The Daily Graphic: Drill Baby, Drill is Over Baby, Over

Good story over at the New York Times on the slowdown in oil drilling and exploration as energy prices have fallen off the cliff over the past several months.

AIG Headlines From the Blogosphere – Not Pretty

• AIG Execs Who Ruined Company to Get $165 million in Bonuses – Huffington Post
• Al Qaeda Hurt Us For A Day. AIG Has Destroyed Us for a Generation. – Verbal Paintball
• Treasury Boldly Adds “Sugar on Top” – Driftglass

(UPDATED 1) Totally Unbelievable: AIG to Pay Out $100 Million in Bonuses To Its Financial Products Division

I am so angry right now, I can’t see straight and I may not be thinking clearly.

President Obama, this crap has got to stop.

The New York Times is reporting tonight that AIG, the world’s largest insurer and the original company deemed “too big to fail” will be paying out $100 million in bonuses shortly.  The government of the United States has shoveled $170 BILLION in AIG’s coffers since last fall in an effort to keep the company afloat.

A once venerable insurer, AIG began gambling on Wall Street some time ago in the credit default swap market.  These financial products, which are essentially insurance, are unregulated by the U.S.  According to multiple accounts in the media since last September, AIG is thought to have guaranteed trillions of dollars in these swaps.

Essentially, in a credit default swap, one party – the insurer – guarantees it will cover the full original value of a financial deal.  The purchaser of the swap pays a “premium” which is usually a percentage of the amount being guaranteed.  In the case of the current economic crisis, the financial deals being covered in these insurance gambles were the bundles of good and bad home loans – mortgage backed securities.  Companies like AIG thought they were raking in free money because, they believed, housing prices would continue to rise.  The housing bubble burst, the underlying bundles of loans became worthless and the swap purchasers are demanding their “insurance” settlements – the original values of the bundles of mortgages.  AIG and other financial institutions who sold credit default swaps don’t have the cash to make good on their obligations.

I fully understand “priming the pump” and the need for increased government spending to kick start a stalled economy.  I do not understand the unaccountable, opaque bailouts of private corporations.  I do not understand the total lack of accountability and justice for the companies like AIG who brought this mess down upon us.

The Times reports:

An official in the Obama administration said Saturday that Treasury Secretary Timothy F. Geithner had called A.I.G.’s government-appointed chairman, Edward M. Liddy, on Wednesday and asked that the company renegotiate the bonuses.

Administration officials said they had managed to reduce some of the bonuses but had allowed most of them to go forward after the company’s chief executive said A.I.G. was contractually obligated to pay them.

In a letter to Mr. Geithner, Mr. Liddy wrote: “Needless to say, in the current circumstances, I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them.”

Geithner “asked that the company renegotiate the bonuses?”  Are you fucking kidding me?  Geithner should have demanded that the bonuses not be paid.  Administration officials are actually taking this crap that AIG is “contractually obligated” to pay these pigs for screwing every single American taxpayer?  This financial crisis is a national emergency – I would expect that after $170 billion thrown down AIG’s maw we would have more leverage than to roll over because of a contractual obligation.  Where are the lawyers?

The one major disappointment I have with the Obama Administration is that the change we were promised is so far merely nibbling around the edges of the financial crisis.  For all of my conservative friends out there who wring their hands every time the word ‘nationalization’ comes up, this circumstance is what nationalization may cure.  This is our money being given to greedy pigs who are held harmless from the havoc they’ve wrought.  Temporary nationalization of these big companies would at least give our government control to go in and clean house.

If we don’t have the political will for nationalization or to hold Wall Streeters accountable, then it’s time to begin letting these companies go bankrupt.  Half the country seems to want this purity of the marketplace, give it to them.  If AIG were in bankruptcy, I believe these contractual obligations would go by the boards.

Update: 1 a.m. Sunday

The current version of the NYT story is now different from the block quote above.  I’ll bet there was some screaming from the Administration about Geithner ‘asking’ AIG to renegotiate bonuses.  The newer version of the story has Geithner portrayed as more forceful.  However, that doesn’t change a thing.  The newer version also points out that the U.S. government (us/we) own 80% of AIG.  If that’s the case, someone needs to have the stones to put a stop this sort of behavior.  AIG is not playing with their money now, they’re wasting ours.

From the Times:

Word of the bonuses last week stirred such deep consternation inside the Obama administration that Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them.

The payments to A.I.G.’s financial products unit are in addition to $121 million in previously scheduled bonuses for the company’s senior executives and 6,400 employees across the sprawling corporation. Mr. Geithner last week pressured A.I.G. to cut the $9.6 million going to the top 50 executives in half and tie the rest to performance.

The payment of so much money at a company at the heart of the financial collapse that sent the broader economy into a tailspin almost certainly will fuel a popular backlash against the government’s efforts to prop up Wall Street. Past bonuses already have prompted President Obama and Congress to impose tough rules on corporate executive compensation at firms bailed out with taxpayer money.

A.I.G., nearly 80 percent of which is now owned by the government, defended its bonuses, arguing that they were promised last year before the crisis and cannot be legally canceled. In a letter to Mr. Geithner, Edward M. Liddy, the government-appointed chairman of A.I.G., said at least some bonuses were needed to keep the most skilled executives.

What the Islamic Terrorists May Really Want: Strike the Match on Pakistan’s Tinderbox

One encouraging sign of potentially avoiding a violent dispute between Pakistan and India in the wake of the Mumbai terror attacks was the planned visit to India by the leader of Pakistan’s sometimes rogue intelligence agency.

Known as ISI which stands for Inter Services Intelligence, the agency is ostensibly an arm of the Pakistani Army.  ISI is chiefly known for being the main conduit between the United States and the Afghani mujahadeen groups who fought Soviet occupation.  When the Soviets left Afghanistan, ISI threw in its lot with the Taliban.  The Taliban in turn eventually welcomed Osama bin Laden and Al Qaeda back into the country and the roots of the current worldwide war on terror took hold.

So, to have the chief of ISI interacting with the Indian government would be a good sign.  Only the ISI chief essentially told Pakistani President Asif Zardari, “No.”  He didn’t make the trip. Read more