Forget It, Jake - It's Chinatown

AIG Financial Products exec Jake DeSantis know how to make an exit - his open letter of resignation to AIG head Edward Liddy is powerful. Briefly, he is out, he is innocent, and he is giving the money to charity.

He explains that his unit was profitable and had nothing to do with credit derivative swaps:

I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

...

I started at this company in 1998 as an equity trader, became the head of equity and commodity trading and, a couple of years before A.I.G.’s meltdown last September, was named the head of business development for commodities. Over this period the equity and commodity units were consistently profitable — in most years generating net profits of well over $100 million. Most recently, during the dismantling of A.I.G.-F.P., I was an integral player in the pending sale of its well-regarded commodity index business to UBS. As you know, business unit sales like this are crucial to A.I.G.’s effort to repay the American taxpayer.

The profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money. I did, however, like many others here, lose a significant portion of my life savings in the form of deferred compensation invested in the capital of A.I.G.-F.P. because of those losses. In this way I have personally suffered from this controversial activity — directly as well as indirectly with the rest of the taxpayers.

...We have worked 12 long months under these contracts and now deserve to be paid as promised. None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house.

Mr. DeSantis also waves the American flag:

You and I have never met or spoken to each other, so I’d like to tell you about myself. I was raised by schoolteachers working multiple jobs in a world of closing steel mills. My hard work earned me acceptance to M.I.T., and the institute’s generous financial aid enabled me to attend. I had fulfilled my American dream.

Raised by schoolteachers in a mill town, yet he dared to aspire to more - it will be interesting watching the lefties excoriate him.  Class traitor, maybe?  Too bad - if Jake gave an anti-war speech (however belatedly!) he could be John Edwards.  FWIW, so far at Memeorandum our friends on the left are silent, but the day is young and I bet the Journolist is humming!  [Eventually they will find a "Jason DeSantis" of AIG Financial was a max donor to Chris Dodd and defeated moderate Republican Nancy Johnson.  Damning!)

He will be giving the bonus to charity, subject to some sensible provisos:

On March 16 I received a payment from A.I.G. amounting to $742,006.40, after taxes. In light of the uncertainty over the ultimate taxation and legal status of this payment, the actual amount I donate may be less — in fact, it may end up being far less if the recent House bill raising the tax on the retention payments to 90 percent stands. Once all the money is donated, you will immediately receive a list of all recipients.

In the current climate he might want to hold on to it for legal fees and personal security.

Mr. DeSantis takes a shot at our two posturing Attorneys General:

The only real motivation that anyone at A.I.G.-F.P. now has is fear. Mr. Cuomo has threatened to “name and shame,” and his counterpart in Connecticut, Richard Blumenthal, has made similar threats — even though attorneys general are supposed to stand for due process, to conduct trials in courts and not the press.

Mr. DeSantis is behind on his history - Eliot Spitzer won his best cases in the press.

Good stuff.  Liddy and others had made the point that most of these AIGers were not culpable.

The Soccer Dad has a good overview of the debacle; Jennifer Rubin of Commentary wonders why, having seen the AIG mess, we want to expand the government's power to seize businesses.

FYI:  Given his work in commodities I infer that Mr DeSantis joined AIG Trading in 1998 and was moved over to AIG FP in 2003.  Do I have a point?  No, other than he was less likely to be in with the in crowd, or anyway, the Joe Cassano crowd.

NOW I QUIT:  Given his work in commodities modified by the fact that per his letter he started at AIG in equities, I infer that my previous "insight" is deeply flawed.  And wrong.

AIG Trading Group Inc., through its subsidiaries, engages in trading and market making in foreign exchange, emerging markets, precious and base metals, energy products commodity indices.

[end of thread]

e price and performance of physical commodities, often by the price of futures contracts for the commodities that are listed on commodity exchanges.
..... Click the link for more information..

Comments

[hit and run]

I love your timing, TM. Re-posting this from the last thread, because you never know if Mr. Liddy could be reading JOM (he certainly should be if he isn't).

...

Well, if anyone wants to see the bailout money that AIG has received some day come back to the taxpayers, then running off the likes of DeSantis seems counterproductive.

But hey, I would be willing to give it a shot at a salary at 1/4th the amount Mr. DeSantis got in his bonus (that he is now going to donate to charity).

