Cd We PLS Get This Straight Re- AIG:

[snot]

Because, pls forgive if this is blunt, but you can't discuss this intelligently otherwise.

IT'S NOT THE BONUSES.

Ok, the bonuses are bad; but they're the LEAST of the problems with what's going on at AIG.

AIG is insolvent; it lacks assets or income sufficient to pay off its obligations to existing creditors.

When you or I get into this situation, if we fail to file bankruptcy, our creditors can force us into it, to provide for an orderly liquidation of our assets and debts. We have to fully disclose all of both, our assets are sold on terms reasonable under current conditions, and the proceeds are divided fairly among our creditors.

This is what should happen to AIG.

Instead, AIG is NOT in bankruptcy, because its creditors are hoping us taxpayers will throw enough bailout money into AIG so its creditors won't have to suffer any losses -- we'll be the losers, instead of them.

So, that's where our tax money's going: to save AIG's existing creditors from the consequences of their mistake in acquiring debt obligations of AIG.

The bonuses are TRIVIAL compared to the amounts being paid to AIG's creditors.

Now, if you or I were insolvent, and we got some chump to give us money so we could use it to pay off our existing creditors, that would probably constitute some kind of fraudulent transfer, and the chump could probably get her/his money back -- if she or he could find it. What are the odds, you think, we'll ever get our money back from AIG's creditors?

AIG is just a conduit. The real robbers are its creditors, Goldman Sachs -- surprise! -- being one of the biggest.

As usual, Elliott Spitzer's nailing it:

The Real AIG Scandal
It's not the bonuses. It's that AIG's counterparties are getting paid back in full.
By Eliot Spitzer Posted Tuesday, March 17, 2009, at 10:41 AM ET

Everybody is rushing to condemn AIG's bonuses, but this simple scandal is obscuring the real disgrace at the insurance giant: Why are AIG's counterparties getting paid back in full, to the tune of tens of billions of taxpayer dollars?

For the answer to this question, we need to go back to the very first decision to bail out AIG, made, we are told, by then-Treasury Secretary Henry Paulson, then-New York Fed official Timothy Geithner, Goldman Sachs CEO Lloyd Blankfein, and Fed Chairman Ben Bernanke last fall. Post-Lehman's collapse, they feared a systemic failure could be triggered by AIG's inability to pay the counterparties to all the sophisticated instruments AIG had sold. And who were AIG's trading partners? No shock here: Goldman, Bank of America, Merrill Lynch, UBS, JPMorgan Chase, Morgan Stanley, Deutsche Bank, Barclays, and on it goes. So now we know for sure what we already surmised: The AIG bailout has been a way to hide an enormous second round of cash to the same group that had received TARP money already.

It all appears, once again, to be the same insiders protecting themselves against sharing the pain and risk of their own bad adventure. The payments to AIG's counterparties are justified with an appeal to the sanctity of contract. If AIG's contracts turned out to be shaky, the theory goes, then the whole edifice of the financial system would collapse.

But wait a moment, aren't we in the midst of reopening contracts all over the place to share the burden of this crisis? From raising taxes—income taxes to sales taxes—to properly reopening labor contracts, we are all being asked to pitch in and carry our share of the burden. Workers around the country are being asked to take pay cuts and accept shorter work weeks so that colleagues won't be laid off. Why can't Wall Street royalty shoulder some of the burden? Why did Goldman have to get back 100 cents on the dollar? Didn't we already give Goldman a $25 billion capital infusion, and aren't they sitting on more than $100 billion in cash? Haven't we been told recently that they are beginning to come back to fiscal stability? If that is so, couldn't they have accepted a discount, and couldn't they have agreed to certain conditions before the AIG dollars—that is, our dollars—flowed?

More at http://www.slate.com/id/2213942/ ; see also http://www.newsday.com/news/local/state/ny-stspit0320,0,7580345.story .

The bonuses are just a diversion.

[Why Syzygy]

1. Rec'd . but

The bonus contracts are also part of the overall liability to creditors. Those "accounts payable" (contracts) represent the same thing in essence as other accounts due. They are just recorded in a different line item of the balance sheet.

[elleng]

2. Yes, and

a large number of its 'creditors' are those to whom it owes (and WILL owe) payouts on its insurance policies. Isn't that a HUGE reason for all the fuss about AIG? because they insure{d} SO MANY for so much?

[FrenchieCat]

3. Yep. That's why.

They are an insurance company after all....and it is difficult to write off a payout, because it is based on prior payments, not any tangible assets.

AIG suffered from a liquidity crisis after its credit ratings were downgraded below "AA" levels shortly after September 15.

