponsored.
A November SEC filing by the company details more than $469 million in “retention payments” to keep prized employees.
Back then, Rep. Elijah E. Cummings, D-Md., began pumping Liddy for information on the bonuses and pressing him to scale them back.
“There was outrage brewing already,” Cummings said. “I’m saying (to Liddy), ‘Be a good citizen. … Do something about this.’ ”
Around the same time, outside lawyers hired by the Federal Reserve started reviewing the bonuses as part of a broader look at retention and compensation plans, according to government officials who spoke on condition of anonymity. The outside attorneys examined the possibility of making changes to the company plans — scaling them back, delaying them or rescinding them. They ultimately concluded that even if AIG’s bonuses were withheld, the company would probably be sued successfully by its employees and be forced to pay them, the officials said.
In January, Reps. Joseph E. Crowley of New York and Paul E. Kanjorski of Pennsylvania wrote to the Federal Reserve and the Treasury Department pressing the administration to scrutinize AIG’s bonus plans and take steps against excessive payments.
“I at that point realized that we were going to have a backlash with regard to these bonuses,” Kanjorski said in an AP interview. In a meeting with Liddy later that month, he said he told the AIG chief that “all hell would break loose if we didn’t find a way to inform the public … and that we should take every step to put that information out there so we wouldn’t have the shock.”
And of course, Kanjorski is right. This is a “distraction”, as Rahm Emanuel is labeling it, that the administration could have avoided had the Treasury Secretary been on top of it and the President had exerted even a bit of leadership. Instead, both are in extreme cover-up mode. And as more and more info comes out, the time-line of events they issued has less and less credibility.
This wasn’t something that just emerged as a problem last Tuesday as Geithner is attempting to claim. This has been known and waved off for months. And that includes the provision that was going to be inserted in the “stimulus” package but died due to apparent Democratic lobbying.