Mr. Liddy, call me!

[Extraneus]

Wow, I wonder what sort of pressure these people are really under. Just thinking about it from what I've read, I can't imagine not gearing up to fight if I were in their position, so it must be pretty damned slimy on the inside.

Meanwhile, isn't A-Rod making as much as all the bonuses combined? Where's the outrage?

[DebinNC]

The Anchoress thinks "This is awesome". I do too.

[bad]

What a mess. All of this stoking of envy and class warfare is awful and will continue to result in madness.

[clarice]

Good for him..Bravo, DeSantis. (Reminds me of another Italian--the one captured and killed by the Taliban who pulled off his blindfold and said ,"I'll show you how an Italian dies!")

[MayBee]

My Dem husband's verdict on last night:
The presser was ok, but no need to do another any time soon.

[NK]

Dear Tom,

I know it's Chinatown, but these thug politians ought to be ashamed of themselmes. They are disgraces beyond description. Dodd, Frank, Spitzer, Cuomo, Blumenthal and that moron Grassley, should find that sepeku blade asap.

[glasater]

Deb~

Your links are always interesting but the one above at the Anchoress showing the smackdown of Brown is something. Thank you.

[sbw]

But, gosh, what does it matter? Axelrod has moved the public on. This is old business. We have a country to run. The burdens on the President are great. Timmy's doing a fine job. Spending more on healthcare will reduce the deficit. This guy is talking yesterday's news cycle. We need more authority to deal with the crisis. It's the Bush administrations fault anyway. Besides, you should feel confident about me because I can now look straight into the camera with my new big screen TelePrompTer.

[MayBee]

Did you notice Obama used IndyMac as a good example of resolution last night? I bet Soros tells him every day how happy he was with that deal.

Anyway, draft legislation for more resolution power being sent to the Hill this am.

[glasater]

Has anyone heard from Rick Ballard, Narciso or Kim lately?
Have not seen any comments from them for a time.

[Charlie (Colorado)]

Wow, I wonder what sort of pressure these people are really under. Just thinking about it from what I've read, I can't imagine not gearing up to fight if I were in their position, so it must be pretty damned slimy on the inside.

Fight, and have a mob firebomb your house, with two Attorneys General giving them your address? When AIG has already cost this guy millions?

I hope Cavuto and Hannety's bookers are on the phone with him right now, though.

[bad]

I was wondering the same thing, glasater. Was hoping Rick's grandchildren are on spring break and he is romping with them.

[clarice]

narciso was locked out for a while but then got back on.

[Porchlight]

I saw a Rick post on Sunday, and I'm pretty sure I saw both kim and narciso over the weekend. Seems like a long time ago, though.

[clarice]

Don't miss this one:

http://www.washingtonexaminer.com/opinion/columns/NoemieEmery/Death-of-the-Obama-dream-41801612.html>Deatrh of a Dream

[Pofarmer]

The profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money.

Dude, your company is soaking up between 100 and 200 BILLION of taxpayer money. What did you expect? If the lunch room in a business makes money, do they take a hit if the entire thing goes bankrupt???????????

...We have worked 12 long months under these contracts and now deserve to be paid as promised.

Don't disagree with that.

I also bet there are a LOT of Hit's out there.

But hey, I would be willing to give it a shot at a salary at 1/4th the amount Mr. DeSantis got in his bonus

So, what was the base salary he toiled under?

[glasater]

I worry when folks don't show up to comment for a time.

Following on Deb's link and theme above and SOP (severely off topic-apologies TM) our favorite European--Czech Prime Minister Merek Topolanek and current head of the rotating EU presidency--Is saying Zero's economic plan is a road to hell.

[Charlie (Colorado)]

We need more authority to deal with the crisis. It's the Bush administrations fault anyway.

Grump grump grump.

Okay, I agree, every time I hear them asking for "more authority" I twitch. But I recall a number of people -- I'm not sure if you were one of them, SBW, so I apologize for using you as a jumping-off point for a more generalized rant -- saying "AIG should just fail and go into bankruptcy, like Lehman",forgetting that AIG was both considerably bigger and more complex than Lehman, and that the Lehman collapse was an unmitigated disaster that precipitated the credit crunch.

