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Charlie Brown and Your Money: A Cautionary Tale.
November 3, 2008
The most critical election in our lifetime is tomorrow, and I just saw a headline that gave me a flashback.
"AIG's Fed Bailout Reaches $143.8 Billion"
The headline reminded me of an editorial published about a week ago that criticized Tom McClintock for his adamant opposition to the $700 billion bailout, and praised Charlie Brown for supporting it. The editorial included a line intended to validate Charlie's support of the bailout, that just struck me as funny: "...the final package assured taxpayers get any profits, required congressional oversight, banned golden parachutes."
I kept reading, expecting to find a punch line, but no, that was it. They were serious. The Sacramento Bee thinks Americans should sleep fine at night, with $700 billion of our money "out there," in part because the bailout plan "required congressional oversight." This is the same Democratic-majority Congress that has an approval rating that fluctuates between 9% and 16%, right?
A separate article will explore in detail the debacle of the bailout, but for now, let's start with a party. It's too bad you weren't invited, because it was quite a party, including $10,000 worth of fine wine and liquor. And you paid for it. 4th District residents, when you vote tomorrow, please keep in mind that Charlie Brown supported giving these AIG executives YOUR money... (Oh, and the $85 billion mentioned below has now turned into $143.8 billion.)
Washington Post
After Bailout, AIG Executives Head to Resort
October 8, 2008
-- Peter Whoriskey
Less than a week after the federal government offered an $85 billion bailout to insurance giant AIG, the company held a week-long retreat for its executives at the luxury St. Regis Resort in Monarch Beach, California, running up a tab of $440,000, Rep. Henry Waxman (D-Calif.) said today at the opening of a House committee hearing about the near-failure of the insurance giant. Showing a photograph of the resort, Waxman said the executives spent $200,000 for rooms, $150,000 for meals and $23,000 for the spa. "Less than a week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation," Waxman said. "We will ask whether any of this makes sense. "
The committee will ask the company's executives about their multimillion-dollar pay packages -- some of which they continue to receive -- as well as who bears responsibility for the company's high-risk investment portfolio, which led to its near collapse just weeks ago.
"They were getting their manicures, their pedicures, massages, their facials while the American people were paying their bills," thundered Rep. Elijah E. Cummings (D-Md.), of the executive retreat at the Monarch Resort.
The House committee, which took on executive compensation at bankrupt Wall Street firm Lehman Brothers yesterday, has received "tens of thousands" of pages of documents from AIG, Waxman said. Those documents show that as the company's risky investments began to implode, the company altered its generous executive pay plan to pay out regardless of such losses.
AIG lost over $5 billion in the last quarter of 2007 due its risky financial products division, Waxman said. Yet in March 2008, when the company's compensation committee met to award bonuses, Chief Executive Martin Sullivan urged the committee to ignore those losses, which should have slashed bonuses. But the board agreed to ignore the losses from the financial products division and gave Sullivan a cash bonus of over $5 million. The board also approved a new compensation contract for Sullivan that gave him a golden parachute of $15 million, Waxman said.
Joseph Cassano, the executive in charge of the company's troubled financial products division, received more than $280 million over the last eight years, Waxman said. Even after he was terminated in February as his investments turned sour, the company allowed him to keep up to $34 million in unvested bonuses and put him on a $1 million-a-month retainer. He continues to receive $1 million a month, Waxman said. Waxman also looked skeptically at the executives' defense that the troubles in the business had to do with larger economic forces and not their own bad decisions.
When a former AIG auditor, Joseph St. Denis, expressed concerns, Cassano told him "I have deliberately excluded you from the valuation ... because I was concerned that you would pollute the process," according to Waxman.
St. Denis resigned in protest.
PricewaterhouseCoopers, AIG's auditor, told the company in March 2008 that the "root cause" of AIG's problems was that people assessing risk did not have enough access to the financial products division, where the risky investments originated. Waxman further suggested that Sullivan had deliberately misled investors. On Dec. 5, 2007, Sullivan expressed confidence to investors. But a week before, PricewaterhouseCoopers warned Sullivan that the company "could have a material weakness relating to these area," committee members said.
