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Political Books






Religious Books -- Not Fundamentalist!

The Fundamentalist Xtians should not be allowed to hijack the language of Christianity. They are at least as much heretics to Christianity as the Arians and Gnostics of early Christian days.




Biblical inerrancy is not possible.


The books both above and below show the limitations of language and the impossibility of Biblical Inerrancy.

How can language be misused? Using General Semantics, this book was Written to explain Nazi propaganda and still used as a textbook


Books - Popular Math, Post Enlightenment & Science

This book explains why the above books on Christian Fundamentalism are politically important in America today.


Modern Society measures risk & predicts possible futures. The book below is a higly readable history of insurance, statistics and modern financial instruments.

Compare this to religion, in which it is presumed that the perfect society was known in the past and all that is necessary to do is to return to that perfect society.


Fascinating, highly readable and fun book on modern mathematics and its limitations. If you are interested in ideas, this is your book!

This is a collection of Hofstader's Scientific American articles. Again, a very fascinationg and highly readable book, requiring no mathematical background. (Buy it used - it is one of the books that will keep disappearing.)

Older, very fascinating book on mathematical ideas. Did you know there are three kinds of infinity?


Sunday, March 29, 2009
GM Rick Waggoner announces he will leave CEO job of GM; Obama Rescue plan due tomorrow
So out of the blue, Rick Waggoner announces that he is going to step down as CEO of General Motors where he has been CEO for eight years. The timing is suspicious. Obama is scheduled to announce his bail-out plan for BM and Chrysler Monday.

There was apparently no advance warning that this might happen. So the question is, did he decide to go himself for REAL personal reasons, or was he pushed out. And if he was pushed out, was it an internal coup by powerful individuals inside GM, or was it outsiders, like someone in the government saying that they would treat GM better if Waggoner was gone. Bankers is another possibility.

The New York Times article says the government asked him to leave.

This is just the beginning of this story.

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posted by Richard @ 4:51 PM   0 comments
Wednesday, March 25, 2009
An uninformed mob is practicing McCarthy-style guilt by association, abetted by a failure to report on the AIG Bonuses.
Guilt by association without any shred of evidence is as wrong coming from the online Progressive netroots community as it was from "Tail gunner" Joe McCarthy or is today from Rush Limbaugh and effectively the whole damned House Congressional delegation. It is especially prevalent in the TV so-called news community and in most talk radio, left or right. I find it suffuses everything in discussion on Talking points Memo, too. Something that surprises and saddens me. It's time for it to stop, and for a little real reporting on AIG as it is today along with a lot more logic to begin to appear in the discussions of AIG and the totally mischaracterized "bonus issue!"

I consider myself part of the Progressive online community, a member who generally but not always supports the positions of the Democratic Party because nothing I have seen from Conservatives is either rational or useful. My key issue is the critical need in this nation for universal healthcare, but my training has been in economics, business, military and mostly political history. When Edward Liddy testified to Congress on the AIG mess, I was initially ready to come down on AIG Chairman Liddy as though he were another overpaid over privileged Tobacco Executive selling poison and refusing to admit wrongdoing because it would hurt his pocket book. Instead, I saw a capable, quiet rational man who had come out of retirement to try to deal with the disaster created at and through AIG by others. As Liddy tried to make his explanation to the posturing, uncomprehending louts on the Hearing committee I found that it was Congress that deserves opprobrium. No one listened to Liddy when he told them that the individuals responsible for the Credit default Swaps mess were gone.

Yet I saw, and still see, no evidence that he was lying. Nor can I see that he had any reason to. He was retired, for Christ's sake. He is getting $1 a year for taking the abuse.

I have also watched the distrusting online Progressive community attacking Chairman Edward Liddy as untruthful and untrustworthy with great vigor, and when I earlier posted a TPM cafe blog to defend his testimony it was ignored in favor of Liddy-bashing. Yet,

I saw and still see no evidence to support the assumption that Chairman Liddy was not telling the complete truth in his Congressional testimony.
I see nothing but incomprehension, anger and distrust either online or in the media.

When do we get a little real reporting into what the Executives at AIGFP really do, and what they were actually involved in the Credit Default Swap fiasco? Has anyone bothered to actually report on what the bonuses were supposed to reward the recipients for doing? Every piece of (limited) information I have seen says they were NOT BEING REWARDED FOR SALES. AIGFP is not selling product any more, and hasn't since January 2008 at least. I have written AIG's Public Relations department and gotten no response. Probably they are in a bunker mentality and trust no one now. I don't blame them.

The same kinds of questions applies to the executives like Jake DeSantis who remain at AIGFP and are helping to wind it down by maintaining the investments that are the only asset of that organization. I see no evidence that those individuals had anything at all to do with creating those assets. I don't even see anyone bothering to try to report on the current AIGFP. Everyone there now is just assumed to be Evil! They are being punished simply for working in the same office as Joe Cossano and his Michael Milken acolytes as they took their poisonous work to AIG and trashed a great insurance company.