The reason AIG didn't get shut down through a bankruptcy like a bank was because AIG wasn't a bank, so the Fed didn't have jurisdiction; the reason it didn't shut down like an insurance company is that insurance companies are regulated by the states, and they didn't have the jurisdiction; and the really troubled part of AIG, AIGFP, was in freaking London.

The reason AIG wasn't put into receivership in the normal fashion was that nobody knew how. There was no precedent and there was no legal framework except for some obscure provisions of the Federal Reserve Act and the Fed's charter.

So let's see the language, and let's make sure that this time it is read, and debated, not rushed through with 19 hours to read it. I'm sure there will be plenty of things to complain about -- with this bunch, I wouldn't be surprised to see Chris Dodd put in a provision awarding himself immunity from prosecution and a million dollar a year pension with thanks from a grateful nation for his actions saving the banking system.

But anyone who's been complaining about AIG not going bankrupt in a normal fashion has no room to complain that Geithner and all are now trying to define a legal framework for doing it.

[Charlie (Colorado)]

Fight, and have a mob firebomb your house, with two Attorneys General giving them your address?

On second thought, maybe that's what he's doing. Now he's freed from the people saying he shouldn't be allowed to speak out.

[Ranger]

So, what was the base salary he toiled under?

Posted by: Pofarmer | March 25, 2009 at 10:59 AM

From the full letter. This guy was asked, and agreed to work for only $1 plus his contracted bonuse payment.

"I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid."

[jean]

Fred Smith of Fedex says if Fedex is unionized they will cancel a 6.5 billion contract with Boeing.I do love our Tennesse Freds

[bad]

glasater, that can't be true. O is restoring our standing in the world. He said so.

[Charlie (Colorado)]

Don't disagree with that.

Funny, I would've sworn you were one of the folks saying how awful the "bonuses" were.

[Charlie (Colorado)]

Heh. I love this line from NOemie Emery's piece (the one Clarice linked.)

"[T]he ‘smoothest transition on record’ stopped being smooth when Bush went back to Texas, and has since been a mélange of scandals and dithering."

Damn that Bush, it's all his fault.

[bad]

Clarice, thanks for that link. Jim Geraghty has an interesting tidbit as well:

This is pretty surprising. Barack Obama holds his first party fundraiser tomorrow night, an entire 63 days into his presidency. It's at the Warner Theater, and as of 5 p.m. today . . . it was not sold out. HT, Moe Lane.

In fact, on the web site right now, it's indicating tickets are still available, for as little as $250.

Geraghty posted this before 9pm last night.

[clarice]

I'll email narciso and Rick (don't have Kin's addy) and tell them the social director at the Hotel California (AKA JOM) wants to make sure they are okay cause they haven't shown up at the free buffet for a couple of days.

[clarice]

Narciso had written me on a little used gmail account that he's locked out. He says:"I've purged the cookies, tried Safari and Firefox
and Internet Explorer, nothing any advice "

I suggested he go to typepad.com and send in a ticket asking for help.
If anyone else has a better idea, post it here for him, please.

[clarice]

Charlie, noemie is really a fabulous writer. Maybe if you ever get here I can introduce you to her.

[ben]

"But anyone who's been complaining about AIG not going bankrupt in a normal fashion has no room to complain that Geithner and all are now trying to define a legal framework for doing it."

I did not comment on AIG, but I still take exception to this comment. What legal framework is needed exactly for a business to go bankrupt and why do we need Geithner et to define that??? Oh, I forgot, AIG is too big to fail.

[gary lewis]

Nice blog thanks for this - I will show to my friend in a moment as he will love it!

****************
Flat House Share

[ben]

"[T]he ‘smoothest transition on record’ stopped being smooth when Bush went back to Texas, and has since been a mélange of scandals and dithering."

Well, it seems like the appropriate solution is to bring Bush back. I certainly would not mind.

[Danube of Thought]

Beutiful link, Deb--gave me goose bumps.

This is off-topic, but it's an issue I don't see being discussed anywhere: does the congress have the constitutional power to grant Geithner the seizure authority he is seeking? Does the Youngstown Sheet & Tube case bear on this? (That's the one where the Supreme Court said Harry Truman could not seize the steel companies in the name of national security.)

Anybody feel like doing a little research on this?

[ben]

"The reason AIG wasn't put into receivership in the normal fashion was that nobody knew how."