Charlie Brown, Tom McClintock, 4th District, AIG, bailout, congressional oversight, approval,
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Winston_Niles and Tom McClintock subscribe to the discredited idea that the market will sort out this mess on its own. Yes, the same market that got us into this mess.
Below is an excerpt from a very recent piece by Thomas Friedman. A pretty smart guy. He basically says that Luddites like Winston, Tom McClintock and the House Republicans who voted against the financial rescue package twice don't have any idea how the world economy operates anymore. Friedman has written about the world economy for many years. His book "The World is Flat" is an excellent piece on the interconnectedness that exists today in our global markets. And in his essay below he destroys the message Winston_Niles is attempting to deliver above which is that the markets can clear up this mess if only we approve Tom McClintock's capital gains tax cut. Yes, a tax cut will save the day.
Not according to Mr. Friedman...
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Thomas L. Friedman
"Vote for ()"
November 1, 2008
Since the last debate, John McCain and Barack Obama have unveiled broad ideas about how to restore the nation’s financial health. But they continue to suggest that this will be largely pain-free. McCain says giving everyone a tax cut will save the day; Obama tells us only the rich will have to pay to help us out of this hole. Neither is true.
We are all going to have to pay, because this meltdown comes in the context of what has been “perhaps the greatest wealth transfer since the Bolshevik Revolution in Russia in 1917,” says Michael Mandelbaum, author of “Democracy’s Good Name.” “It is not a wealth transfer from rich to poor that the Bush administration will be remembered for. It is a wealth transfer from the future to the present.”
Never has one generation spent so much of its children’s wealth in such a short period of time with so little to show for it as in the Bush years. Under George W. Bush, America has foisted onto future generations a huge financial burden to finance our current tax cuts, wars and now bailouts. Just paying off those debts will require significant sacrifices. But when you add the destruction of wealth that has taken place in the last two months in the markets, and the need for more bailouts, you understand why this is not going to be a painless recovery.
...all I can suggest is that you vote for the candidate with these character traits:
First, we need a president who can speak English and deconstruct and navigate complex issues so Americans can make informed choices. We have paid an enormous price for having a president who could not explain and reassure us during this financial meltdown. We wasted a huge amount of time pretending that we could punish Wall Street without punishing Main Street — when, in fact, they are intricately intertwined.
A major money market fund — Reserve Primary — failed in September because the extra interest it offered customers derived, in part, from the $785 million in high-yielding Lehman Brothers commercial paper and notes it was holding. Depositors who told their congressmen to just let that greedy Lehman Brothers fail were shocked to discover this meant that their own money market would be frozen. No, we don’t need a president defending greed on Wall Street, but we do need one who can explain that we are all in the same boat, that a leak at one end can sink everyone and that while we must regulate, we don’t want to kill risk-taking and the rewards that go with that — which are essential to growing our economy.
Second, we need a president who can energize, inspire and hold the country together during what will be a very stressful recovery. We have to climb out of this financial crisis at a time when the baby boomers are about to retire and going to need their Social Security and eventually Medicare. We are all going to be paying the government more and getting less until we grow out of this hole.
Third, we need a president who can rally the world to our side. We cannot get out of this crisis unless China starts consuming more and unless Europe keeps lowering interest rates. Everyone is interconnected, and everyone is still looking to America to lead.
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Thanks, Thomas. Readers, please vote for Charlie Brown tomorrow. Thank you.
Why, good morning, "winston_niles," the fictional character in the Kurt Vonnegut novel and pseudonym for one of McClintock's PR guys/gals.
[ The following is a true story from the Nightmare Ages, falling roughly, give or take a few years, between the Second World War and the Third Great Depression.
There was a crowd. The crowd had gathered because there was to be a materialization. A man and his dog were going to materialize ]
Cueing Rational_Thinker, the resident expert on the man & dog topic.
[ Now Winston Niles Rumfoord and his dog Kazak existed as wave phenomena—apparently pulsing in a distorted spiral with its origin in the Sun and its terminal in Betelgeuse. ]
Why has the McClintock campaign lied about Doolittle and John Feliz actually running it, when they are both under investigation ?
So, given the shady character's young Master Klein has been soliciting lately, do you think you're going to get through the next year without a subpoena?