Now one of them, Jake DeSantis, has gotten tired of being bashed for stuff others did and being demonized as the American public and the general media are doing to all individuals from AIG who carry or carried the job title "Executive." He has resigned from AIG and the New York Times has published his letter yesterday. It is very much worth reading. Here is the beginning:

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.

After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.

I take this action after 11 years of dedicated, honorable service to A.I.G. 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. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.

He accuses government officials of persecuting him, and he is right. But I have listened to radio and TV "news" personalities stating the common wisdom of the media as though it were reporting doing exactly the same thing.

When does the mob back off and let someone speak of reality? Is there still any reporting function going on in America? I have seen no evidence of it. Just blowhards on TV and people spewing what they seem to think is their rightful anger on line. Even the NPR reporters speak only gossip from the reporting community - a community which has now sunk into uselessness.

I was used to much better when major newspapers existed and TV was just an admitted provider of headlines and images instead of claiming to report news. Our society lost a lot when CBS fired its last newsman, Dan Rather, abandoned the news business and replaced him with an over aged entertainer who still has no clue regarding what news is or should be.

It’s time to stop kicking people for associating with failure. Someone do some real reporting, or tell me how to get the information out of AIG. I used to delegate that kind of work to reporters, but I guess there are none any more.

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posted by Richard @ 11:39 AM   0 comments
Friday, March 20, 2009
Bonus? Pah! They're balloon payments of delayed compensation!
This is my latest iteration explaining the so-called "Bonuses" to people looking for a cause to get upset over. I got it basically from Chairman Liddy's explanation of the bonuses to the grandstanding Congressman.



Those payments are not what the media thinks they are. The contracts were written in Jan 2008 to give to the technician managers of the bundles of CDO's that remained after firing Joe Cassano and shutting down his financial products division because of the losses that had occurred in the CDO's AIG was managing.

AIG had massive investment in the remaining CDO's. The current investment is still $1.6 trillion dollars. They have a fixed termination date and don't pay off until that date, and have to be managed on a daily basis every day until that final date. Each bundle of CDO's has to be hedged against changes in default risk as the risks in the market change. The technicians, the bundle managers understand both the hedging markets and the particular structure of the given CDO bundle they are managing. Replacement bundle managers simply cannot be trained and trusted not to cause a default of the CDO which loses the entire investment AIG has in it AND triggers massive default penalties. It is critical that each manager remain on the job until the last day of the bundle he manages.

However, AIG has shut down the FP unit. After the bundle expires, there is NO JOB for them at AIG. AIG is reverting to being an insurance company and has been since January 2008. Only, they have to recover the investment in each CDO bundle without it going into default, which can only be done after the Bundle final expiration date has passes. Then those managers are out of jobs.

How do you stop the managers from finding new jobs and moving on now, instead of at the end of the life of the bundle they are managing? Keeping those managers on the job for the life of the investment is crucial to the recovery of the funds invested in those CDOs by AIG, and that is crucial to AIG actually repaying the taxpayer bailout funds. The alternative is a series of defaults in which the investment funds are lost, AIG is destroyed, and the world banking system is seriously threatened at the very least. Imagine the economic consequences of that. That will be avoided if those managers remain at their jobs until the contracts expire and the investment in each intensively managed bundle of CDOs is recovered with the expected profit. Thus the contingent final payments, contingent on the contracted individuals working until the end of the bundle they are each managing.

Those payments should be called deferred compensation with a balloon payment contingent upon completing the job to the final expiration. They don't get the pay until the job is finished. Which explains the 13 bundle managers who have left AIG before getting paid. They had to finish the job to get paid, and after that, the job was over. But since they had fulfilled the terms of the contract, they were owed the promised money.

The $175 billion in taxpayer money will be repaid with a significant profit if the bundles don't go into default. It is WORTH taxpayer money to pay those bonuses if it keeps the managers protection OUR investment funds and keeping them out of default. Those "Bonuses are a mere pittance compared to what will be lost if the managers leave early. You want the managers to collect that money. I want those managers to collect that money. That means they finished successfully and WE GET THE BAILOUT MONEY BACK - with interest. Probably a big profit. Certainly a profit more than large enough to cover the so-called "Bonuses. "

Sadly, the incompetent financial media is looking for a story to sensationalize, so they misread (intentionally?) what the so-called "Bonus" payments are for. Certainlythey aren't reporting on it. They are disseminating assumptions, not facts. The media consist of essentially incompetent "reporters" and shills selling investment products. It's a frigging game to the media. Jon Bennet Ramsey is gone, there hasn't been a murdered white girl to sensationalize for months, and OJ Simpson has gone to prison after all, so they have latched on to this. They have nothing else to pile on to. The Republicans are egging them on because they, too, are incompetent, losing as politicians, and they are generally venal. Republicans are aiding and abetting in large part because they are almost universally negative-talking assholes.