This is great! It's the most novel excuse yet for why we have to waste billions of taxpayer money in bankrupt institutions. Nobody knows how to shut them down!

[bad]

Judge Napolitano on FOX just declared it a constitutional no-no, DoT. FWIW

Volohk hasn't posted yet.

[cathyf]

I'll repost this from the other thread, too:

But hey, I would be willing to give it a shot at a salary at 1/4th* the amount Mr. DeSantis got in his bonus (that he is now going to donate to charity).

Hey, me too! And I even have a risk system already! And a supercomputer! (Ok, so it won't value the cds's, but any of that collateral that can be modeled as a series of cashflows, hey, we can do that.)

[Charlie (Colorado)]

Charlie, noemie is really a fabulous writer. Maybe if you ever get here I can introduce you to her.

She married?

[Charlie (Colorado)]

This is great! It's the most novel excuse yet for why we have to waste billions of taxpayer money in bankrupt institutions. Nobody knows how to shut them down!

Ben, did you have to practice to get this good at being an idiot?

[Extraneus]

My Dem husband's verdict on last night:
The presser was ok, but no need to do another any time soon.

Maybe that was the point. He can take the next four months to do another one with a "Hey, he just did one in March. I thought you guys were complaining about over-exposure."

[bad]

does the congress have the constitutional power to grant Geithner the seizure authority he is seeking?

How delicious if the constitutional law scholar president proposed something unconstitutional.

[glasater]

I'll email narciso and Rick (don't have Kin's addy) and tell them the social director at the Hotel California (AKA JOM) wants to make sure they are okay cause they haven't shown up at the free buffet for a couple of days.

Thanks Clarice for herding the cats:-)

[Pofarmer]

Funny, I would've sworn you were one of the folks saying how awful the "bonuses" were.

It's not that I really think the bonuses were awful, I just think that it was a very tin ear kind of thing to do, especially in light of how unpopular the bailout bill was, and how much money AIG received.

From the full letter. This guy was asked, and agreed to work for only $1 plus his contracted bonuse payment.

"I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid."

Yeah, so he really didn't agree to work for that $1, did he?

[Charlie (Colorado)]

What legal framework is needed exactly for a business to go bankrupt ...?

See, Ben, when a company goes bankrupt, it hires "lawyers" -- they're people with lots of education, and occasionally, as with Clarice, some actual sense -- and "accountants", who know all about things like "financial regulations" which are established based on these things called "laws". These lawyers prepare a bankruptcy petition, and they go to a "court", which is a big room with nice woodwork where another lawyer, a special one employed by this big group called the "Federal Government" called a "judge", goes through the requirements of those "laws" to figure out how to allocate the remaining stuff the company has.

[verner]

Fred Smith of Fedex says if Fedex is unionized they will cancel a 6.5 billion contract with Boeing.I do love our Tennesse Freds

WAY TO GO FRED!

What we must remember is that Fedex is a great employer, with great benefits without a union. In fact, Fred is doing everything possible to keep his peeps employed during the downturn--cutting salaries rather than layoffs.

[ben]

"Ben, did you have to practice to get this good at being an idiot?"

I quoted you...you made the idiotic comment...now live with it.

[Ignatz Ratzkywatzky]

The reason AIG didn't get shut down through a bankruptcy like a bank was because AIG wasn't a bank, so the Fed didn't have jurisdiction; the reason it didn't shut down like an insurance company is that insurance companies are regulated by the states, and they didn't have the jurisdiction; and the really troubled part of AIG, AIGFP, was in freaking London.

Charlie,

I'm not sure what you're saying here.
Are you saying AIG couldn't have been taken by it's owners or creditors into Chapter 11 or 7?
Or are you saying it would have been uncharted territory?
I doubt very strongly the first.
The second may be true but is not a persuasive argument against it.

[Charlie (Colorado)]

Yeah, so he really didn't agree to work for that $1, did he?

Posted by: Pofarmer | March 25, 2009 at 11:55 AM

So, what was the base salary he toiled under?

Posted by: Pofarmer | March 25, 2009 at 10:59 AM

Wasn't quite what you asked, was it?

[cathyf]

does the congress have the constitutional power to grant Geithner the seizure authority he is seeking?

Not just "no" but "hahahaha *gasp* NO hahahahahahaha *gulp* *gasp* heheheheheheh..."

