The man of system, Andrew Cuomo, ignores the contradictions between the first paragraph and the last in this excerpt from this New York Times story:
Moreoever, the attorney general argued that contracts can be
renegotiated. He said that because A.I.G. had received federal bailout
money, it had to consider what was best for taxpayers.
“You could argue that if taxpayers hadn’t bailed out A.I.G., the
contracts wouldn’t be worth the paper they were signed on,” he said.
The attorney general is seeking the list of employees who will
receive these bonuses, as well as their job information and
performances. Mr. Cuomo said that the company had failed to heed a
previous request for this list.
Mr. Cuomo is also demanding the contracts guaranteeing these bonuses
and the names of individuals who developed and negotiated the
agreements.
During the call, he said that he is not seeking to “micromanage” private businesses.
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thats like opening fire in a crowded mall the day before christmas and saying you werent trying to kill anybody
what kills me is the straight face they say it with.
i always wonder though: do they actually believe what theyre saying?
I imagine that in discovery the plaintiffs will be able to depose all parties that caused the destruction of underlaying values of the products that caused the payment of massive sums to both foreign and domestic banks, financial institutions, pension funds, hedge funds, and etc. A certain ex HUD Secretary might want to look into his own closet before he points fingers. He might not want to recall how he encouraged Fannie and Freddie to increase their purchase of sub prime mortgages!
Reminds me of Alan Alda playing Sen. Ralph Brewster to DiCaprio's Howard Hughes in The Aviator. Brewster is a lackey for TWA's ambition to be the sole provider of trans-Atlantic airline services in the U.S.
Hughes: I mean, do you think it's fair that one airline should have a monopoly on international…?
Brewster: A monopoly? No, no, no. Oh, no. No, I think one airline could do it better, see, without competition.
This story is playing out "across the pond," with about a two week head start on us, regarding the contracted pension of Sir Fred Goodwin at RBS.
From (deputy leader of Labour party) Harriet Harmon:
“The prime minister has said it is not acceptable and therefore it will not be accepted. And it might be enforceable in a court of law, this contract, but it’s not enforceable in the court of public opinion and that’s where the government steps in.”
Oh, Thomas! Is that directly from Harmon's mouth or is that a quote from "Yes, Minister".
We're doomed.
This is the beginning of the end of bonuses in the financial industry.
I hate bailouts, but if we are going to have them, then why shouldn't a cost of a firm seeking taxpayer bailouts be governmental mircomanagement.
Such treatment might deter further rentseeking.
When you take into account the amount of money the government has handed over to AIG since last fall, the 175 million dollars for bonuses is less than 2 tenths of a percent of the entire bailout amount. If I remember Obama's rhetoric about the omnibus bill and the stimulus bill, the American people don't care about such minor percentages and they can simply be whitewashed because overall the money is being used for "the public good." Since when did Obama start caring about minutia?
Much as I dislike the grandstanding of the NY AG I think he has at least the basics of a point. When AIG accepted federal money they were effectively bankrupt. Had they gone through the formal declaration the bonuses would have been relegated as subordinated unsecured creditors, basically last in line.
The answer should not be as MeThinks suggests the end of bonuses in the financial industry – but a more narrow point. When you accept federal money you dance to their tune.
It won't kill the rent seeking. It will encourage the firms to be more clever in seeking rents. It will be a disaster for companies that would rather fail than accept bailouts but are forced to take them anyway because of "systemic" risk caused by the government regulating competition out of existence so that the collapse of one firm will have unnaturally bad consequences.
"what kills me is the straight face they say it with. i always wonder though: do they actually believe what theyre saying?"
He means well, which makes it OK.
Methinks,
Yes, it is direct quote. I did mispell her name, however, (it is Harriet Harman) which would complicate finding the quote.