Oh, and the managers are back-office administrative technicians. They supported the sales turkeys after the sales people sold the products. Period. The managers do not sell product, nor do they generate revenue. AIG fired all those sales people in January 2008 when they started to shut the FP division down. The sales people were the decision makers who created those products that turned out to be so toxic. The bundle managers manage nothing except their own staff who are responsible for on-going monitoring of the existing contract bundles. They were not responsible for the creation of the CDOs that have been so generally toxic so widely. They just manage the investments to keep them profitable until they can be liquidated.

Bonus payments? Forget it folks. There's simply no real story there.



The real problem is that the media is creating one of its patented circuses over this subject, so the actual subject very quickly got lost right from the get-go. There has been NO REPORTING! None. Zilch.

Especially there has been no reporting from the so-called financial news.

The Obama people, from Barack on down, are waiting the wild-assed journalists out. No real response, no counters, no nothing. Anything they do will just prolong the journalistic idiocy, so they are quietly letting the furor die out on its own.

It is driving the so-called journalists nuts. Watch the fun and enjoy their frustration. I keep hoping for some real journalism to break out and for someone to ask some real questions, but I don't consider it at all likely. This is the TV age. We get images instead of questions with real answers based on real evidence.

Even the bloggers are caught up in the furor. The right-wing bloggers always have, and the left wing bloggers are used to going after the idiots of the Bush administration.

It's going to be a while before the Obama people bring the TV personalities to heel, but it's happening. Just watch and enjoy the show.

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posted by Richard @ 12:30 AM   0 comments
Wednesday, March 18, 2009
The hearings today with AIG's Liddy
Today Congress had AIG's Chairman Liddy in front of them to explain why he approved and permitted the payment of $165 million dollars to executives of the AIGFP division out of taxpayer funds. There is a great deal of public outrage at the appearance made by giving the bonuses, called retention bonuses, on March 15th. Some of the multimillion dollar bonuses were paid to individuals who have already left the job. The video of Liddy's testimony can be found here.

My reaction to his testimony started with disgust at Liddy's initial evasiveness (as I had expected), but then became more sympathetic to the problems Liddy was dealing with. I'd have to say that by the end of his testimony I feel that the media simply has not given the AIG situation a fair break. My reaction frankly surprised me, and it is NOT one I was inclined to make for him. But Liddy is not a tobacco executive.

Liddy was at the beginning evasive on whether he would comply with NY State AG Cuomo's subpoena for the names and amounts of the bonuses which were paid. He seems to feel that the employees have privacy rights that might override AG Cuomo's subpoenas, so Liddy cannot right now commit to compliance with the subpoena. When pressed for a yes or no answer to the question of whether he would comply with the subpoena that NY State AG Cuomo had sent asking for the names and amounts of bonus of individuals getting the payments Liddy would not say either way. He does not seem to believe that is a decision he can make without his attorneys. Upon reflection, I think I would agree with him. That's a Congressman's PR-hungry trap question.

Liddy is not a PR expert, and I have to have sympathy for him. He has neither the training nor the experience in putting public lipstick on a pig to pretty is up when it is already hated by the mob. He is sitting in front of Congress trying to defend actions that he felt were critical to the continued survival of AIG but which run counter to the current wave of public and Congressional outrage.Let me explain that.

The bonuses were apparently contracted for back in January 2008, and it is my reading of Liddy's responses that the retention bonuses were contracted to guarantee that the individuals would work out highly complex books of derivative contracts which require daily evaluation and manipulation until those books could be shut down and closed out without going into default along the way. That would mean that the reference retention was completed in the year 2008, not on-going. Liddy also makes the point that those contracts were written long before he came on the scene last September, and that he would not have written the contracts that way. While the payment of the bonuses occurred this year, the decision to pay them was made in January 2008 upon completion of the work contracted for. These were not performance bonuses in the sense of being for successful sales. They were for completion (performance) of services contracted for in January 2008. They were contracts to get individuals to shut the books of derivatives down without loss of great sums that default would have involved.

Liddy said that he knew making those payments was going to lead to public outrage, but he felt that the work had been contracted for at a price and performed as contracted for so he was committed to making those payments.

That's no doubt what Secretary of the Treasury Geithner and Chair of the Economic Advisers Summers saw when they let it pass without blocking it.

I'm glad that I didn't have to make the decision to make those payments and then have to defend my decision before Congress. Liddy's job has been to parachute in after the credit crunch of last Fall, take over AIG, isolate the destructive CDS and shut them and the derivative books down without losing any more money than necessary (a complex process easily screwed up at extreme cost in case of default), and then sell off the various parts of AIG to pay the Treasury back for the funds that were put into it. The assets are there, and given time and effort to maintain them until the end of the contract, can permit full recovery of their value for the taxpayers. Default would destroy their value and instead create massive losses. The guys getting the bonuses were doing the daily maintenance and shut down. Apparently the crooks who created those contracts were removed in September.