Not only are many if not most of the counterparties international with the securities registered mostly in London, but some of the counterparties are governments.

[Patrick R. Sullivan]

Charlie, I'm more curious if ben and Po are just naturally clueless or require medication to perform at their level.

[clarice]

Charlie, she's not..though she recently adopted a dog.

DoT, I'll let Volokh do it. It sounds not quite kosher to me.

[Pofarmer]

Anybody feel like doing a little research on this?

DOT, I think we crossed the Rubicon of constitutionality some time ago.

and the really troubled part of AIG, AIGFP, was in freaking London.

Sooooo, what did the Brits kick in?

Nobody knows how to shut them down!

Ben, did you have to practice to get this good at being an idiot?

Now c'mon Charlie, be fair, that has been your basic arguement.

[glasater]

A fellow just on CNBC was talking about the AIG people in London "having a more militant attitude" than the personnel here.
He doesn't believe the London crew will be turning back the bonuses any time soon. And they may leave the company as a group with no one in place to unwind the mess which would cost the US taxpayer more money.

[cathyf]

Are you saying AIG couldn't have been taken by it's owners or creditors into Chapter 11 or 7?

Well that's pretty much for sure a no -- unless the British bankruptcy law just happens to have the name numeric scheme as the American law.

[bad]

God save us all. This can't be good.

LUN

[Charlie (Colorado)]

[Unchrted territory] may be true but is not a persuasive argument against it.

What you'll find persuasive is a separate question, but consider the orderly reorganization of Bear-Stearns against the debacle that was Lehman. One of them, done ad hoc by Paulson, was a big business news story for a few days, but only the Bear-Stearns stockholders were badly hurt. The other one damn near broke the banking system (even though the story about $550 B in withdrawals in 4 hours was a myth.)

The point of bankruptcy is to allow a company to shut down or reorganize in a way that hurts the fewest people, and does as much as possible to protect innocent bystanders. A straight out normal bankruptcy didn't do it with Lehman.

[Ranger]

Yeah, so he really didn't agree to work for that $1, did he?

Posted by: Pofarmer | March 25, 2009 at 11:55 AM

That was my point. You asked how much he made before his bonus. The answer is $1. He was working only for a bonus that he would recieve full payment of only if he stayed at work the entire year. Which brings us back to the point of these "retention bonuses" as essentially severance pay for these people working a a division that is already slated to be shut down. Stick around to close down the shop, and we pay you X amount. Leave early and give up a big chunk of your compensation.

The poeple you are so angry at are long gone from AIG-FP. Those that are left are trying to clean up the mess.

[Cecil Turner]

So, if I'm reading this right, the gang that can't be bothered to read the legislation that specifically authorizes those bonuses spends weeks hyperventilating their faux outrage on the wrong guys? Wow, there's a shocker. Wonder when they'll get around to examining Fan/Fred bonuses like the ones that made Jamie Gorelick a gazillionaire? Or the millions in campaign donations to some of our favorite Democrat causes? (Oh, right, that's different . . .) But at least AIG is saving $1/annum on future salary.

On a related note, reliable sources quote Mr A. Soprano as annoyed with AG Cuomo:

"If he tinks he can run a protection racket in my neighborhood without giving the Boss a taste, he's oobatz. Da way I see it, he's into me for fifty large . . . and another five for the juice . . . forget about it!" [emphasis in original]

Okay, maybe the source ain't that reliable.

[Charlie (Colorado)]

Now c'mon Charlie, be fair, that has been your basic argument.

You somehow left this out: It's the most novel excuse yet for why we have to waste billions of taxpayer money in bankrupt institutions.

Amazing what you can "prove" with a selective quotation.

[Charlie (Colorado)]

Cecil, there's a reason that the Congress has been called America's only native criminal class.

[clarice]

Cecil, I wonder why Tony didn't have his beak in.

[Fresh Air]

It's very unfortunate these payments were termed "bonuses." They are not; they should be called what they are: "stay-puts," or "retention payments." These guys had the opportunity to leave the firm in the spring of 2008 and make good livings elsewhere. The firm was concerned enough about this prospect to work out these arrangements. The employees remained and they thus deserve their money. END OF STORY.