Here is the source, which includes video:
http://news.bbc.co.uk/1/hi/uk_politics/7917361.stm
Methinks,
In the short term I think you're right. The way to play with the government is to play it safe – follow the rules and collect a share of the loot. But eventually even the government will realize that someone has to take some risks. No risk, no return. No return, no taxes. The government finds itself with a well regulated financial machine, that doesn't produce any revenue. So in the long run I think there will be room for entrepreneurial finance, much as there is room for special operations forces in the military.
"“You could argue that if taxpayers hadn’t bailed out A.I.G., the contracts wouldn’t be worth the paper they were signed on,” he said."
Why not get hardcore and say all those who contracted with AIG should have been left with worthless paper? The total losses of bad contracting would have send a harsh lesson to any and all about making sure you don't contract with bad businesses. Actually you could say those who want their contracts fulfilled at taxpayers' expense are just as bad as AIG.
Have you noticed the politicians who always claim to be for the workers, fair wages and job security want EMPLOYMENT contracts summarily voided-but haven't been combing AIG to see if they were paying lobbyists or giving money away to charities with taxpayer funds?
Lets be honest this is exactly what'swrong with politics. The grand theater of the absurd says people who met or exceeded their personal performance standards shouldn't be paid the agreed -pon wage and the point man on this public charade of conservancy of public treasure is a TAX CHEAT
Randy,
I don't think government will realize any such thing. The only hope is that voters will wake up and elect politicians who will be forced to loosen the noose of regulation (however lightly and however temporarily). I don't think this will happen. I think we're just going to see a slowly declining standard of living and become more like Europe.
Methinks,
Probably slow growth (like Europe) for the next decade or two. But I suspect that our "Progressive" political class will soon become disenchanted with the restrictions of slow growth. The US does at least have the advantage of free market traditionalism, which could be called on if they get disenchanted enough.
Randy, I hope you're right.
The treasury sided with rule of law, as did Summers, even if Congress and the administration are looking for a way around it. This will end with taxpayers paying themselves back the bonuses, and then putting their $30b back into AIG creditors. A rousing early win for the big O.
Probably? Slow growth in the next decade or two is practically inevitable, because growth in the size of the U.S. labor force slows practically to zero in this period, and the size of the elder population, which dominates rent seeking and generally lowers productivity, simultaneously grows rapidly.
In other words, the workforce stops growing, but a growing proportion of workers provide services, like health care, to elders; therefore, the size of the workforce producing everything else shrinks. We can still have "growing GDP", as we did in the austere years of W. W. II, but the volume of goods and services we're accustomed to consuming will grow much less rapidly if it grows at all.
Don't take my word for it.
Of course, this change is purely demographic and has nothing to do with recent political or financial events.
But we'll completely ignore the economic fundamentals and blame whatever we don't like in the economy on our political rivals, while crediting our political comrades with everything we do like, because we're all brainwashed by simplistic talking heads in popular media.
Note: the last time we had a substantial fall in labor force growth, in the late seventies, we had severe stagflation. Then the growth rate fell about a percentage point, from 2.5% to 1.5%, before leveling off.
This time, the rate falls from 1-1.5% to roughly zero over a similar period of time, and the retirement of the "baby boom" happens simultaneously
In the late seventies, the last "boomers" were entering the workforce, thus the fall in labor force growth, but the elder population was not exploding simultaneously.
Martin,
I agree that the demographic effects are kicking in too. A political regime focused on regulation and reducing risk at all cost is not going to help. We need innovation now more than ever. And by innovation, I do not mean bureaucratic machination.
Well surprise surprise, turns out that the AIG bonuses were a know factor for over a year, not only that but guaranteed by a measure introduce by, you guessed it, the same senator that is now clamoring to tax those same bonuses. That would be senator Dodd.
Shocked! Yes Shocked he is!
They knew all this time, and are now using it to distract you from the stench of the cesspool which is growing larger every day.
Drain the fricking cesspool inside the beltway, fill it in, pave over it and scorch that pavement so badly nothing ever goes there again.
Oh and did I mention, disgusted he is, as well.
The collapse of pension fund value may promote later retirement.