Cartoon: Thanksgiving, Bailouts, and Rescues

Cartoon: AIG Bonuses and Campaign Contributions

Cartoon: AIG Bonuses and Geithner

Cartoon: AIG and Campaign Contributions

While some bailed-out banks, such as Wells Fargo and JP Morgan Chase, have reduced their campaign donations, others have discreetly made donations this year, Newsweek reported. Bank of America's political action committee (PAC) gave $24,500 in January and February, "including $1,500 to House Majority Leader Steny Hoyer and another $15,000 to members of the House and Senate banking panels," the weekly news magazine said...

Citigroup, which has received a total of $45 billion in federal aid, donated $29,620 to members of Congress, including $2,500 to House GOP Whip Eric Cantor. In February, the U.S. government boosted its stake in the troubled financial firm to 36 percent – a move that aimed to avoid nationalization of Citi, once the world's biggest financial firm. Analysts said the conversion gave the government effective control as the bank's largest shareholder...

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My thoughts: We have the best politicans money can buy.

AIG, the Constitution, and Bonuses

The House has passed a measure imposing a special punitive tax of 90% on certain employee compensation in response to the AIG scandal. As others have noted, this raises serious constitutional issues. Article I, Section 9, Clause 3 says simply and directly: “No Bill of Attainder or ex post facto Law shall be passed.” The congressional bill being considered in response to the AIG bonuses seems to violate both those prohibitions at least in spirit...

Bills of attainder, ex post facto laws, and laws impairing the obligation of contracts, are contrary to the first principles of the social compact, and to every principle of sound legislation.
James Madison

Aside from the dangers to liberty from overzealous members of Congress, there are issues of priorities here. While Congress has been busy with this particular
inquisition, the Federal Reserve is moving ahead with a new plan to shower the economy with a massive $1.2 trillion cash infusion–an amount 7,200 times greater than the $165 million of AIG retention bonuses.

source

My thoughts: The national debt just passed $11 trillion, Congress is considering another stimulus package, and the Fed just created $1.2 trillion. There are more important things for Congress to be angry about. Maybe if Congress took the month off, filled out NCAA tournament brackets and watched basketball things would improve. The bonuses were filling a contractual obligation. If Congress had wanted to attach strings to the bailout money, it should have been done before the bailout occurred.

Cartoon: Earmarks and Bonuses

Cartoon: AIG and Congress

Cartoon: AIG Bonus

Cartoon: AIG Bonuses

Cartoon: AIG Bonuses

AIG Bailout Controversy

Last Friday, AIG paid out about $165 million in bonus checks to employees who worked in the troubled AIG Financial Products unit. The bonuses were part of a larger package, some $450 million due to these employees in 2008-2009.

New York state Attorney General Andrew Cuomo on Tuesday said that 73 employees got more than $1 million each, including 11 people who don't even work for AIG anymore.President Obama says he wants to try to get the bonus money back. Turns out, it can't be done so easily.

Treasury chief Tim Geithner says he found out about the bonuses last week, although AIG revealed in regulatory filings last year that it was giving such bonuses. The contracts had been set up months before the government became a nearly 80%owner in the company. Treasury's lawyers said it would be legally difficult to block the bonuses.

The best Treasury said it could do right now is to ensure that the public coffers get reimbursed for all the bonuses on top of all the other money AIG owes. Treasury says it will add a reimbursement provision to latest deal to pump another $30 billion into AIG.

In the meantime, Congress is itching to get involved. Senate Democrats are talking about legislation to tax the heck out of the bonuses. Two key senators on Tuesday said they would try to impose a big tax on retention bonuses paid to executives of companies that received bailout money or in which the United States has an equity interest.

read the CNN article

Wall Street Journal Q & A on AIG Bonuses

My thoughts: The entire system and idea of bailouts in corrupt. Instead of focusing the wisdom and constitutionality of government interventionism, the media is focused a tiny group of people. The AIG bonuses are less than 1% of the money given to AIG. The money given to AIG is less than 1% of the bailout costs. So a victory may be achieved in a minor battle, while the war is being totally lost.

Cartoon: AIG Bonus

Cartoon:AIG Bonuses

Cartoon: AIG Bonuses

Cartoon: AIG Bonuses

The AIG Bailout Continues

U.S. Federal Reserve Chairman Ben Bernanke Tuesday defended the government's latest bailout of insurer AIG, telling irate lawmakers that he, too, was angry, but that failure to act could have triggered an economic disaster...

Pressed by the Senate committee to justify the latest in an expanding series of bailouts for American International Group, Bernanke said there was no alternative, even though the company had been irresponsible.

"We know that failure of major financial firms in a financial crisis can be disastrous for the economy. We really had no choice," he told the panel.

The U.S. government threw a fresh $30 billion lifeline to AIG (AIG, Fortune 500) on Monday, as part of a restructured bailout that had earlier swelled to about $150 billion. AIG, which reported a record $61.7 billion quarterly loss on Monday, has been slammed by losses on its credit default swaps that guarantee mortgage-linked securities.

read the CNN story

My thoughts: Let them fail. They are not too big to fail. The market system is one of profits and losses. The profitable succeed, the unprofitable fail. It is a waste of resources unsupporting an unprofitable company. It creates moral hazard that spreads to the entire economy.

Not Everything Can be Too Big to Fail

AIG: Biggest Corporate Losses Ever $61.7 Billion

The U.S. government, saying it needed to prevent broad damage to the financial system, announced Monday that it was again restructuring the bailout of American International Group after the battered insurer reported a staggering $62 billion quarterly loss.

Overwhelmed by ongoing deterioration in the credit markets and charges related to its restructuring, AIG's losses overwhelmed the firm during the fourth quarter. Its $61.7 billion loss was the largest ever reported by an American company.

AIG's loss for the full year was even more dramatic -- $99 billion. In 2007, the company reported a profit of $9.3 billion.

read the CNN story

Cartoon: AIG Junket

Cartoon: AIG Retreat

Cartoon: Financial Crisis and Nationalization