They knew that they had problems, as the mortgage industry was taking a nose dive throughout 2008, and AIG was paying off claims to banks on mortgage insurance at a much faster clip than anytime prior. This is why they brought in their new CEO in June of 2008; to try and get a handle on things before the shit hit the fan.

The Federal Reserve Bank on September 16, 2008, created an $85 billion credit facility to enable the company to meet collateral and other cash obligations, at the cost to AIG of the issuance of a stock warrant to the Federal Reserve Bank for 79.9% of the equity of AIG.

In November 2008 the U.S. government revised its loan package to the company, increasing the total amount to $152 billion.

So far the U.S. government has given the company over $170 billion.

AIG is attempting to sell assets to repay the loans, but unlike a bank that might have assets such as foreclosed homes and other tangible assets, an insurance Company doesn't really have much in the way of tangible, other than insurance contracts. Hence this is why they are selling their headquarters in New York, etc...

So AIG is not a bank.

I predict that the bonus outrage that we have witnessed is just the start of this AIG business in the news, from what I can gather. The media is smelling a good "scandal", and AIG is the designated vehicle (I am using that term for a specific reason).

The fact that AIG is an International Company is why they paid off large Banks in foreign countries. So the outrage from the media about this fact was quite faux, since any reporter with any knowledge wouldn't have been surprised that an international company might have to pay claims in other countries.

The Obama Administration changed the rules when they started doing their bail out, in where certain information had to be revealed. That is why we found out about the foreign payouts, the bonuses, etc...although most of this wasn't ever a real mystery (just the details, cause that's how Bush set it up; to be vague). Of course the media will not explain any of this, just like they knew that reporting the foreign claims. Americans would automatically recoil at the mention of Foreign anything. They used it as kind of a dog whistle!

Currently, The Treasury Dept is supervising a winding down of AIG, from what I understand.
Something that takes time, as buyers have to be found to buy up the existing insurance contracts.
Remember, this was the 18th largest business IN THE WORLD!

Notice that when AIG was on the brink of failure back in September,
the media had no question; not a one. Nada.
Now that AIG is sure NOT to fail,
the media is all of the sudden becoming real cracker jack reporters.

But what the media is really trying to do is find a cause of scandal of any sorts with AIG,
in order to have a story to report on so that Americans can become viseral about any bail-out, spending, budget, etc...thereby tying Obama's hands in reference to anymore bailouts of anything.
That will slow down the recovery...which is fine with some people like the GOP and the Corporate world.

The real tragedy, as the President stated on Leno, is that all of this stuff that AIG did was legal.
The SEC and the Bush WH made sure that there would be no oversight, no watchdog, no officials to inquire about the "what if this happens" of AIG. The had 8 long years to do it.

What the Obama Administration is trying to do is get back to basic,
without creating a panic, and limit all financial institutions risk taking,
restrict what instruments each type of institution will be allowed,
and are putting together some real stringent regulations
that they plan on enforcing.

As for the Corporate Media and the GOP,
they are trying to make us believe that there are scandals to unearth at AIG.
Because you see, the media would love nothing better than to keep us busy
for the next 2 years, till the 2010 election, at being nice and "outraged".

Understand that most of the Republicans voted against both
Bail out bills, as well as the Stimulus.

The GOP, with a little help from their media friends,
are hoping to campaign on the Bail out VOTE that brought you AIG.
Most Democrats won't be able to do that,
since most voted for all of those bills.

without AIG to distract us,
Obama's economic plan works (although he cannot ask for any bailout,
which is why he put it in his budget instead--so that makes things more difficult),

And as reported, the stimulus is due to kick in big time by 2010.

Without AIG, the Republicans have no real calvanizing issue to run on.

The Corporate world needs the Republicans to win in November of 2010.....
because that's the year the Tax Cuts Expire, on December 31, 2010.

But gains by the GOP in November means extending the tax cuts in December.

So it really is simple,
because like everything else,
It's all about politics.

[elleng]

4. Thanks. AND

do you think it would help the admin if it explained to the public some of the stuff we here have been wrestling with recently?

Public hears some large institution is obtaining bail out money, and has no idea how it works. and then, AIG, about whom we've never heard becomes SO important to us! I think we all could benefit from some lessons.

RACHEL does this kind of stuff really well, but I think it should come from someone in the admin. And NOT one of the players. MAYBE Gibbs could do it, maybe a hired professor, but a GOOD teacher.

AHA, Frenchie, just thought of one! Our 'old' commander is a GREAT teacher! Wes could do it VERY well.

[Hannah Bell]

5. is there a reason the bush tax cuts can't be rescinded *now*?

assuming the votes are there now, & might not be in 2010.

[FrenchieCat]

6. Perhaps after the budget and health care reform is done.....

Cause health care reform is crucial!
Good thing partial funding is built in to the budget,
which will make things easier, as long as the senate acts right
during budgeting time and don't remove the health care money provision...
and they might.

