Posted on 03/17/2009 5:57:31 PM PDT by tobyhill
Cue the outrage. For months, the Obama administration and members of Congress have known that insurance giant AIG was getting ready to pay huge bonuses while living off government bailouts. It wasn't until the money was flowing and news was trickling out to the public that official Washington rose up in anger and vowed to yank the money back.
Why the sudden furor, just weeks after Barack Obama's team paid out $30 billion in additional aid to the company? So far, the administration has been unable to match its actions to Obama's tough rhetoric on executive compensation. And Congress has been unable or unwilling to restrict bonuses for bailout recipients, despite some lawmakers' repeated efforts to do so.
The situation has the White House and Treasury Secretary Timothy Geithner on the defensive. The administration was caught off guard Tuesday trying to explain why Geithner had waited until last Wednesday to call AIG chief executive Edward M. Liddy and demand that the bonus payments be restructured.
Neither Obama nor Geithner learned of the impending bonus payments until last week, senior administration officials told The Associated Press late Tuesday, speaking on condition of anonymity about internal discussions.
(Excerpt) Read more at google.com ...
“The only people who can navigate the US out of this financial time bomb is the experts in AIG.”
That’s absolutely horse manure. They are crooks. What makes you think their experts at anything. The money is long gone.
So your idea is to pay the bomb maker to defuse the bomb?
Google 2005 Congressional Hearing Derivatives. AIG were greedy pigs and the US government were misguided/stupid, thus we are in a big mess. Unfortunately the SEC admits they do not understand the derivative market. The last thing I want is the government manage this finely tuned market, mishandle it and cause a major collapse that will bring down this country and even the world. Talk to people who are familiar with derivatives, and they will tell you Wall Street/AIG really created a big mess because they thought they could manage the complex matrix of debt, but they did not forsee the collapse of real estate could trigger a collapse. Right now we are living with a 55 trillion dollar financial time bomb that has to be dismantled and there are a very few people who have the expertise to do this. I don’t agree with your position of letting it all fall, but I do share your sentiment, the situation sucks and AIG are crooks. A good NCO once taught me about decision making, in an ambush, before you deal with the idiots in the platoon, first you must get the platoon out of the ambush.
This too will blow over, Obama’s going on Leno Thursday night haven’t ya heard? His poll numbers should zoom up to 100% by Friday morning./sarc to the max
Another case of getting caught while attempting to slip something through? Or is it a setup to boost zero’s ratings? If it’s true that zero and his zombies knew about the bonuses beforehand, why didn’t they include a clause in the bail-out agreement that prohibited the issuance of bonuses? Are they THAT stupid? Dumb like a fox, Zero, now enters the scene, stage left, to play the people’s hero, “saving” them from this outrage. Problem is, he won’t stop with corps receiving fed bailouts. We’ll all be making $5 an hour by the time his term is up.
...and that leads to a question I’ve been asking here on FR for more than a month. “What if the original mortgages were sold more than once?” I’m not talking about re-selling up the food chain. Think, Max Bialystok!
“What would you call it?”
Waterloo.
...That’s what I was a thinkin’, If you step in sh!t, you can wipe it off, but, the smell is always on you...
...Yer right, it’s all a distraction. The only thing wer’e going to get from the clown president is campaign mode for 2012...
The only good thing I can say about this is that nobody is likely to be taken out and shot as a result of all of these “show trials.”
Otherwise, this is identical to Stalin’s show trials of the late 1930’s. Gin up a fake scandal. Have all the politicians decry the “wreckers” as traitors (or crooks). Get the press (which is nothing more than the propaganda tool of the state) to whip up a public frenzy for retribution.
As an avid student of history, I’ve seen this before. 0bama and his Stalinist wanna-bes are playing out the same game plan. Unfortunately, most Americans are just like the Russians; too stupid and ignorant to see it for exactly what it is.
The goal, as always, is to subdue opposition in the pursuit of power. In this case, the “opposition” is any private industries targeted for takeover. First will be the finance “show trials.” The energy companies are next.
I guess when you keep stepping in the dung of the elephant in the room, it’s only a matter of time before you gotta report it.
I’m sure this is Chinese proverb!
