S O U T H E R N
A U T H O R
"A Play for Power"
... available at most every online bookstore!
Order here and save!
Sir Hopenchange and his great money printing machine
Last weekend, Sir Hopenchange and his lieutenants - Timothy Geithner and Ben Bernanke - decided to reward AIG with 30-billion more of our dollars. Then as a bonus, they relieved the company of their obligation to pay any interest on the billions we previously gave them. All this came after AIG had posted the largest fourth quarter loss of any US company in history.
The Wall Street Journal then reported that about $50 billion of more than $173 billion that the US government has already poured into AIG was paid to at least two dozen US and foreign banking institutions. Below are the top ten largest payouts as contained in a report recently released by AIG:
Societe Generale: $4.1 billion
Deutsche Bank: $2.6 billion
Goldman Sachs: $2.5 billion
Merrill Lynch: $1.8 billion
Calyon: $1.1 billion
Barclays: $0.9 billion
UBS: $0.8 billion
DZ Bank: $0.7 billion
Wachovia: $0.7 billion
Rabobank: $0.5 billion
Now according to my Casio, that adds up to about $9 billion to foreign banks and $6.7 to American banks.
"Why," you ask, "are we sending billions of dollars to bail out banks in foreign countries? The answer is simple: AIG had a contract with these banks to insure them against losses. As distasteful as it is to hand over billions in US taxpayer dollars to foreigners, AIG had a binding contract these foreign banks much like the business insurance many people carry to insure their businesses against calamity. It turns out that in addition to insuring a ton of other stuff, AIG insured much of the world's financial system against the consequences of a global financial meltdown.
I would think that to the savvy actuaries that study such risks, it seemed like a reasonably safe bet. But that was before the meltdown of Fannie Mae and Freddie Mac; before it all hit the fan. In the end, when the Brits and the French and the Germans and all the rest filed their claims, AIG was incapable of delivering on their promises. In fact, no private company ever could've which is one reason AIG's business of selling credit default swaps was such a scam.
So back in September, Prince George and the US Government stepped in to bail out AIG as the ultimate underwriter and insurer.
Oh, but that's not all. This week we learned that $125 million in executive pay was also contractually owed to a number of high-ranking AIG employees - the bad guys that sold the derivatives that exacerbated the company's problem. That caused the House Chairman of the Financial Services Committee Representative Barney Frank, to charge that AIG's decision to pay millions in executive bonuses amounted to "rewarding incompetence." (Now, old Barney knows a lot about rewarding incompetence - he's been being re elected to Congress by the people of Massachusetts since 1981.)
Such bad news also got the attention of Sir Hopenchange and his merry band democrats on Capitol Hill. They ranted. They raved. They carried on to no end. "How dare they?" was the mantra repeated over and over inside the people's house.
Senate Majority Leader Reid said, "Recipients of these bonuses will not be able to keep all of their money." Chuck Schumer of New York said, "If you don't return it on your own we will do it for you." Sir Hopenchange said, "How do they justify this outrage to the taxpayers who are keeping the company afloat? He then asked lawmakers and Treasury Secretary Geithner to "pursue every legal avenue to block these bonuses and make the American taxpayers whole."
That was just before the House and Senate Democrats crafted separate bills to tax up to 100 percent of the generous bonuses awarded executives by AIG and other companies rescued with taxpayer money.
Small question: $173-billion later, why are our lawmakers so hush-mouthed about AIG honoring one contract - the one with foreign banks - and not the one with AIG employees? Did the money AIG owed them come as that big of a surprise? As they rushed to judgment and passed all the bailout bills, could it be someone didn't read the fine print? Could it be that when it came to buying 80% of AIG, we bought a pig in a poke? And when it came to binding contracts, are some contracts more binding than others? And speaking of that; why - when we know full-well that the union contracts in Detroit are sinking the American auto industry - doesn't Congress seek to void those contracts as well?
Answer: not only can Congress not legislate morality, they can't/won't/don't practice it either.
Now if the government wants to punish the evil doers in corporate America -- which many, including me, think is just fine, then let's not stop with AIG. Let's go after all the other crooks, too.
After the 2001 corruption scandal at ENRON was revealed, the government went after Ken Lay on ten counts of securities fraud and related charges. He would have served 20-to-30 years in Federal prison had he not died first of a heart attack.
But in addition to AIG, there are so many others: What about Franklin Raines, the former chairman and chief executive officer of the Federal National Mortgage Association, commonly known as Fannie Mae? According to the Office of Federal Housing Enterprise Oversight, while under Raines' Leadership, Fannie Mae committed extensive financial fraud and was later forced to pay a $400 million civil penalty. Raines cooked the books at the company he led and increased his compensation more than $90 million!
The losses at Fannie Mae under Raines are far greater than the $60 billion in stockholder value lost at ENRON under Ken Lay. Yet as the retired chairman and chief executive of Fannie Mae, he receives a lifetime monthly pension payment of $114,393 ($1.4 million a year).
At the time of his retirement in 2004, he was also owed $8.7 million in deferred compensation and holds vested options for 1.6 million shares of stock, plus options for another 368,800 Shares. He has a life insurance benefit of $5 million until age 60, with a benefit of $2.5 million thereafter,
In all the ranting on the Hill about excessive pay for corrupt executives, why is Raines never mentioned? Why does he have such immunity? Well, for one thing, he has friends on the Hill. According to Chris Mathews of MSNBC, Chairman Barney himself was a recipient of more than $40,000 in campaign donations from Fannie Mae while Raines was at the helm. Not only that, Frank was once romantically involved with a (male) Fannie Mae executive!
Raines also has ties to the White House, past and present. He served in the Carter Administration as associate director for economics and government in the Office of Management and Budget. He was White House budget director under President Bill Clinton, and according to Anita Huslin of The Washington Post, "In the four years since he stepped down as Fannie Mae's chief executive under the shadow of a $6.3 billion accounting scandal, Franklin D. Raines has been quietly constructing a new life for himself. He has shaved eight points off his golf handicap, taken a corner office in Steve Case's D.C. conglomeration of finance, entertainment and health-care companies and more recently, taken calls from Barack Obama's presidential campaign seeking his advice on mortgage and housing policy matters." (Anita Huslin, "On The Outside Now, Watching Fannie Falter," The Washington Post, 7/16/08)
Just as Garth Brooks brags about having friend in ‘low places', I guess folks like Franklin Raines can brag about having friends in high places ... perhaps as he drives his long-assed Mercedes to the golf course every morning.
But not to worry. We can rest easy, knowing that Sir Hopenchange and his great money-printing machine are hard at work, growing government and rewarding incompetence and malfeasance at every level as fast as he can get the money printed and out the door. As a co worker once said of our own mismanaged business, "it's the blind leading the deaf with someone continually yelling ‘over here.'"
It's a good thing the old television show "Who Do You Trust?" never went to Washington. If it had, the phonies would have out-numbered the legitimate folks a thousand to one.