What Happened at AIG?

The story of AIG is complicated. Matt Taibbi, a contributing editor at Rolling Stone, explains to Laura Flanders on GRITtv what happened.

WATCH:

Obama's First Priority

Via Robert Reich:

In the wake of AIG: We've also learned that much of the 170 billion has been used by AIG to pay off AIG's putative obligations to other Wall Street banks such as Goldman Sachs. Goldman has maintained that it got no bailout money from the Treasury. But in fact it received some $13 billion through AIG. More troubling is that the original plan to bail out AIG was concocted at a meeting held last fall, run by then Treasury Secretary Hank Paulson who, before becoming Teasury Secretary, had been CEO of Goldman Sachs. Also attending the meeting was Lloyd Blankenfein, the current CEO of Goldman Sachs. Also at the meeting: Tim Geithner, then head of the New York Fed.

Before it can clean up Wall Street or do much of anything else, the Administration has to clean up the way it's been trying to clean up Wall Street.

The News about the News

The following is a great example of not believing everything you read. At least Daily Kos is on top of this story.

CNN reporting:

Geithner: Treasury pushed for bonus loophole

(CNN) — Treasury Secretary Timothy Geithner told CNN Thursday his department asked Sen. Chris Dodd to include a loophole in the stimulus bill that allowed bailed-out insurance giant American International Group to keep its bonuses.

CNN transcript (note the highlighted section):

Velshi: Let's just talk a little moment again about those payments and the legal ramifications of doing anything about it. Sen. [Chris] Dodd says that he had a clause that was put into the stimulus bill that basically allowed these payments to be made to people at AIG in this particular unit, and he says that somebody at Treasury asked him to put it in.

Geithner: Let me just start by saying that [Senate Banking Committee] Chairman Dodd has played an enormously important leadership role in this, and he's doing the right thing in trying to make sure that the assistance we provide doesn't go to benefit people that shouldn't benefit from these things. And I am enormously impressed by the importance of what he's trying to do in this case.

Velshi: But somebody -- have we figured out who told him to put this clause in?

Geithner: This provision? We expressed concern about this specific version. We wanted to make sure it was strong enough to survive legal challenge. But we also worked with him to strengthen the overall framework, and his bill has this very important provision we're relying on now to go back and see if we can recoup payments that were made that there was no legal ability to block.

Velshi: But inadvertently, might somebody at Treasury have told Sen. Dodd to do something that has now resulted in these payments not being able to ...

Geithner: No, again, what we did is just express concern about the vulnerability of a specific part of this provision, the legal challenge, as you would expect us to do, that's part of the legislative process, but again, his bill also has this very important provision that allows us to go back and see if we can recoup these payments, and we're going to explore that, but in any case, we're going to make sure that the American people are compensated for any payments we can recoup.

The key point here is that while Geithner does confirm that Treasury spoke to Dodd's office and expressed concern about whether the clause would hold up to legal challenge, when Velshi asked him specifically whether Treasury instructed Dodd to do something that resulted in the AIG bonuses, Geithner said no.

Now perhaps there's more to the story than what Geithner is saying. But he didn't say what CNN reported he said.

And that means CNN's transcript is at odds with CNN's reporting.

AIG: "Recklessness and Greed"

Obama On AIG: "How Do They Justify This Outrage?"

President Obama’s full statement:

I want to comment on the news about executive bonuses at A.I.G. This is a corporation that finds itself in financial distress due to recklessness and greed.

Under these circumstances, it’s hard to understand how derivative traders at A.I.G. warranted any bonuses, much less $165 million in extra pay. How do they justify this outrage to the taxpayers who are keeping the company afloat?

In the last six months, A.I.G. has received substantial sums from the U.S. Treasury. I’ve asked Secretary Geithner to use that leverage and pursue every legal avenue to block these bonuses and make the American taxpayers whole.

I know he’s working to resolve this matter with the new C.E.O., Edward Liddy, who came on board after the contracts that led to these bonuses were agreed to last year.

This isn’t just a matter of dollars and cents. It’s about our fundamental values.

All across the country, there are people who work hard and meet their responsibilities every day, without the benefit of government bailouts or multi-million dollar bonuses. And all they ask is that everyone, from Main Street to Wall Street to Washington, play by the same rules.

That is an ethic we must demand.

What this situation also underscores is the need for overall financial regulatory reform, so we don’t find ourselves in this position again, and for some form of resolution mechanism in dealing with troubled financial institutions, so we have greater authority to protect the American taxpayer and our financial system in cases such as this. We will work with Congress to that end.

The Rich Get Richer...

...and the Poor Ponder!

The real scandal of AIG, according to Robert Reich, isn't just that American taxpayers have so far committed $170 billion to the giant insurer because it is thought to be too big to fail -- the most money ever funneled to a single company by a government since the dawn of capitalism -- nor even that AIG's notoriously failing executives, at the very unit responsible for the catastrophic credit-default swaps at the very center of the debacle, are planning to give themselves over $100 million in bonuses. The scandal is that even at this late date, even in a new administration dedicated to doing it all differently, Americans still have so little say over what is happening with our money.[...]

This sordid story of government helplessness in the face of massive taxpayer commitments illustrates better than anything to date why the government should take over any institution that's "too big to fail" and which has cost taxpayers dearly. Such institutions are no longer within the capitalist system because they are no longer accountable to the market. To whom should they be accountable? As long as taxpayers effectively own a large portion of them, they should be accountable to the government.

But if our very own Secretary of the Treasury doesn't even learn of the bonuses until months after AIG has decided to pay them, and cannot make stick his decision that they should not be paid, AIG is not even accountable to the government. That means AIG's executives -- using $170 billion of our money, so far -- are accountable to no one.

Attytood has an interesting view:

This will go down as the weekend that America collectively screamed "AIGGGGG!!!!!" For a long time, outrage over the multi-multi-billion dollar black hole that was once a powerful insurance company AIG simmered rather than boiled because a) other bailout recipients like Citi and Bank of America are more visible and b) most average people have a hard time wrapping themselves around what AIG did (although blogger John Marshall has been quite good -- as always -- on this.[...]

Fire all the morons at AIG, Citygroup, B of A, et cetera, who got us into this mess, or they don't get a dime of our tax dollars. It might make for a few awkward moments down at the Capitol Grille, but it simply needs to be done.

Depressing? Here's the lighter side of the AIG fiasco.

Are You Feeling Like a Sucker, Yet