By
Marilyn M. Barnewall
March 22, 2009
NewsWithViews.com
If the way Congress has mismanaged "The AIG Affair" doesn't tell you what a bunch of clowns represent you, nothing will. If you believe Congress is really trying to solve the AIG problem (which, to be totally truthful, Congress created) you should not read the rest of this article. It will make you angry.
Yes. To answer a popular question, Timothy Geithner, our inept Treasury Secretary, had to know about the employee bonuses being paid to AIG. If he did not know about the bonuses, he wasn't doing his job as the head of the New York Federal Reserve Bank (which he was, at the time the bonus agreement occurred). It's this simple: If he is so naïve or dumb that he did not know what was happening, he has no business being Secretary of the Treasury for the United States of America. And, these appear to be the only two possibilities: Either he lied, or he is dumb and naïve.
When I was president of the MacGruder Agency, a bank financial consulting firm, I signed a lot of contracts with commercial banks. When a bank wanted to retain me, I gave them my consulting contract which was then given to the bank's lawyers. Each bank added its own requirements. My contract told them they would have to pay for my first class airfare, for example. It told them how many hours I would work during a "day" and how many of my days each year the amount they were paying would buy.
They required specific things of me, too. I was promising to create a credit-driven private bank for them. They required me to specify costs and services provided. In other words, the contract made clear what we could expect from one another.
From the largest to the smallest banks in America with which I worked, believe me if I did not perform as my contract said I would, they could have terminated the contract any time. Now, when a group of people are so inept as to bring a company to bankruptcy, there is plenty of reason to say "You didn't earn your bonus this year." There is rarely - if ever - a contract offering money for performance that does not have a specific performance clause in it.
There was one logical question to be asked of Edward M. Liddy, President and CEO of AIG, when Congress raked him over the coals at hearings last week. You know which hearings I mean - where everyone was "outraged" over the employee bonuses? One question needed to be asked and I certainly didn't hear anyone ask it. Thus, the "outrage" lacks credibility.
"Where's the beef?"
Translated: "Where are the employment contracts signed by AIG? I need a copy to determine what you promised to pay these people and what you required of each employee to earn this bonus. Black out the names if need be, but I need to see a copy of the contracts you say you absolutely must honor!"
Without a copy of the AIG contract giving bonuses of $165 million to employees, no one really knows whether or not the bonuses had to be paid.
"But we need this money to retain these employees," was the story given.
Really? Then maybe you can explain why over three dozen of them have already left the company.
Because the right questions were not asked, I mark the Congressional hearings off as "artistic performance," not serious questions and answers trying to solve a problem.
Rather than ask one simple question - the right question - Congress instead passed what appears to be unenforceable legislation. Pelosi's past actions have proven how little concern she has for the U.S. Constitution, so it should surprise no one that she is willing to tromp on the civil rights of a group of people to over-compensate for not doing sufficient due diligence before giving AIG huge amounts of money. This problem exists because of her arrogance and stupidity!
AIG isn't the only mistake Congress made. For example, did you know that Goldman Sachs is offering money to employees they had to terminate because of the economic crises that company helped create? Yep. Such a nice thing to do, too, offering their former employees tax dollars to pay their moving expenses to locations where it might be easier to find employment. Haven't heard about that one yet?
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Surely you read the Wall Street Journal article this week about Fannie Mae paying bonuses to its employees? These are retention bonuses of from $470,000 to $611,000 to be paid in 2009 to executives. Frankly, we would all be better off if every executive at Fannie Mae and Freddie Mac were not "retained." The performance of the company certainly doesn't justify doing anything to encourage Fannie's executive managers to stay nor for paying them a bonus.
Bear in mind, Fannie and Freddie just reported combined losses of nearly $108 billion largely from home mortgage defaults. Who decided to bank those mortgages? Executive managers they want to retain via a bonus are responsible for such decisions. If they were not, they should have been. The Treasury Department will provide up to $200 billion for Fannie and $200 billion for Freddie.
The two mortgage behemoths currently need $60 billion in additional funds (since TARP) to cover loan losses to date. There are so many mortgage bankers looking for jobs right now, it is very doubtful anyone is going to walk away from their job over a lost bonus. If they do, we still win. With a little help from Congressman Barney Frank (D-MS) and Senator Chris Dodd (D-Del), they got us into this mess. We could benefit from their departure.
Are you feeling "outrage" yet? How about this:
Thirteen of the firms that received billions of dollars of bailout money owe hundreds of millions of dollars in UNPAID TAXES.