When anticipating the public outrage the bonus payments made, Liddy, top AIG managers, and US government officials were anticipating normal public outrage. The ability and intent of the ignorant Washington media to blow the issue up to "Terry Shiavo" levels to feed to a ravening, angry public was not anticipated.

That's what I gleaned from Liddy's testimony. It's also an explanation that would explain why Larry Summers and Timothy Geithner (grudgingly) approved of the bonus payments before the "loyal opposition" and the Washington Media looking for a scandal blew it up into a media firestorm.

I guess I'll have to shelve my earlier, more paranoid conclusion that the payment of the bonuses was the result of a scam by holdover Financial Products executives. I sort of regret that. My crooks-running-a-massive-scam over non-lawyers was more fun. But Liddy's explanation fits the facts better and requires a lot less criminality.

Josh Marshall, however, is looking into the possible criminal fraud that occurred in AIGFP. He seems to think that there is a RICO investigaion going on. The previous head of AIGFP, Joseph Cassano, was a protege of crooked bond trader Micheal Milken who went to prison for his junk bond dealings.



Note:

The division that has caused all of AIG's problem, AIGFP, is a separate apparenlty wholly-owned organization called AIG Financial Products.

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posted by Richard @ 2:17 PM   2 comments
Fewer than 24 real Intelligence assets at Guantanamo? Wilkerson says so.
Lawrence Wilkerson, retired US Army Colonel, Vietnam veteran and Chief of Staff to Secretary of State Colin Powell, has written a powerful article pointing to aspects of the Guantanamo Bay detention camp that have not been discussed in the media.

First was the utter failure of the segregation in Afghanistan of high value prisoners from accidental detainees. He attributes that largely to mismanagement by then-secretary of Defense Don Rumsfeld. second was the failure of Guantanamo and military managers to act when they realized that a very large number of relatively innocent and mostly useless detainees were being housed at Guantanamo. Wilkerson's third issue is to explain how extremely hard both Colin Powell and Richard Armitage worked to correct the problems created by the first two failures of Bush administration and military management.

Wilkerson's fourth issue is to point to the truly bizarre ad hoc "Intelligence-gathering doctrine dreamed up to conceal the extreme degree to which Guantanamo and its detainees were being mismanaged. The purpose of the new doctrine was to permit the managers to ignore the fact that almost all of the detainees in Guantanamo were both innocent of any real crime and were in fact of no real value as intelligence assets.

There were no more than at most two dozen real leaders with any Intelligence information at all located at Guantanamo. The rest of the detainees were individuals swept up on the battlefield and (properly) handed off by the combat troops to the people who should have been evaluating them and segregating the potential high-value Intelligence assets for Interrogation. The support individuals were not trained to do this and were also under great pressure by the Bush administration civilian leadership to get as many possible people sent back to Interrogation as possible. The result was the beginnings of the disastrous mismanagement of detainees.

In my opinion Wilkerson addresses only a few aspects of the way in which the support of the combat troops in both Iraq and Afghanistan was totally mismanaged by the incompetent Bush administration. Wilkerson is, in my opinion, way too kind to how badly the Bush administration handled the entire set of middle eastern issues. The Bush people had already failed in so many things they had tried that the very threat of exposing one more drove them to commit utter absurdities just to avoid press coverage of another major set of failures.

Because of the continued highly defensive posture taken by ex-Vice-President Dick Cheney and so many other ex-officials of the Bush administration these issues are still being highly covered up. That's the basis for Cheney's attack on Obama the other day, for example. The cover up is not least perpetuated by the Washington political media which seems to have a vested interest is supporting the Bush administration and tearing down the Obama administration. Oddly enough, the Bush administration's attitude towards the massive economic downturn afflicting our economy was "I'll fix itself. We'd just screw it up if we tried to fix anything." So they took a very Hoover-like approach to the economy.

That may have been an accurate assessment of the competence of the conservative Republicans then in power. In fact, most of the current downturn can be tracked back directly to economic policies the conservatives have put into place in the last 30 years.

Obama obviously thinks otherwise and so do most sentient Americans. So he is trying to fix the economy as much as possible as his first priority. But for some reason, the media is still hung up on defending the Bush administration, so they are participating in the conservative cover up. Only the alternate media, such as Steve Clemon's blog where this current article by Wilkerson was published provide the real truth about the degree of sickening mismanagement and incompetence that was the hallmark of the most recent eight years of government.

It is this kind of media defensiveness that has Jon Stewart on the warpath against MSNBC. But as Wilkerson documents in his excellent article, the whole set of problems goes back to the gross mismanagement that has characterized literally every action of the Bush administration, followed by a continued cover up of most of the worst of the Bush administration's failures to govern with even a modicum of competence. The Bush administration was wall-to-wall "Michael Brown at FEMA" from 2001 right through 2009. Guantanamo was only a small part of the overall picture.

Go read Wilkerson's excellent article. This summary can't do it justice.

