Thursday, March 19, 2009
Kabuki dance
I agree with this bit of superficiality:
Ed Liddy sized up this situation when he got to AIG and came to the conclusion that the best course for taxpayers and for the financial system was to pay the bonuses. This gets back to something I wrote earlier: If Obama disagrees with Liddy's decision, he should either A) fire Liddy, or B) fire the guy who hired Liddy (Tim Geithner). What he should not do is go along with this Kabuki outrage, in which official Washington pretends it had no idea that big financial institutions — especially failing ones — might need to keep paying their top employees competitive salaries.
That would seem so obvious it need not be said, but apparently the entire press corps has decided to do the Kabuki dance along with the clown show on Capitol Hill.
Look, I have no clue in the world whether it makes sense to pay these bonuses. This is what I do wonder: Why is Ed Liddy taking all this grief? The government brought him in to clean up this mess. As nearly as I can tell, he took the job for a dollar a year -- adjusted for inflation, that's less than FDR's dollar-a-year men got! -- and there is no disclosure in AIG's SEC filings to suggest that he is getting anything more than that (although to be sure we have to wait for the proxy statement). Why has Liddy become every federal politician's punching bag? One is forced to wonder why he does not just tell the Obama administration that they can find some other chump to wind down AIG.
CWCID: Glenn Reynolds.
19 Comments:
By 
twp, at
Thu Mar 19, 07:55:00 AM:
I watched some of the Liddy testimony on C-SPAN. What a joke. The jerks in on the house committee were chastising Liddy, asking these vehement questions that made no sense, and personally insulting a guy who is doing all he can do to pull their butts out of the fire. Liddy needs to interrogate those jerks and ask them who this happened.
Congress protests too much. They are doing all they can to lay blame widely so that when reelection time comes up, nobody does the math that would hold them responsible.
By 
, at
Thu Mar 19, 08:07:00 AM:
Maybe he should just tell anyone who'll listen "I inherited this mess." and repeat it ad nauseum.
By , at
Thu Mar 19, 08:44:00 AM:
What he should have said was:
"I will rescind the bonuses and then you all can pay the legal fees that ensue, once all of you politicians return the cash AIG gave you over the past 10 years in campaign contributions.
When we buy a politician, we expect him to stay bought."
By , at
Thu Mar 19, 08:54:00 AM:
Over at Power Line they copy some of Liddy's testimony from yesterday emphasizing that these were retention and not performance bonuses paid to executives to get them to stay on board as they wound down the Financial Products Division of AIG, a dead-end function.
Also note that Pelosi's 90% tax rate on bunuses would also cover sales comissions. The last thing you want in a floundering business is to de-incent your sales force.
JLW III
PS: If you follow the link you'll have to scroll around. Looks like their permalink function is broken. jlw
By , at
Thu Mar 19, 08:55:00 AM:
Anon 8:44. Perfect. And just wait 'till the Obamanauts try to get another competent manager to step in and fix the stuff these hacks (both parties) messed up.
By , at
Thu Mar 19, 09:34:00 AM:
If there was ever anyone in America who thought for a nanosecond that giving Congress control over the delivery of medical care to citizens would be a good idea, this sort of hearing ought to be instructive. I'm all for these hearings. I hope they go on and on. Idiots on the left will learn their lessons this way, and this way only.
By , at
Thu Mar 19, 10:13:00 AM:
How many people will stay at a company now when the government feels the need to step in? After watching the witch hunt hearings, they'll probably decide it isn't worth it to be "retained". More than likely, this will leave the company worse of and drastically reduce its ability to recover.
By Cosmo, at
Thu Mar 19, 12:06:00 PM:
Tiger:
You're asking for Obama to act like a leader instead of an agitator. To borrow a phrase, that would be above his paygrade.
That the bonus is being used as a populist distraction to cover all the other bailout shenanigans is no surprise.
What is surprising is that no one is calling b*llsh*t on on the whole charade by pointing out the financial ties between AIG, Obama, Dodd, Freddie, Fannie (and their bonus recipients). You couldn't ask for better opposition ammo.
But unfortunately, the truth has no representation in Washington.
By , at
Thu Mar 19, 12:20:00 PM:
TH: Why is Ed Liddy taking all this grief? The government brought him in to clean up this mess. ... One is forced to wonder why he does not just tell the Obama administration that they can find some other chump to wind down AIG.
I'm not a Randian. Still, I smile at the perfect "Atlas Shrugged" moment that would ensue if during these interrogations Liddy paused, smiled, took a deep breath, and said, "You know what, Congressman? Fix it yourself." And walked out, on camera.