Whether the payments now look distasteful, excessive or inappropriate is rather immaterial. Two parties entered into a contract. Both parties fulfilled their obligations. High dudgeon, whether on this blog or in the Congress, doesn't really change anything

[MayBee]

It's nice to know Obama waited until he knew what he was talking about regarding the AIG bonuses.

[Danube of Thought]

I'm with Fresh Air. It's the loaded term "bonus" that has all these people's knickers twisted. They should've consulted with the Obama bureaucrat who just renamed the Global War on Terror--I think it's now an "Overseas Contingency Operation" or something.

(When I was a young midshipman a very grizzled Marine sergeant, a Korean War veteran, dismissed Truman's characterization of that war as a "police action." He said "If it was a police action, how come they didn't send cops?")

[Thomas Collins]

Not being an expert on bankruptcy law, I am not going to comment on the technicalities of taking companies into and out of reorganization and liquidation bankruptcies. However, it seems clear that, although no one wants to put it this way, the Globalized Financial Polity is in a state of effective bankruptcy (a Chapter 11 restructuring bankruptcy in US terms), with the world's central banks and finance ministers, and various folks from the investment firms and hedge funds (and their lawyers) serving as the trustees in bankruptcy, the creditots' committee, the debtors' reps, and the potential new money waiting to pounce at the right opportunity. The bizarre thing about this is that it is not clear which parties are functioning in which roles, and the same party may be functioning in different roles at the same time. And, unlike a normal bankruptcy, the folks who are helping in the unwinding (such as the AIG folks) are being pummelled for doing a job which, if not done, is going to make all of this messier than it already is.

I think the only one with the smarts to sort
this all out is the character played by Eddie Murphy in Trading Places!

[Charlie (Colorado)]

It's very unfortunate these payments were termed "bonuses." They are not; they should be called what they are: "stay-puts," or "retention payments."

I suppose if they'd realized that they'd be used as an excuse for Barney Frank's demagogueing and Obama's posturing, they would have. But they've always been called "retention bonuses" on the theory that a "bonus" is a one-time payment and a "salary" is paid periodically.

[DebinNC]

Latest on the CT AIG front. Some AIG honchos will be grilled tomorrow..first in private and then "possibly" in public. I think that scene comes just before the show trial scene is most holocaust movies.

[RichatUF]

DoT-

does the congress have the constitutional power to grant Geithner the seizure authority he is seeking?

Don't think I can top cathyf's earlier comment, but Paulson recognized the regulatory problem early in the crisis from the US side. The problem I see with Geithner coming out of the gate and say "seize" is that it spooks the markets globally, probably runs afoul of the WTO (and numerous tax treaties), and would conflict with the interests of the IMF and Basel II.

Can they do it? The NY Fed and NY Commissioner of Insurance organized the first bailout under existing Federal Reserve Authority and it isn't as if there weren't a parliment of regulators looking over AIG's shoulders every step of the way (per the OCC there were 400 regulators watching AIG).

[Charlie (Colorado)]

And, unlike a normal bankruptcy, the folks who are helping in the unwinding (such as the AIG folks) are being pummelled for doing a job which, if not done, is going to make all of this messier than it already is.

Plus, the chattering classes aren't thinking it out carefully. Consider, for example, the ones who say "if there'd been a bankruptcy, they could have broken these contracts", which in fact if there'd been a bankruptcy, these contracts would have been made as part of the bankruptcy and would very likely have been very similar, if not bigger, and would have been based on debtor-in-possession financing.

[Charlie (Colorado)]

From Deb's link:

Other than Mr Liddy, all of the men were in a group of AIG senior employees that gave Senator Chris Dodd more than $100,000 in campaign donations during the last election campaign.

"An honest politician is one who stays bought."

[Charlie (Colorado)]

The problem I see with Geithner coming out of the gate and say "seize" is that it spooks the markets globally, probably runs afoul of the WTO (and numerous tax treaties), and would conflict with the interests of the IMF and Basel II.

Geithner has a real way with words, doesn't he?

What they need is something like when the FDIC seizes a bank -- receivership and reorganization. The choice of words could be better.

[Charlie (Colorado)]

Today's Phun Phact is that Chris Dodd's wife was a director of an AIG company 2001-2004.

[clarice]

The market doesn't look "spooked" to me--housing starts are up and so is spending on durable goods and the Dow is up.

Maybe having heard this stupid plan and all his backtracks last night, the market figures the gang that couldn't shoot straight will not be able to do much and we'll just do it (and do it better) ourselves.