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posted by Richard @ 12:53 PM   0 comments
Monday, March 16, 2009
AIG has to pay those bonuses because there is a contract? That's a crock!
This post has gotten to complex to follow easily, so I want to add some structure. What we have is a fait accompli by the executives in the financial products division of AIG in which they are holding both AIG top management and the US government (representing the taxpayers) out of somewhere between $100 million and $450 million dollars in so-called retention bonuses.

Whoever these executives are, they somehow convince Chairman Liddy of AIG that he had no choice except to pay the bonuses, then manipulated him to convince Treasury Secretary Gaither and Director of the White House National Economic Council, Larry Summers that there was no viable way to stop from paying those bonuses because they are fixed in preexisting employment contracts. All of these people were as of earlier today convinced of the inevitability of paying those bonuses, as distasteful as such payments to the exact same individuals who destroyed AIG as an independent financial organization. The discussion here has four different parts.

In Part I, Glenn Greenwald provides the ways an experienced contract lawyer would poke holes in a so-called bullet-proof contract.

In Part II, Josh Marshall at Talking Points Memo posts weaknesses in the argument used by AIG Chairman to convince Treasury Secretary Geithner and Director of the White House Council of Economic Advisers Larry Summers that the payment of the bonuses was the least expensive of the various possible options for the government to (grudgingly) accept.

In Part III, I offer my opinion that the entire story is a massive scam, being run by executives from AIGFP, who it seems to me have few if any job prospects after leaving AIG because anyone who knows just how they destroyed the company AIG would (in my opinion) be a fool to hire them and give them any significant responsibility somewhere else.

In Part IV, the just published statement by Cal. Rep. Brad Sherman indicates that the TARP Law passed last October already contains a provision that gives the Treasury Department final control over all executive compensation at AIG. That provision supersedes all preexisting employment contracts. The so-called inevitability of paying the outrageous extortion demanded by the AIGFP executives appears to be a total figment. This would confirm my suspicion that the whole damned thing is a scam being attempted by the unethical AIGFP executives just to rip the taxpayers off for significant walking away money as those executives leave the company.

[Header added at 11:48 pm CDT.]


Part I

Constitutional lawyer and writer Glenn Greenwald has weighed in on those unnecessary and excessive payoffs to the financial products crooks. Those crooks are, in fact, the very executives who sold the disastrous CD's that have required the federal government to step in and give the company $180 billion dollars (so far) to keep the overall banking system from collapsing.
there are almost certainly viable claims to be asserted that the contracts were induced via fraud or that the bonus-demanding executives themselves violated their contracts. Independently, it’s inconceivable that there aren’t substantial counterclaims that AIG could assert against any executives suing to obtain these bonuses, a threat which, by itself, provides substantial leverage to compel meaningful concessions. Many of these executives were, after all, the very ones responsible for the cataclysmic losses.

The only way a company like AIG throws up its hands from the start and announces that there is simply nothing to be done is if they are eager to make these payments. One might expect AIG to do so -- they haven't exactly proven themselves to be paragons of business ethics -- but the fact that Obama officials are also insisting that nothing can be done (even while symbolically and pointlessly pretending to join in the populist outrage over these publicly-funded "retention payments") is what is most notable here.

Legal strategies aside, just as a business matter, one of the first steps taken by every company in severe distress is go to its creditors, explain that it cannot make the required payments, and force re-negotiations of the terms. That’s as basic as it gets. To see how that works, just look at what GM and other automakers did with their union contracts – what they were forced by the Government to do as a condition for their bailout. Obviously, if a company goes into bankruptcy, then contracts to pay executive bonuses are immediately nullified, but the threat of bankruptcy or serious financial distress is, for obvious reasons, very compelling leverage to force substantial concessions. And the idea that, in this economy, AIG executives (of all people) will be able simply to leave and go seek employment elsewhere unless they receive their "retention bonuses" (even assuming that’s an undesirable outcome) is nothing short of ludicrous.

There may be other reasons why the Treasury Department decided it wanted AIG to pay these bonuses (Marcy Wheeler considers some of those reasons here), but this claim from Larry Summers that the sanctity of contracts precludes any alternatives is not just false, but insultingly so.
Glenn has more to say, but I want to add his addendum.
UPDATE: Jane Hamsher has more here on AIG's insultingly frivolous claims as to why these contract obligations are unavoidable, and here FDL has a petition, to be delivered to the House Financial Services Committee during Wednesday's hearing on the AIG payments, demanding full disclosure before any more payments are made.
This bank bailout is already much too damned expensive - and would have been unnecessary had Wall Street banks acted like prudent bankers instead of long-shot playing riverboat gamblers playing with someone else's money. Unfortunately, allowing the economy to go into a 1930's style Depression because of bank misdeeds is even more expensive. That's why the taxpayers are being dunned to save the crooks on Wall Street.

