You are hereBlogs / John Martin's blog / Every Legal Step? Really?

Every Legal Step? Really?


By John Martin - Posted on 16 March 2009

Glenn Greenwald over at Salon has a good summary of the administration's doublespeak on the AIG bonuses, and their insistence that nothing can be done to stop them.

But first, what Summers and others are saying.  It all sounds even more insane a day later:

 

Next, here's what the President is said today.  A little better, but still along the lines of "well, maybe we can stop these bonuses."

 

And here is part of an Associated Press report from February 18th, obviously suggesting that the federal government is, in fact, very able to influence private contracts when billions in bailout money is at stake, regardless of what Summers and the others have been claiming:

The United Auto Workers’ deal with Detroit’s three automakers limits overtime, changes work rules, cuts lump-sum cash bonuses and gets rid of cost-of-living pay raises to help reduce the companies’ labor costs, people briefed on the agreement said today.

The UAW announced Tuesday that it reached the tentative agreement with General Motors Corp., Chrysler LLC and Ford Motor Co. over contract concessions, as GM and Chrysler sent plans to the Treasury Department asking for a total of $39 billion in government financing to help them survive.

Concessions with the union are a condition of the $17.4 billion in government loans that the automakers have received so far.

Finally, here's the crux of Greenwald's piece from today:

As any lawyer knows, there are few things more common – or easier -- than finding legal arguments that call into question the meaning and validity of contracts.  Every day, commercial courts are filled with litigations between parties to seemingly clear-cut agreements.  Particularly in circumstances as extreme as these, there are a litany of arguments and legal strategies that any lawyer would immediately recognize to bestow AIG with leverage either to be able to avoid these sleazy payments or force substantial concessions...

...The only way a company like AIG throws up its hands from the start and announces that there is simply nothing to be done is if they are eager to make these payments.  One might expect AIG to do so -- they haven't exactly proven themselves to be paragons of business ethics -- but the fact that Obama officials are also insisting that nothing can be done (even while symbolically and pointlessly pretending to join in the populist outrage over these publicly-funded "retention payments") is what is most notable here.

Now, what can you do to help light a fire under the rears of those claiming this latest AIG swindle is a fait accompli?

Suggestion #1:  Join one of those ridiculous Tea Party things.  (That's mostly a joke.  Republican activists don't seem near as angry about the $170 billion AIG has gotten as they are about any help homeowners or low-wage earners are due to receive.  Surprise, surprise.)

Suggestion #2:  Sign this petition.

 

This is all so insane.  Does anyone else find it odd that AIG sent the bonus checks over the weekend?  I'm assuming they were trying to sneak this one past the public.

The contracts were reportedly signed in April of 08.  The Fed gave AIG something like 80 billion in September, and now they are still drawing from the TARP funds.

The employees that are getting the bonuses are in the division that sunk the ship.  Why would  AIG think they are the best and brightest and want to retain them?

"We the people" now own 80% of AIG.  Doesn't that give us some say in how the company spends it's money?  As the new owners, why don't we just fire their a$$es?

What's with all of the money AIG has dispersed to foreign banks?  I know it is a global economic crisis, but...dang!

A good lawyer can often find a way to break a contract.  If the lawyers can't find it, bring it before a court. 

There is no point to this post, it's a rant only, and yes, I signed the petition!  Damn straight I did!!

Petition signed.

Let 'em eat cake. These failed banks and AIG and other "losers" need to be broken up and sold off. 

"For those who plan with audacity and execute with vigor,
progress is the magnificent by product." 

Maybe it's because i'm a little tired and it's late (and I might be a bit slow) but i'm confused. The Obama administation is saying there is nothing they can do about the AIG contracts?
They inferred that over the weekend...Sunday, maybe? 
So TomG was right to a degree about the misplaced outrage?
There is no question that I'm blaming AIG first and foremost.  My best guess is also that we taxpayers probably needed to bail them out.  I just think that the federal government has a little bit more juice to affect this bonus debacle than they're letting on.  Why, I do not know.

That means it actually does seem to be the case that the Obama administration didn't do as much as the could to secure the AIG bailout money before it was given? Now justified outrage will spread to Obama for screwing this up or not doing enough?