Health care reform has got to come right after the budget.....because it is the key to reducing deficits in future years, which Pres. Obama has promised.

Health care reform has to come hand in hand with Entitlement reforms (Medicaire part D, and Social Security cap raised) in order to provide more funding for the public part of the health care package.

A tax increase could be done in early 2010.....depending on how things are going.
Of course, it is always difficult to do a tax increase in an election years,
even if it is on only 2% of the population.

Guess it will depend on how much mandate the President will still have at that time.
The media and the GOP ain't gonna be playing softball though...at anytime throughout.

[Hannah Bell]

8. personally, i think the money should precede the health care.

& i think it would be easier to get public consensus on removing the cuts for the top 1-5% than getting a public consensus on health care reform.

so i guess there's no real reason that bush's tax cuts couldn't be revised right now, except it's not a priority to do so.

[FrenchieCat]

9. Well, I'm just guessing.

Possibly, an Global financial meeting will provide a better glimpse as to how the recovery will go...because it is the Recovery going well that will establish the priorities.

Article about the importance of the International piece of this....
http://www.businessweek.com/the_thread/economicsunbound/archives/2009/03/a_simple_guide.html?chan=top+news_top+news+index+-+temp_news+++analysis

[KharmaTrain]

7. Walking And Chewing Gum

It's the corporate media that is going wild with the bonus story...it's an easy one for them to do. The real scandal, as you properly note is how this sham company is being used as a backdoor to shovel money around the world to pay in full a lot of these phantom assets that were only supposed to be on the books and not have any real money behind it. Now that the con has been exposed, the con men are screwing us an umpteenth time with trillions ending up at Goldman Sachs, Deutche Bank and other gamblers in many of the markets biggest schemes.

There is a benefit in highlighting the bonuses as it does give a face to the story...it's something the corporate media can run with compared the the far more complex connections (including their own corporate owners) that turned the market into a gambling casino run on a credit card (OURS).

The bonuses also open a door to expose that larger fraud. I hope that Andrew Cuomo or other intrepid AGs (like Blumenthal in CT) will use the investigations into these bonuses to begin squeezing up...getting the smaller players to start giving up their roles and who else was involved with them. As Olbermann continues to say, one day this who fiasco will be known as "Why Daddy Went To Jail".

Cheers...

[FrenchieCat]

10. Well, as you know, these transasctions were not illegal....

thanks to George Bush and two crucial acts that passed in 99 and 2000.

Most of the SWAPS were purchased by foreign banks in foreign countries.
They aren't going to jail,
but if this is not resolved correctly,
America will become a third world country pretty quickly, IMO.

The only thing to do is to make sure this doesn't happen again.

As for recriminations, what would they be charged of having done
that broke what law?

[KharmaTrain]

11. Blame Phil Gramm

Hi there Frenchie...remember booosh wasn't in power in those years, but his buddy Phil Gramm was running rampant in "deregulating" his banking buddies and then bailing in 2002 to UBS...a Swiss bank among the many that got AIG and other TARP bail-outs. This scumbag was in line to be McCain's treasury secretary :shiver:

Blame has to be cast at the Clinton administration...Larry Summers at treasury...who bent over backwards to "globalize" and greased the skids through the 90's for more and more capital to go offshore and allow the foxes to run the henhouse. We were supposed to "trust 'em". Where I come from when someone says those words it's the same as saying "screw you".

Insider trading wsa intense...and are scandals waiting to happen. And a lot of it was illegal, but we had ZERO regulation for the past 25 years. This is the result.

In many ways, going to jail isn't the worst thing for many of these criminals...losing their wealth and power is. My hopes are they'll be fighting class action civil suits for years to come.

Cheers...

:hi:

[Bluenorthwest]

12. But let us avoid the implication

that only the larger picture matters. The bonus pay is part of the larger crimes. The fact that there is more to the story does not mitigate the wrongness of the bonus payments.
In the commission of large crimes, often smaller ones are committed. One does not get to say 'oh, the robbery does not matter, it was just done on the way to the killings' because all crime should be prosecuted.
They are not the whole story, but that does not mean they are not A story, and a good one, and one that calls for justice, in a personalized and specific way.
Most folks are able to see both the forest and the individual trees and do not have to pick one or the other.

[TankLV]

13. WE FUCKING KNOW ALL THAT!!!

But THE BONUSES ARE A VERY VISIBLE SIGN OF THE PROBLEM!!!

We CAN chew gum and walk at the same time...

To assume that we are ONLY concerned about the BONUSES is completely clueless and ASSININE!!!

We are duely and justifiablly concerned and angry about the bonuses BECAUSE they are THE visible personification of this whole mess!!!