[Ranger]

Well, Cap-and-Tax is a dead letter, the budget is getting cut to bits on the hill, and "healthcare reform" which is the one thing that may happen appears now to be a way to shift medical costs from private companies to the tax payers. That may explain why the market is headed up.

[Ranger]

Oh, and Card Check looks dead too. Yet another reason to be cheerful about the economic future.

[bad]

Geithner and Obama disagree? or is Geithner unable to say what he means?

Geithner, at the Council on Foreign Relations, said the U.S. is "open" to a headline-grabbing proposal by the governor of the China's central bank, which was widely reported as being a call for a new global currency to replace the dollar, but which Geithner described as more modest and "evolutionary."

"I haven’t read the governor’s proposal. He’s a very thoughtful, very careful distinguished central banker. I generally find him sensible on every issue," Geithner said, saying that however his interpretation of the proposal was to increase the use of International Monetary Fund's special drawing rights -- shares in the body held by its members -- not creating a new currency in the literal sense.

"We’re actually quite open to that suggestion – you should see it as rather evolutionary rather building on the current architecture rather than moving us to global monetary union," he said.

Later, Geithner was committed to Obama's denial of changing currency.

LUN Loose lips and all that. I hope he wasn't spilling the beans and walked back.

[bad]

oh carp

[jimmyk]

OT: Fed Ex threatens to cancel jet orders because of card check legislation.

Of course the article doesn't describe the legislation other than as "making it easier for unions to organize workers." I thought it was just about "free choice."

LUN

[jimmyk]

Oops--I didn't see the earlier posts on this. But I guess it really isn't "OT", it's the same thing--saying "I'm outta here." There may be a lot of this if Obama continues down this road.

[Jack is Back!]

A missing element here is that the AIG funding by the Feds are officially 'loans' and preferred share purchases as well as some credit infusion. For those warrants the federal government got 80% control of the AIG Holding company and are for all intent and purposes its majority owner. If the Federal government was as hard on Fannie and Freddie back in 2004-2005 as it is now on AIG, this whole mess could have been moderated. Additionally, there is a Paulson/Goldman link here that Ed Liddy represents. The money we loaned them and purchased shares with was used to stem losses on CDS's bought and paid for by firms like Goldman and Merrill to cover risk of the layered CDO's they had in mortgage securities. Well the chickens came home to roost when the investment banks called in the CDS's that AIG had significantly under-estimated the catastrophic risk of all of them being called. That is why they lost $62 billion one quarter and that is where the Federal contribution went to cover the financial products (CDS) they wrote. BTW, Ed Liddy, when head of All State served on the Goldman board and was Chair of the Audit Committee. Want to guess what the Audit Committee does?

[RichatUF]

clarice-

We'll see. Modest improvement of really bad numbers doesn't impress and bankruptcy for GM and Chrysler is still on the horizon. The Obama Administration couldn't grind the US economy to a total halt though it appears they gave it the old college try.

The other thing I see out there is that the national security risks and general diplomatic incompetence of the Obama Administration hasn't been fully priced in and when it is we'll have a pretty long leg down.

[Appalled]

Jack:

So what's your argument? Liddy is getting something out of his AIG tenure besides heartache? The Congress is right about bonuses? Rich people are meanies?

[Extraneus]

A private, then a possible public hearing?

I'd pay money for the opportunity to be grilled by these scumbags in a public hearing if I were one of these AIG guys. I might even donate my entire bonus to charity if Barney Frank promised to be there asking questions.

[hit and run]

Fed Ex threatens to cancel jet orders because of card check legislation.

Fred Smith was at one point on the short list of potential McCain VP picks...

I'm sure that there is no way the lefties will overlook that fact when they address FedEx's threat...

Won't be long until we hear: "Fred Smith wants Obama to fail".

[cathyf]

Hey, I just realized who Jake is -- I worked for him until 1998!

I'm off to hit up my network of former coworkers to see if anybody has an email for him so I can give him an electronic high five.

[jwest]

“I'll email narciso and Rick.....to make sure they are okay....”

Sure. No thought as to if jwest is alive or dead. I could be homeless or sleeping under a bridge like 1 in 50 children in the U.S. and no one would care.

Where is the love?