Beyond its dramatic value -- he becomes an instant folk hero and energizes the productive class -- it just might be strategic for Liddy to do this. Look, if he doesn't set some boundaries now, he will be condemned to years of micromanagement and to replaying this show trial over and over. So will every other exec working for a bailout firm.
A little pain now or a lot of pain later?
-Prospect
By , at
Thu Mar 19, 12:36:00 PM:
I agree with Prospect--Liddy should walk. Geithner too.
Where are the grownups in Washington?
Who else is missing W? God, I never thought I'd write that.
Kelli K
By Purple Avenger, at
Thu Mar 19, 12:37:00 PM:
"You know what, Congressman? Fix it yourself." And walked out, on camera.
That is exactly what I would have done. Flip your ID badge up on the table and say "You are all hopeless, I quit".
By , at
Thu Mar 19, 12:51:00 PM:
The "unpatriotic" meme would get trotted out instanto. Good. Let's get all the Orwellian lefty rhetoric out and trot it around publicly. More hearings!! All the time!!
Me, I'd like to send Ed Liddy a cake. Just to thank him.
By , at
Thu Mar 19, 02:47:00 PM:
Eli has it exactly right. In addition, since Obama and his familiars in Congress are forcing us to a France-like form of government, we should have a France-like response. All taxpayers should take a day off from work in protest; it should be adopted as part of the Tea Party movement, and large enough to get mainstream publicity. I know it's hard for working folks to take a day off, but if there can be a protest to see what it's like to have a day without illegal aliens, we should show the non-producers what they will be missing when the producers aren't around - a march in Washington on that day would be good too.
By , at
Thu Mar 19, 05:10:00 PM:
I wasn't sure what to make of Liddy until I read his Washington Post op-ed. Conclusion: he's a self serving liar.
On his one dollar compensation: from Financial Times, "Compensation for Mr Liddy, who took over the embattled firm as chief executive in September, consists entirely of stock grants in 2008 and 2009.
He will not receive an annual bonus for those two years but, depending on his performance, will be eligible for a special bonus in 2010."
On executive compensation he brags that bonuses were reduced by 56 percent from 2007 to 2008 without noting that AIG stock fell from 57 dollars to under two dollars in that time frame, that the 2007 bonuses were hugely inflated to begin with and that it was in 2008 that AIG almost went belly-up and needed the multi-billion fed bailouts.
At the end of the editorial he states that "The business unit that was the source of our greatest losses is being shut down" without closing the loop to say that that business unit is the very same Financial Products Group whose retention bonuses he defended earlier in the editorial. This was a deliberate attempt to mislead.
Small points perhaps but points that are indicative of the dishonest nature of the op-ed and, I believe now, the man himself.
Also note that it was Liddy who defended last year's absurd 440,000 dollar luxury spa AIG executive retreat as "a standard industry practice."
Liddy's not a hero here, not at all.
By Viking Kaj, at
Thu Mar 19, 05:39:00 PM:
Obama accepted $ 120,000 in 2008 campaign contributions from AIG and at the end of his campaign had $30 million leftover for the next election cycle.
If you beleive it is unfair for AIG executives to receive bonuses, then it is also unfair for Obama to retain that money.
I wrote an email to the Whitehouse today urging him to donate the $ 120,000 to the US Treasury.
If you agree please contact Obama at www.whitehouse.gov.
TH, if you are in the mood, I think we should start a campaign here. I am well and truly fed up with the hipocracy of our politicians. Maybe we can bump this to a separate post?
By , at
Thu Mar 19, 06:51:00 PM:
@eli:
By the same token, Liddy's priority should have been to actually "pull their (AIG's) butts out of the fire", not pay off incompetent CEOs with bailout money.
Here's some excerpts from my own blog:
There’s been a lot of controversy over the $450 million (total) bailout of AIG. They’re not the only pigs at the taxpayer-funded trough, but their feckless arrogance at giving bonuses to incompetent CEOs responsible for its nosedive into default, and the subsequent payoffs to overseas banks, has really pissed off already fed-up taxpayers.
Some brain-dead people even thought putting them back in charge to “straighten out the mess” was a good idea. Why? So they can screw up again? To be fair, I’m angry at both AIG and the politicians who gave AIG the money to skate right out of its irresponsible mistakes.
This whole economic crisis was a train wreck just waiting to happen. Politicians mandated that banks make loans to people least likely to repay them, and used OUR money to bail them out. To top it off, the government loaned money to corporations that got into trouble by making bad business decisions, and bailed them out, too.
