PART ONE OF TWO PARTS.
"We need to find out whether these bonuses are legally recoverable." Representative Barney Frank, Chair of the U.S. House of Representatives' Financial Services Committee, quoted by Mary Williams Walsh, "A.I.G. Lists Firms to Which it Paid Taxpayer Money" p. A1, col. 6 (New York Times Nat'l Ed., Monday, March 16, 2009).
Upon reflection, the unfolding story of AIG's Bailout Bonuses that was publicly reported for the first time over this past weekend, presents two major and hidden questions in my judgment. These questions are in addition to the obvious ones.
First, over the weekend we received an announcement that someone had reviewed the unseen AIG Bonus Contracts and came to a legal conclusion that they "should" be paid. Why did we receive that announcement from Mr. Larry Summers, an economics adviser to the President, and from Mr. Timmy Geithner, the current Treasury Secretary? These bonuses apparently guaranteed by AIG would instead be paid with Federal Taxpayers' Money, not AIG's money. Why were we not told instead that the Attorney General of the United States and the Department of Justice which he heads, came to a legal conclusion -- if he and they actually did come to that legal conclusion -- that our money, yours and mine, "should" be paid out on these bonuses?
Second, it was reported that Mr. Geithner telephoned AIG on Wednesday, March 11, before the next installment of AIG's Bailout Bonuses came due to be paid as of Sunday, March 15, 2009. Mr. Geithner, along with Mr. Summers and others, advanced another generous amount of Bailout money to AIG on Monday, March 2nd. Did Mr. Geithner and the others not know then, that within two weeks AIG would take our money and give it away in these Bailout Bonuses? Why did no-one apparently do any due diligence? Was it because it was not their money, but ours? Otherwise why did Mr. Geithner wait until the 11th of March to contact AIG about the payment of Bailout Bonuses which he pretty clearly had only just learned about?
Who are these people?
After receiving $170 Billion in Bailout Money from the Federal Taxpayers since the Fall of 2008 (no pun intended), AIG reportedly will pay a mixture of "bonuses and retention pay" amounting to $165 Million with the approval of the current Federal Government. At first, the amount of these Bailout Bonuses was unreported and apparently unknown as this story developed. See David Cho and Brady Dennis, "Bailout King AIG Still to Pay Millions in Bonuses/Geithner Gets Firm to Make Revisions" (Washington Post Online, Sunday, March 15, 2009). Another newspaper reported that the figure is $165 Million. E. Scott Reckard and Jim Puzzanghera, "Ailing AIG Stands by Need for Bonuses" (Los Angeles Times Online, Sunday, March 15, 2009). Still another newspaper reported that AIG had already paid $55 Million in Bonuses in December, 2008, and the remaining amount of "about $165 million" in Bonuses was coming due "on or before March 15." Edmund L. Andrews and Peter Baker, "At A.I.G., Huge Bonuses After $170 Billion Bailout" p. A1, col. 5 (New York Times Nat'l Ed., Sunday, March 15, 2009), rewritten in part online, under the headline, "AIG Planning Huge Bonuses After $170 Billion Bailout".
Each of these newspapers reported this same thing, however: The Bailout Bonuses that came due on March 15th were payable to AIG Financial Products, the very division of AIG which brought it down and which called forth uncountable amounts of Bailout Money from the Federal Taxpayers. It will be remembered, of course, that the core business of AIG was always Insurance. The division of AIG Financial Products instead invented and sold Credit Default Swaps or CDS's for which AIG was liable and which were sold in huge quantities on the strength of AIG's then-credit rating. CDS's are the financial equivalent of "Insurance", but unregulated, without Reserves and without capital to back up the guarantees. According to the report in the New York Times, these Bonuses will be paid to 400 persons in that division, with 7 'executives' alone slated to receive more than $3 Million. Edmund L. Andrews and Peter Baker, supra.
When did AIG agree to these Bonuses, and Why?
This post will be continued ..... WITH THESE TWO SUGGESTIONS ALSO PUBLISHED HERE: (1) Show us the CONTRACTS and (2) Absent compelling privacy considerations, TELL US WHO THESE BONUS BABIES ARE AND IF THEY ARE STILL WITH AIG NOW.
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