See how generous you are, America? You not only loan AIG money so it can pay foreign banks billions and billions of dollars, you pay back taxes owed for companies who haven't paid their own tax bills! What a country!
One company that received bailout funds owed $113 million in unpaid federal income taxes, another $1.1 million (plus another $223,000 in federal employment taxes). Oh, they can't release the names of these companies to you. That wouldn't be fair. Apparently it's fair for you to get billed for everything but kept ignorant of for what your tax dollars pay (and those of your children and grandchildren).
All of the banks and other firms that received federal money signed contracts stating they had no unpaid taxes so if they lied, we can prosecute them. That, of course, won't get your money back, but it will help you with the "outrage" and reduce the costs involved with your anger management classes.
Using AIG as an example, here's what is outrageous.
After the big AIG fall last September, Edward M. Liddy, 62, took over two positions with AIG, succeeding Robert B. Willumstad. Prior to taking on responsibilities for the failing AIG, Liddy was affiliated with Sears as Chief Financial Officer (CFO) and later was Chairman of Allstate Insurance.
AIG has been presented to the American public as an "American-based" company. It has offices in New York, but its corporate headquarters is in London. The company's roots are in Shanghai - which is part of the People's Republic of China. Specifically, AIG was founded by C.V. Starr as American Asiatic Underwriters in Shanghai in 1919. In 1921, Starr founded Asia Life Insurance Company. It was the first company to offer life insurance to the Chinese people. .In 1975, Maurice R. Greenberg, Chairman and CEO of AIG at the time, traveled to Beijing for the first time. He made many similar trips during future years.
Is that what you call an American company? I don't.
AIG was involved in credit swaps - you don't need to know what they are to understand what AIG did, so I'm not going to waste words explaining it - with 25 international financial institutions. These financial institutions are called "counterparties." Had you, dear taxpayer, not been so generous, when the credit swaps went bad and AIG was unable to pay insurance losses on them without billions of tax dollars, the company would have gone into bankruptcy… probably Chapter 11. AIG first gave these "counterparties" the collateral supporting the loans. You understand the collateral process. Just look around your neighborhood and you'll be sure to find someone who's been foreclosed on. The bank took possession of the collateral on your neighbor's mortgage loan by kicking their butts out into the street. That's the collateral process. So, AIG first gave their "counterparties" loan collateral. Later, AIG gave them billions of your tax dollars and, lo and behold, it made the "counterparties" whole.
Who were these wonderful American companies you helped by giving money to AIG so it could give it to its counterparties? Société Générale (France); Goldman Sachs (New York); Merrill Lynch International; Deutsche Bank (Germany); Calyon, Crédit Agricole (France); UBS (Union Bank of Switzerland); Barclays (England); Coral Purchasing, DZ Bank (Germany); Bank of Montreal (Canada); Rabobank (the Netherlands); Royal Bank of Scotland; Bank of America (U.S.); Wachovia Bank (U.S.); HSBC (Household Bank, England), and Barclays Global Investors (England).
Looking at the amount of money injected via funds given to AIG because it needed to be saved and then somehow got into United Kingdom coffers, I'm sure we can expect a thank you note from the Queen, any day now.
In other words, while your legislators are keeping you either entertained or nervous with "outrage" they themselves created, the American taxpayer has once again gotten the fickle finger of fate shoved in their faces - but it's a golden finger!
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They are keeping your attention diverted from what is really going on in the hallowed halls of your United States Congress.
The employee bonuses totaled only $165 million. The payments to all of those foreign entities listed above almost totals $100 billion.
You've been had. Again.
� 2009 Marilyn M. Barnewall - All Rights Reserved
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Marilyn Barnewall received her graduate degree in Banking from the University of Colorado Graduate School of Business in 1978. She created the first wealth creation (credit-driven) private bank in America in the 1970s. Prior to her 21-year banking career, she was a newspaper reporter, advertising copywriter, public relations director, magazine editor, assistant to the publisher, singer, dog trainer, and an insurance salesperson and manager.
She was named one of America's top 100 businesswomen in the book, What It Takes (Dolphin/Doubleday; Gardenswartz and Roe) and was one of the founders of the Committee of 200, the official organization of America's top 200 businesswomen. She can be found in Who's Who in America (2005-08), Who's Who of American Women (2006-08), Who's Who in Finance and Business (2006-08), and Who's Who in the World (2008).
Web site:
E-Mail: marilynmacg@juno.com