[bad]

jwest, I've been worried SICK that you were doing just that. Thanks for checking in!!!

[clarice]

jwest--Oh dear *smooch, hug****

[MayBee]

jwest- we've been too worried to even dare mention it.
xoxox

[jwest]

Thanks, all…..it’s nice to be missed.

I can tell from the punctuation that the concern is sincere.

[Ignatz Ratzkywatzky]

Well that's pretty much for sure a no -- unless the British bankruptcy law just happens to have the name numeric scheme as the American law.

I presume this is a joke or a technical point since that portion of AIG outside the US was hardly going to survive absent the US portion of the company, especially since the CDS trading seems to have been as much or more outside as in.

What you'll find persuasive is a separate question, but consider the orderly reorganization of Bear-Stearns against the debacle that was Lehman.

Not really.
A very good argument can be made that the government intervention in the Bear case shielded the larger market from the information it needed to understand the gravity of the financial problem for months thereby exacerbating it when the inevitable occurred and allowing investors, the Fed and the companies themselves to underestimate what was coming.
The Lehman bankruptcy and resultant money market convulsion was quickly covered by the Fed and the FDIC and the rest of its assets were sold off. Did people other than the stockholders get hurt. Probably. That is why it's called moral hazard. Counterparties tend to be more careful with whom they deal when their fingers are burnt. Bankruptcy brings painful lessons. Bailouts bring comfortable short term obliviousness and risk transfer and, and perhaps more importantly, statism.
Did Lehman throw a massive scare into the markets? Yeah, and about time something did. Markets self correct painfully and quickly, government intervention doesn't stop the pain because the markets cannot be denied, they just prolong it, sometimes deepen it and always, always empower the government at the expense of our freedom.

The argument that things would be so much worse if the government did, either nothing, which few people argue, or something far less interventionist and irreversible seems to me to be not very different from the rightly ridiculed Obama claim that he is 'saving' 3-4 million jobs.
Neither assertion can be measured, but are just supposed to be accepted as proof on their face, apparently.
If we look to history for guidance I can't see much evidence supporting either the efficacy or wisdom of government intervention, outside of the occasional coordinated central bank interventions, which is not what we're talking about here. I can however find a good many cases of slashing spending and taxes working very well to get us out of similar fixes.

[RichatUF]

I ♥ jwest;)

[Neo]

Perhaps Jake DeSantis should sue for harassment being that he had to work in a “hostile environment”.

[Old Lurker]

Bad, thanks for that quote. So the only guy smart enough to be Treasury Sec makes a remark in support of the China/Russia idea about replacing the dollar as the main reserve currency and the currency markets plummet in minutes. Only when he was asked to clarify did he speak in favor of the (strong) dollar remaining the reserve currency so the markets settkled down some.

It seems to be a disease of this administration that they do not understand that the world listens to every word they say.

Smartest guy in the room???

[bad]

Old Lurker, I hope he wasn't speaking the truth, then belatedly remembered it was on the down low for now.

[MayBee]

So the only guy smart enough to be Treasury Sec makes a remark in support of the China/Russia idea about replacing the dollar as the main reserve currency and the currency markets plummet in minutes.

I bet Major Garrett feels vindicated for asking the question he did last night.

It seems to be a disease of this administration that they do not understand that the world listens to every word they say.
ding ding ding

[bad]

This can't be good:

But Geithner wasn't the only top Obama adviser who refused to rule out a transition to a global currency. White House economic adviser Austan Goolsbee said much the same thing yesterday afternoon in an interview with CNN's Wolf Blitzer. Although he characterized such a change as "unlikely," Goolsbee twice declined to rule out such a global currency despite being pressed by Blitzer. "I haven't seen the details of the proposal," Goolsbee said.

LUN

[Extraneus]

Evidence of a Cuomo shakedown?

What's a "security review," anyway?

[Extraneus]

Speaking of scumbags, I would have to hold back a part of the bonus unless Cuomo agreed to ask questions at the public hearing, too.

[RichatUF]

bad-

The Obama Administration must want interest rates to shoot sky high because the amount of dollarized global trade is essentially a global subsidy keeping US long term rates artifically low. Hummm...

Who benefits by Obama Administration comments which trash the dollar and essentially support for an IMF managed gold standard?

[MayBee]

bad- you just don't understand the highly technical economic terms "unlikely". ;-0