The passage of Sarbanes Oxley (in reaction to Enron’s failure) caused a massive amount of money to flee the stock market looking for other ways to make money. The rules for Sarbox were not well understood, and the unpredictable penalties of not complying slowed down initial public offerings for new ventures. This made real estate very attractive as an alternative investment.
In the meantime, the CRA generated a portfolio of risky loans that were not truly credit-worthy. Yet with low interest rates from the Fed, the number of risky loans was climbing with low teaser rates. So Congress authorized Fannie and Freddie to lower their standards so the banks could effectively unload their loans onto you and me, and turn around and make more CRA loans. That’s why Frank and Dodd fought against reforming the GSEs - if the CRA program were stopped or slowed down considerably, groups like La Raza and ACORN who were raking in commissions from the sub-prime applications would no longer be funded and it would hamper their ability to campaign for democrat candidates.
The lowered GSE standards opened the door to a bonanza of sub-prime loans that the GSEs bought. The loans made the banks’ books look very profitable and hid the danger of default. Banks made sub-prime loans even when customers could have qualified for regular mortgages, because the loans were rated as AAA and made the banks look profitable. They could always be packaged and sold to Fannie and Freddie. The general idea was that real estate never lost value.
But the banks still weren’t sure they could survive a general downturn in the economy that would lead to loan defaults, so they purchased insurance from companies like AIG, in the form of Credit Default Swaps. These instruments were purported to guarantee the sub-prime loans in case of default, but they weren’t backed by anything! Look up Joseph Cassano if you want to know how AIG went into this market after Hank Greenberg was forced out.
When the recession started, the effect of increased foreclosures was like setting gasoline on fire. Everything undergirding the housing market failed at the same time. The failure of the CDS market brought down Lehman, Bear-Sterns, AIG, JP Morgan, etc. The failure of the financial services companies rippled across the economy, in particular banks who held shares of these companies. Their loan-to-value balance was dramatically reduced, making many banks technically (or actually) insolvent.
At the same time, Sarbanes-Oxley came back with a vengeance, forcing banks to evaluate their assets at fire-sale prices, causing a downward spiral in bank bonds and equities. This hurt all banks because by regulation they had only limited investment options (banks can't buy most stocks, they can only buy financial company's stocks, other bank's stocks, or shares of Fannie and Freddie).
Sound banking principles would have kept this from happening, but the Fed, Fannie and Freddie, Congress and the rating agencies had all fallen prey to the idea of a great “untapped market” in poor areas (formerly called “redlining”) and immigrants (so called NINJA loans). Congress regulated social justice into the banking system, and it became a worldwide disaster.
But you can’t fit all this history on a bumper sticker, so liberals refuse to try to understand it.
That is a great explanation. Very clear. Thanks for posting it.
bump
“This too will blow over, Obama’s going on Leno Thursday night haven’t ya heard?”
Why shouldn’t he? This isn’t his fault: it’s Geithner’s! As the AP article says:
“Publicly, the White House expressed confidence in Geithner — but still made it clear he was the one responsible for how the matter was handled.”
This is classic BHO throw-staff-under-the-bus behavior. We saw it repeatedly during the campaign and the MSM never called him on it. So it’s not surprising that he thinks he can get away with it again. Fortunately, the public seems to be awakening from its slumber and now realizes in horror the mistake that was made last November.
“The only good thing I can say about this is that nobody is likely to be taken out and shot as a result of all of these “show trials.”
Otherwise, this is identical to Stalin’s show trials of the late 1930’s. Gin up a fake scandal. Have all the politicians decry the “wreckers” as traitors (or crooks). Get the press (which is nothing more than the propaganda tool of the state) to whip up a public frenzy for retribution.”
In a discussion on Glenn Beck today, they were comparing what is happening to what happened in France right before the French Revolution. A public that doesn’t care that people’s lives are being threatened will not mind when the guillotine is brought out....
Great post!
Rick: How can you close me up? On what grounds?
Captain Renault: I'm shocked, shocked to find that gambling is going on in here!
Croupier: {hands Renault a pile of money} Your winnings, sir.
Captain Renault: Oh, thank you very much.
Captain Renault: Everybody out at once!
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.