Forbes — AIG’s Larceny
|April 4, 2009||Posted by Jeffery J. Smith under Progress Report, The Progress Report|
Forbes — AIG’s Larceny
Roundup — Journalists on the AIG Scandal
Our bailout of AIG reveals how our political economy really works. We trim, blend, and append three 2009 articles from: (1) Forbes, Mar 3, on free markets by Dan Gerstein, founder and president of Gotham Ghostwriters and ex-communications director to Sen. Joe Lieberman; (2) SF Gate, Mar 19, on insiders by Robert Scheer whose new book is The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America; and (3) AlterNet, posted Mar 26, on derivatives by Lucy Komisar.
by Dan Gerstein, by Robert Scheer, and by Lucy Komisar
- Forbes — AIG’s Larceny
The company that perpetrated the biggest business loss in the history of the world is handing out half a billion dollars in retention bonuses to the unit that almost singlehandedly destabilized the global economy.
The government-appointed CEO of AIG (from Wall Streets Goldman Sachs) paid a retention bonus to the people who bankrupted the company — i.e., the people who should have been fired once the company posted a $60 billion loss in the last quarter of 2008.
The only real way to remedy the original mistake — allowing the bonuses to go forward in the first place — would be to demand the employees who already got bonuses to return them, sue those who don’t comply, and block the rest of the bonus money from being released.
Forget about bonuses for a moment. Why was AIG allowed to assume so much risk without carrying the reserves necessary to cover it?
Todays market has no transparency. Junk loans masquerade as triple AAA; banks pay off rating agencies to pimp their products. Nor is there any accountability, not when Lehman Brothers hands out multimillion-dollar bonuses to the executives who drove it out of business.
Are the elites who have been running and corrupting this system actually capable of changing it?
- AIG — the biggest shark of all
The $165 million in taxpayer funds used to for bonuses is but a sideshow in a far larger drama of moral decay swirling around the banking bailout. It should not distract from the many billions, not paltry millions, of our dollars being diverted to reward the very folks who brought us such misery.
Consider the $12.8 billion of the $170 billion that taxpayers gave AIG in bailout funds that AIG then secretly diverted to Goldman Sachs, a company that evidently has a lock on both the Treasury Department and the Federal Reserve no matter which political party is in power. It was the biggest payoff among those that AIG made to a score of foreign and domestic financial giants.
There must be a criminal investigation of the AIG debacle, and it looks as if New York Attorney General Andrew Cuomo is on the case. The collusion to save this toxic company in order to salvage the rogue financiers who conspired to enrich themselves by impoverishing millions is being revealed as the greatest financial scandal in US history.
- The Real AIG Scandal
There’s nothing like a grandstanding member of Congress to deflect attention from the real issues at hand by throwing a few juicy bones to the masses. Most legislators at a House Finance subcommittee hearing avoided the real story of AIG’s collapse. Instead, they homed in on the public relations disaster of hundreds of top AIG officials and staff getting $165 million (later revealed as over $218 million) in bonuses.
The key issue ignored by the congress was the potential catastrophe represented by as much as $2.7 trillion in AIG derivative contracts. To put that number in context, we’ve so far provided the company only about $170 billion.
If there were illegal profits made on derivatives transactions that created sham shares sold into the marketplace, we should claw back that money, which could amount to a lot more than the bonuses paid to AIG officials.
Gerstein (again): At least AIG’s most outrageous ripoff yet has ripped off the last remnants of the free-market mask on our economy and exposed the full extent of the broad fraud that American capitalism has become.
Moreover, it’s forcing all of us to confront our own complicity in this con. More than just buying houses we could not afford, average Americans, who were glad to live inside the blinding bubble we helped blow out of proportion, and led by a coalition of rent-seeking businesses and their free market-idolizing enablers in Washington, as a people failed to see the difference between corruption and enterprise.
A free market is supposed to reward initiative instead of privilege, allocating capital to the opportunity seizers and profit makers, regardless of their status or connections. It has basic regulations to disclose information, prevent crime, and keep our investments safe. And a safety net to protect us in times of trouble. But those are for equal opportunities, not equal outcomes.
JJS: This rightwing critic sees more of the deeper workings than do the two lefties. More basic yet, why let all our savings and mortgages become concentrated on Wall Street? Let’s end speculation in land and our trying to make money off each other. Land value is part of the commons, something we should recover and share. With such a geonomic policy in place, wed not have to worry again about bubbles and bailouts, as the business cycle would be smooth and its riders secure.
Jeffery J. Smith runs the Forum on Geonomics.
Much of high finance lately has not been legal
Bailout for AIG Not Needed
Public dollars are already lining speculator pockets on Wall Street
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