so I'm not sure that its really even a retroactive tax, even if people weren't given a lot of advance warning. 
We have a bunch of ex-Goldman Sachs (GS) bankers making $1 a year, and whatever Rubin and Paulson got paid for their government stints, putting together a package paying countless billions to make Goldman whole (which they claim is a side effect of “prevent a global cascade of Apocalyptic scale”). These are guys who are ex-Goldman partners and they''re being grilled brutally for exactly the wrong reasons.
It’s like having ex-Gambino guys on the stand and grilling them over paying bonuses to the delivery boys at the pizza joints that fronted heroin businesses that were 8 degrees removed from the Gambino guys. It’s insane, and it’s obvious where the real money is made - and where the real taxpayer losses went.
Explained without the the vaguely slanderous metaphors: It wasn’t the AIG (AIG) traders, over-selling of instruments -- which were flawed in a way the AIG people didn’t understand -- who got the bonuses. The AIG guys getting bonuses were paid to unwind those positions.
That was what Liddy was trying to explain. They weren’t “retention bonuses." The bonuses were based on the speed and efficiency exercised when unwinding the idiocy being practiced by AIG up until last year. It’s not immaterial that the banks on the other end of the trade -- those who weren’t going to get paid if AIG died, or if TARP didn’t go through with no questions asked -- effectively put AIG out of business by buying the flawed instruments in enormous size.
The outrage is that the AIG bonus people were greedy Wall Street fat cats. That’s an argument that''s easy to sell to the naïve, or to people who don’t work in finance. “Greed” from the AIG guys? Even if the bonus babies put together the flawed CDs, or whatever they called the vehicle, they didn’t sell it in enormous size because they were greedy. They sold it in enormity because they had mispriced what they were selling in a way they didn’t realize.
Taxpayer dollars paid out to banks exploiting AIG’s pricing mistake: $70,800,000,000
You can nitpick the numbers. You can, in fact, make them much worse by delving into the “trillions at risk on toxic assets” - which we still don’t have any real detail on yet.
The groups who made out on the AIG bailout weren’t the hundreds of workers who split $165 million. They were the banks who thus far have been paid 429 times the bonus pool to ease AIG into being 80% government-owned. Some of that money was in AIG assets. Most of it was the $70.8 billion in taxpayer money.
My best guess as to the thinking on both sides of the transactions: The AIG traders sold in massive size because they didn’t understand the risk. The traders buying from AIG bought in huge size because they recognized AIG was selling this insurance too cheaply.
The other side: “YES! Die, you stupid &#@*% die! I’ve got the hugest genitals on Wall Street! Champagne room at 10 after 4, boys! It’s on daddy tonight!”
I’ll let you guess as to which side is which.
AIG employees didn’t get paid “retention bonuses." They got paid to “unwind the horrible trades that killed AIG, then leave." There will be AIG bonus babies on either side of the evil and greedy/ hard-working victim spectrum.
Keep in mind that the AIG people are cleaning up lousy trades with the endgame of losing their jobs. They then get to go job hunting in a horrible market with AIG on their CVs. And once their names are inevitably leaked to the press, they''ll have the joy of being vilified in public.
Were the decisions made by Liddy and Paulson clouded by ties to their old profession? Impossible to say; again, Goldman is the type of place where smart, driven people go to work on Wall Street. For that matter, so are all of the counterparty institutions paid off in order to “prevent a financial catastrophe,” the likes of which we haven’t seen since... Well, we still have no idea, since we haven’t gotten any detail yet.
What we do know is that 2 ex-Goldman guys, each worth more than $165 million, are taking heat because AIG paid $165 million to the shlubs working their way into unemployment by mopping up AIG’s mess. Either ex-banker could have paid that amount out of pocket, 0.2% of what AIG’s counterparties have gotten paid so far, and an utterly infinitesimal amount of the total toxic assets (which we still don’t know).
It’s staggering on the surface but $165 million is peanuts in this situation. It’s nothing. It’s not worth a moment of Ed Liddy’s time as he mops up the wreck he’s getting paid a buck a year to dissolve. We''re blasting out laws, Constitution-violating, IRS-enforced laws, specifically aimed at people who are working themselves into unemployment and life with “AIG” stitched in scarlet letters on their pinstripe suits. We’re cheering the government for crushing the underdogs; guys already or soon-to-be unemployed, while the winners are collecting what will end up being trillions behind the scenes.
Even the President pronounced himself “angry” over the AIG bonuses. If President Obama is really angry, he either hasn’t been properly briefed, or he’s nakedly pandering to the masses. If you think he’s been properly briefed -- that is to say, if you think President Obama is smart and informed -- you must conclude he''s inciting the rage of the masses for reasons which are either horrifyingly short-sighted or, more scandalously, to distract them from where taxpayer money is really going.
As for the House, they''re either fools, corrupt, or a combination of the two. Whatever the case, they didn’t do their jobs as this mess built, they didn’t do it in the early stages of the fix, and they aren’t doing it now. Congress and the Senate are focused entirely on gaining the votes of the masses by pandering to the uninformed. This would be neither surprising nor enraging if they weren’t being encouraged to pass hastily penned, illegal, unconstitutional tax laws overnight.
Bottom line: You’re right to be outraged. Let’s just make sure we point the anger in the right direction. Where’s the right place to concentrate that rage? We don’t know yet, but from the facts we have so far, the answer is: anywhere except the group of soon-to-be unemployed AIG people. They''re the underdogs who got boot-stomped by the powerful. Raging against the AIG employees who are left is the antithesis of the way America likes to think of itself. It’s a disgrace.
There’s only one word for the idiocy and hypocrisy of the United States and our elected officials in making AIG employees with the character to finish their jobs at Wall Street''s current pariah into villains for getting paid in accordance to the contract they signed.
The word is outrageous.
No position in stocks mentioned.
Excellent article. I think so many people misunderstand the facts and this lays it out. I am disgusted by the pandering the politicians are doing. As I have mentioned on here before, my husband used to work for Ed Liddy and I have never heard anyone (except a few disgrunted former employees or message board lunatics say ANYTHING negative about this man.
The most frightening thing is that most of Congress and certainly our current Admnistration has exactly no one who fully understands any of this. What does that say about their ability to govern in ''a global market'' world? At the very least, previous Admins were cognizant of the fact that they didn''t fully understand. They relied, perhaps too heavily, on those who did.
But the vote earlier this week to impose a 90 percent tax on bonuses at TARP supported banks has many at Goldman feeling betrayed, fearful and angry. On Thursday and Friday, the trading floor at Goldman echoed with brokers and traders cursing the lawmakers who passed the bill and seeking reassurance from their fellow employees that their bonuses wouldn’t be clawed-back. At least one Goldman trader called his lawyer to see what legal protections might be available
(So, lads and lasses, here’s your reassurance. If this bill becomes law, last year’s bonuses won’t fall under the 90% tax. It only applies to bonuses paid after December 31st. So you’ll have till the end of the year to figure out some way around this thing. We’re sure you can do it. Now back to the story.)
“F*** Obama,” one person said aloud on the floor, giving voice to the feeling of political betrayal.
i am not totally up to speed on this, but if your story is accurate, i hope some foreign banks get the losers who have no honor. laws and constitution mean nothing to me at this point, regarding the low life''s receiving the bonuses. they caused a lot of harm to the united states economy and they should be ashamed to accept a bonus they are being given due to a contract and not due to a job well done. don''t let the door hit you on the butt on the way out as far as i am concerned.
What they earned is getting fired then tarred and feathered.
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