Still, the Wall Street Extortioners should not be allowed to gather even more misbegotten personal wealth directly from the taxpayers pockets, taxed by law. They must be stopped, as much of that wealth as possible should be extracted from the Wall Street bankers who do not and did not deserve it, and the entire Wall Street banking system has to be tightly regulated and restrained so that this cannot happen again.

It's not just the extortionate bonuses that's bad. In addition, Wall street is already spending large sums on lobbyists to get to Congress and prevent new regulatory bills being enacted.


Addendum I at 7:34 pm CDT

Part II

There are some seemingly very important issues about whether or not failing to pay the bonuses allegedly due under employment contracts would be considered a default by AIG on its CD contracts. That's what the link above to Marcy Wheeler was explaining. Apparently that was the argument that AIG used to convince Larry Summers that those employment contracts had to be paid no matter how bad they are. You may notice that I am emphasizing the fact that the contracts that (allegedly) require payment of the bonuses are employment contracts, NOT finance contracts of the type purchased by the CD counter parties. Keep that in mind as you read the discussion .

The discussion can be found at Josh Marshall. He quotes a few people who seem to know what they are talking about. It is highly illuminating.




Part III

My suspicion is that a very few AIG lawyers who have reputations for understanding CDS contracts have essentially pulled the wool over a number of non-lawyers like Larry Summers (PhD. Economics), AIG Chairman Edward Liddy and the current Secretary of Treasury, Timothy F. Geithner (M.A. in international economics and East Asian studies from Johns Hopkins University's School of Advanced International Studies in 1985 and studies in Chinese and Japanese.)

I am guessing that this is a scam being pulled by the same unethical individuals in AIG's financial products Division who killed AIG as a viable financial organization in the first place. First they snowed their own Chairman, Liddy, and then manipulated him to snow the government officials. If, as I suspect, the US Treasury Department and the Federal Reserve have no high-ranking attorneys who know the law governing the CD contracts inside and out, that would not be all that difficult.

I'm not saying that the scam I postulate DID occur, but all the evidence I see in the media, as well as the discussions at Greenwald and TPM I have referenced above, makes me extremely suspicious that it is quite likely. The behavior of the AIGFP individuals demonstrates the very kind of unethical behavior that should make them targets of suspicion.


Addendum 2 at 9:57 pm CDT

Part IV

According to California Democratic Congressman Brad Sherman, the Treasury Department already has all the authority it needed to stop those outrageous AIG bonuses. Rep. Sherman knows, because he specifically placed the provision into the TARP legislation before it passed, and it still has it in there. Here's what he says about it:
We had a provision in there that said Treasury was supposed to establish, by regulation, standards for executive compensation. We required that to be done -- had it been done, it would have been binding, whether [or not] these contracts had been signed earlier. It's entirely within the power of the federal government to have contracts modified [at companies receiving public aid]. Nixon had contracts modified by the federal government. We gave a similar power to Treasury.
Henry Paulson, Treasury Secretary until Obama was sworn in, clearly did not believe that it was within the proper jurisdiction of the federal government to use the powers given by this provision.

Since the TARP law was already being administered, it seems likely to me that the new Secretary of Treasury, Geithner, did not bother to go back and reopen such previously established decision. Beside, Geithner is also a Wall Street banker, and probably has the same view of the proper role of government. It also seems likely to me that Geithner never bothered to give Obama the option that provision of TARP offered. It was a previously settled decision, and seems unlikely to have caused anyone who read it to consider that those higher in government were not aware of it and how it could be used. That would particularly be true since Obama was so damned non-committal on the subject of those bonuses until the last day or two.

It will be interesting to see if California Rep. Sherman can change that and get Obama to act on the powers he has already been given by law.

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posted by Richard @ 5:08 PM   0 comments
Sunday, March 15, 2009
The AIG bonuses-to-crooks story is worse than originally reported
It appeared Friday and yesterday that the bonuses the AIG managers gave to the executives of the financial products unit that bankrupted AIG was only a comparatively small $100 million or maybe $170 million. I say "comparatively" advisedly. That's all by itself a lot of money to be misused by bankers for their own personal gain.

The Wall Street Journal, however, has offered a new report. The true amount was at least $450 million. If my math is correct, that is 2.6% of the total $170 billion the treasury has put into AIG so far.

Or looking at it another way, taking my numbers from the Tax Foundation report as of July 2008, the average taxpayer who paid any income tax at all for 2007 paid $$7,543.07 in total income tax. That includes Bill Gates and Warren Buffet, of course, but it is still a lot of money. If the bonuses to a few crooked and stupid financial products executives totaled $450,000,000, then each of the 135,719,160 taxpayers who paid uncle Sam any income tax at all paid the first $3.32 of their tax money directly to the crooked executives at AIG.

Talk about your fraud, waste and abuse!! The bakers at AIG make government at every level in America into pikers!