That’s why Congressional hearings are a joke. If anything, the rank and file taxpayers are the one’s who should be holding hearings on the Congressional and Senate assclowns who approved the bailouts.
Elected officials, (Christopher Dodd in particular) helped write “contractual” loopholes, to ensure that AIG could use the money as they saw fit, with no stipulations. No wonder, since several members of Congress and Senate on both sides of the aisle, received donations from AIG.
To people who make the excuse that AIG is simply “abiding by the terms of your contracts with your employees”, you’re dead wrong on this, and here’s why:
The bonuses, per se, are not the problem; it’s the source of the bonuses. It's taxpayer anger over being forced to bail out FAILURES.
I’m a capitalist. If you profit through hard work, risk, perseverance, and smart business decisions, more power to you. Capitalism is supposed to reward SUCCESS. If you fail, don’t dig into my pocket for rescue.
Was it shareholder money? NO. Was it money that AIG had leftover from profits? NO. It’s ours. It was taken by the government against our will and given to a failed business in the name of “bailout”.
I don’t give a damn about their contracts. Let them get sued. Let them go into bankruptcy like every other business that goes tits up.
It’s not just a bailout; it’s a lack of integrity and accountability. Even some state governors are turning down stimulus money because they know they will be forced to spend it on pork. AIG has no shame. But again, they’re just another pig at the trough.
These bonuses were guaranteed in a contract not agreed upon by those who foot the bill. We, the benefactors, did not sign the contract which the government is indirectly “honoring” with our money. I don’t recall MY signature being on any AIG contract.
Under any other circumstances involving normal business transactions that would be illegal.
A legal example: My car insurance company was sued in a class action suit, and as a paying CONTRACTUAL customer directly involved in the financing of said company, (through premiums) I get a settlement. That’s fair, because I signed a contract with the company and I’m getting back some of MY OWN money. People not included in the contract are not liable.
Though we never agreed to a binding contract, we are being held liable for AIG’s failure. How is that legal?
AIG CEO Edward Liddy opined that these contract agreements were in place in 2007, before he took over.
I don’t care if the retention bonuses have been in place since 2007, that’s not what the bailout money was intended for. It was supposed to put AIG back in the black and prevent it from going into bankruptcy (where it belongs), not pay for bonuses.
So, when all is said and done, AIG committed fraud. And, they’re still in the red.
Spread the wealth.
Expect more “contractual obligation” excuses to come up every time corporate heads are questioned about their own CEO ‘bailouts’, in lieu of rescuing their companies.
Taxpayers have had it.
WE want a bailout.
By , at
Thu Mar 19, 07:47:00 PM:
With all due respect, sfcmac, that post is confused and off-target. As well as factually incorrect (e.g. the bailout is not $450M; and Liddy is the CEO).
I like a little populism, just as I like a little Tabasco sauce. But you can't make a meal out of Tabasco alone, and you can't base a policy on populism alone.
By cubanbob, at
Thu Mar 19, 11:38:00 PM:
Liddy should have said 'here is your buck, my badge, goodbye and good luck finding anyone to take job' and walked out. He doesn't need the grief and the payoff if any is too speculative to bother with.
If the clowns that voted for this bill had actually read it then perhaps they may have a point. AIG went bust because the government fucked up, plain and simple in not regulating the banks properly (incompetence) and simultaneously encouraging them to make bad loans. If the the NY State Dept. of Insurance had actually studied the AIG situation then perhaps this would not of happened. Then again if Eliott Spitzer had not hounded the former chairman of AIG out with his populist bullshit, this debacle would not have happened either since that guy was winding down their CDO exposures, that is until Spitzer forced the guy out and the new guy plunged all the way in with them.
So let Schmuck Schumer and the rest of the democrat morons tax the bonuses to the last penny. Do it. But when anyone worth a damn doesn't stay with the company or any bailout company lets see if they can run it. So go ahead, do it. They will loose in court and wind up paying a boat load of money for the plaintiffs attorney's bills, the bonuses themselves and find that no one will work for them.
By , at
Fri Mar 20, 10:00:00 AM:
This is all Kabuki theater. The House bill with the 90% tax will die in the Senate. Everybody knows that so they are free to posture and pose for TV. Eventually, even Obama voters may figure this out.
I don't know if Liddy has stock options as an incentive to stay but I suspect they will never be "in the money" as AIG will be liquidated and the surviving insurance businesses spun off. What is more worrisome is whether the insurance industry is really OK and all the speculation was in Financial Products or is the the rot all through the industry.