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posted by Richard @ 4:44 PM   0 comments
AIG's inappropriate bonuses to Executives must not be allowed to stand
AIG has given $millions in bonuses (See also this Reuters article) to the very same executives who are running the unregulated side of the company that caused all the losses that drove AIG into bankruptcy. The Bush administration was convinced that the financial collapse of AIG would drive the overall financial economy into collapse, so the government could not afford to let AIG go into it's well-deserved bankruptcy. This has since required the government to step in giving AIG close to a fifth of a $trillion dollars of taxpayer money (so far) to bail them out and keep them functioning. Had AIG been smaller, then the government could have let them go into bankruptcy as they had the smaller Lehman Bros. earlier.

Josh Marshall reported briefly this morning on why the AIG administrator (appointed by the Secretary of the Treasury) claimed he felt it was necessary to provide those bonuses. The Reuter's report explained it this way:

AIG Chairman Edward Liddy said in a letter to U.S. Treasury Secretary Timothy Geithner that the firm was legally obligated to make already-committed 2008 employee-retention payments, the value of which were set early last year before problems at the Financial Products unit became public.

About half of the $1 billion was due to be paid to staff of AIG's main insurance businesses and the rest to employees of the largely unregulated AIG Financial Products.

AIG Financial Products was the unit that made bad bets on toxic mortgages and credit default swap contracts that led to the company's near collapse.

The decision to give out those bonuses is so wrong on so many levels that it is beyond ridicule. AIG is on life support, based on the earlier decisions made by the very executives now getting these bonuses as payment for their earlier services. Without taxpayer funding, there would be NO MONEY with which to pay these bonuses! So why did Liddy make that decision? Here's what we know about Liddy.

AIG Chairman Edward Liddy was appointed as Chairman of AIG back in June 2008 after AIG had gotten into severe credit problems. Liddy is a long-time Wall Street banker, clear trusted by the Board of AIG to protect AIG from the problems it was in. The timing of his appointment, well before the general Wall Street Financial Crisis demonstrates clearly that his loyalty is to AIG as an institution first rather than to the government, the taxpayers, or even the overall banking system.

This orientation would have made him a good match for the Bush Treasury Secretary, Henry Paulson, also a long-time Wall Street banker. By the end of the Bush administration, it was generally clear that Paulson similarly had a greater loyalty to the institutions of Wall street Banking than he did to taxpayers, government or to society in general.

Unfortunately, most of Obama's experts have similar backgrounds, not least being Timothy F. Geithner the current Secretary of the Treasury.

So what, you say? That's where the expertise is. Quite true. But consider Chairman Liddy's explanation for his decision to pay those bonuses, shown above. Then consider this article at CFO.com. It's title, "Creditors Could Go After Lehman Bonuses," is not even hinted at by Chairman Liddy's explanation.

The CFO article, based on the earlier experience of Lehman Bros. after they went bankrupt, rather strongly suggests that a bankrupt company not only did not need to pay out bonuses to it's executives, but also that if they did, the bankruptcy court could later demand that those bonuses be returned for redistribution to the creditors. Such a payment of bonuses when bankruptcy looms literally amounts to theft from the creditors.

The only difference in situation between the earlier, smaller Lehman Bros. and AIG is that the Treasury stepped in to provide funds that allowed AIG to remain outside the jurisdiction of the bankruptcy court. By so doing, the Treasury also became AIG's largest creditor.

Why Liddy and his attorneys might think the government would not sue to get those bonuses back is a mystery, unless they were depending on the kindness of Timothy Geithner based on his prior history at the Federal Reserve Bank of New York and on the general nature of the incoming personnel at the Obama Treasury Department. That may not have been a bad bet. Liddy many also have believed that they could weather the firestorm of political objections.

On this latter bet, I sincerely hope they were wrong. Those bonuses must not be allowed to stand. That's MY money, and yours, being paid to crooks and fools as a reward for failure. Wall Street cannot be allowed to float along with impunity above the financial disaster that they, specifically, are largely responsible for.

Wall Street must change before it drags America (and the World) back into further financial crises like this one. They have largely created this financial mess. They must not be allowed to do it again. Retrieving those bonuses will not change Wall Street, but it will be a strong signal that the old rules they wrote are dead.

This is going to be a clear battle. It is between them and us, and we'd better win.

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posted by Richard @ 11:22 AM   0 comments
Wednesday, March 11, 2009
a click on the door from near the floor
a click from low on the door

the door opens slightly

a gray paw suddenly extends into view

a black eye appears over the paw

then an ear

the door opens more

The whole cat appears

the paw opens the door further

she glances up at me, momentarily

not a danger or obstruction

my room is suddenly graced with her silent presence

the cat is in the room

for a while

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posted by Richard @ 3:19 PM   0 comments
Nothing discredits the Republicans more than their love of Rush Limbaugh
No one loves Rush Limbaugh except most of the rank and file members of the Republican Party, and there is nothing that provides a greater symbol of why the Republicans simply are not fit to govern than their acceptance of his leadership. Let's not forget that whenever any other Republican spokes person or leader speaks out against Rush, he gets slapped down and forced to apologize. Go read Eric Kleefield's short article on the poll results.

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posted by Richard @ 2:57 PM   0 comments
What the complaining Republicans (and the Democrats) are missing
Ed Kilgore looks at the many complaints the various Republican public commentators are missing, and how the Democrats are letting them get away with it. The public is being to led to buy the Republican line that Obama is trying to change the stuff put into place by the last eight years of the Bush administration.

Well, Duh!

Why do they think that in the current crisis the American voters voted decisively to elect Obama in the first place? They wanted and still want him to change away from the failed conservatism that has created the current economic crisis!

Of course he is going to revise the policies put into place that have created the current status quo! That's why we sent Obama to the Presidency!

Go read Ed's excellent (and short) article.

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posted by Richard @ 10:35 AM   0 comments
Friday, March 06, 2009
Why are each of us paying at least $1000 to bail out the gamblers of the AIG hedge fund?
Barry Ritholtz explains in simple terms what the essential problem is with AIG and the excuses given for bailing out the gambling crooks after they took their losses. You need to go read his post.

If you don't want to click through to his post, he explains that AIG is in fact two different companies.

The first. the old firm, is the largest life insurance company in the world. It is AAA rated because it is state regulated. State regulation means that a company that sells life insurance, where they sell a policy that is basically a promise to pay a certain amount when the insured dies. Because an insurance company collects premiums for years, even decades, before it comes time to pay what it promised, a lot of companies used to keep too little in reserves and simply gamble that they can keep collecting money and not have to pay "until later." So the states inspect life insurance companies and guarantee that they have sufficient reserves to be able to pay the claims and are not wasting those already committed reserve funds elsewhere. AIG not only was regulated, it did everything possible to guarantee that the funds were on hand. It was, and remains, a very conservative AAA rated insurance company and made (and continues to make) good money based on its reputation.

The second company has grown out of the first, and is an unregulated hedge fund that sold CDS and other derivatives into the shadow banking system. Trading on the reputation and AAA rating of the insurance company, they became one of the biggest gamblers on Wall Street. This is the bankrupt company (created because of the disastrous Commodities Futures Modernization Act pushed through the Senate by Sen. Phil Gramm and signed by Bill Clinton. It is this second nest of gamblers, operating under the shadow of the first companies' AAA rating (a scam if there ever was one) that is now bankrupt and has caused the government to nationalize both companies.

Henry Paulson, Secretary of Treasury under Bush and previously Chairman of Goldman Sachs, made the decision that in order to protect the counterparties to the disastrous CDS sold by the AIG hedge fund company the taxpayers were going to have to bail out the unregulated, uninsured gamblers at the AIG hedge Fund side and pay off all those bad CDS even though they were uninsured and had no guarantee of government backing. Ritholtz offfers his suggestion.
What should have been done?

Simple: When we nationalized AIG, we should have immediately spun out the good, solvent life insurance company. It is a highly viable standalone entity.

The hedge fund should have been wound down in an orderly fashion. Match up the offsetting trades, the rest go to zero. End of story.

You as a credit default swap gambler have no reasonable expectation that anyone other than the incompetent firm you placed your bet with is going to make good. You had as your counter party another hedge fund. That was the risk YOU — not the taxpayer — assumed. That is was under the roof of a legitimate insurance company is irrelevant.

Right now, we are into this clusterfuck for $166 billion — every last penny of which is a needless waste.

Taxpayers should not be bailing out hedge fund trades. This insanity must cease immediately .
I agree that this is the decision that should have been made. Why did Paulson not make it? Here are three facts to consider:
  • From what I have read, no one knows who the counterparties out there who will be damaged are. Bank secrecy, you know.
  • But I have also read that Goldman Sachs was AIG's biggest customer for derivatives and CDS.
  • The disastrous decision to pay off the uninsured debts for AIG was made by Hank Paulson, ex-Chairman of Goldman Sachs.
I can certainly connect the dots and see what probably motivated Paulson, one of the very largest crooked gamblers out of the now failed shadow banking system of Wall Street. How likely is it that he is protecting his fellow gamblers?

Whatever you decide about Paulson's decision, one thing is completely clear. Any so-called bank that is too big to fail is also too big to operate without close, intensive government regulation. Such regulation does not imply insuring their product, though. That needs to be made absolutely and publicly clear.

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posted by Richard @ 6:38 PM   0 comments
Sunday, March 01, 2009
Here's why AIG is costing the taxpayers over $150 billion and counting
The New York Times has a good article that explains why AIG is in so much more trouble than any of the other financial firms. Go read it. "Propping Up a House of Cards" is a good description.

Next week AIG is going to post the greatest quarterly loss that any American corporation has ever reported. It even surpasses the very worst losses by General Motors. Maybe the money spent to prop AIG up would have been better spent helping Detroit auto firms.

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posted by Richard @ 3:34 AM   0 comments
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Name: Richard

The single most important essay that I have published here is Rule of Law vs. Arbitrary Command.

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