Let's see how this plays out.  I'm sure we'll find out more over the coming days. 
no, they are working on it. That was Not said by OBAMA.
Dear John M ;  Thank you for including the fact that national Republican political figures tend not to be as upset about these huge corporate bonuses, but just in a lather over homeowners being helped out or people in a low wage job being helped out.  Shows how bad this sickness is.  Signed, John M.
I do not know enough about contracts to just state they can be discontinued with out a huge law suit, that would end up costing us more. Also I "think" a lot of people would lose their 401's, retirement, and bussiness go into limbo if AIG failed.  The Obama administration is right to take their time, look into the "Law" parts of the contracts and find out how many low income, middle income, small and large bussiness, seniors, and retireing seniors will suffer if AIG fails. We can't just state we'll discontinue a contract, because we want to! Obama is a lawyer and well knows this. You have to work the legal system on this and follow the law! To break our laws, makes us no better than them, you see. But in the long run, if the courts have to be involved and you have more than 4 or 5 contracts to break in the courts, it might end up costing US more than the bonuse's they recieved! Than who will the tax payers blame for lose of more money? I think they should be taught a lesson, yes. Maybe a Bill in congress that will put a end to this kind of High way robbery. But certainly this is a time to look at all sides of this in the laws eyes, and the courts--------As well as speak up about how out raged we feel about all this at a time our economy is takeing such a hit, an make the Obama administration realize that action to stop this in the future must be taken as quickly as possable.( sorry about spelling), computor not ch, don't know why.  I can't fathom it would be easy or cheap to discontinue several contracts of high powerd people who certainly seem to me would fight it. So I don't think it's as simple as you folks think it might be! Unless of course you want the Obama administration to turn into the Bush administration and turn a blind eye to the laws and run over them whenever it suited them-------such as doing torture and inlegal wire taping! We really don't want to go down that road again!
I think I saw this in the comment sections of one of these articles (or I forgot and saw it here, and if so, I apologize) but I read someone saying that the likelyhood of them being sued for broken contracts might be low because then the exec's name becomes a matter of public record. That would give people a specific person to focus anger on, and i'd imagine they would like to avoid that.

Thanks for the reality check, jupitor!  You're right.  I think the public outrage is so high, and it needs a place to go, but we DO need to remember that we are a nation of laws, and adhere to them.  Nothing is ever as simple as we tend to see it through angry eyes...especially in big business and politics.  Your post got through to me, as I hadn't considered it in the same context as wire tapping, torture etc.  Abandoning the rule of law is the worst thing we can do in any situation.

So..whatever is done must be legal and above board, even if the courts have to settle it.  AND we must surely learn from this fiasco as we go forward with any bailout money.

 

Pres. Obama is just stating the facts, based on his knowledge of the law. I don't think John is accusing him of not wanting to try (at least I hope not)-I think we are all just frustrated with the reality that the President of the United States may not even be able to stop this nonsense. It may be difficult to win on this legally, despite the outrage we all feel (including our president-I don't think he's faking that.)

Obviously AIG was good at manipulating this situation, but it looks like Congress (assisted by Cuomo from NY) may have a little something up it's sleeve to do a little manipulating of it's own. It's called taxing the bonuses BIG TIME. It's interesting to read the legal points in this article from MSNBC First Read. What do you think of this proposal? Could it really pass? To those of you with legal backgrounds, would this be legal for Congress or considered over the top? Hopefully, just moving in this direction could shame AIG into doing something ON IT'S OWN to rectify the situation. I personally don't hold Pres. Obama responsible for this mess. I'm with Suzi that you can't even point to one entity when it comes down to such widespread greed, but at least Pres. Obama is committed to overhauling a flawed system. I know there are many CEO's who play by the rules and help the job market, etc. I don't want to demonize all big companies. Fair or unfair, the collective disgust and distrust of "corporate America" lays at the hands of AIG, Bank of America, etc. who gleefully abused/raped the system.

Did I read correctly that the AIG president will go before Congress tomorrow morning? I hope he wears some protective gear!

If they're as weaselly as I suspect they are, AIG may find itself with a fraud case on its hands (and yes, I'm wearing my tinfoil hat...):
  • They negotiated huge bonuses in a year when the market wasn't doing very well. They can argue individual employee performance and contractual obligations all they like, but dishing out millions in bonuses while you're being supported by taxpayers doesn't sound like good financial sense. If they had the leverage to get them to agree to a dollar salary, surely they had the leverage to mutually amend the contracts?
  • They convinced Bernanke and Paulson that they needed money, and as a bonus, Paulson and Kashkari got them money without oversight of any kind-- at least, where the first half of TARP was concerned.
  • As an additional bonus, they managed to avoid bankruptcy court, which would have reneged the contracts and prevented the bonuses from being distributed.

The point where it may result in actual fraud, then, is the timing of the contract negotiations, which is why Congress is demanding to see the contracts. If they were like Merrill Lynch and signed these employees to these contracts after the bailout legislation passed-- or even after the first AIG bailout which predates TARP-- there may be enough for a fraud case-- it would be difficult for AIG employees to prove that they didn't sign on to take advantage of the bailout funds.

Even if they negotiated before the first loan, there has to be something seriously insane in the membrane if they think shelling out millions is a good idea after the housing bubble burst in 2007. Did they seriously think their subprime assets wouldn't be affected, or that the heavily-leveraged markets wouldn't some day affect them?

Either way, I find it hard to shake the thought that they were able to squeeze billions from the Fed and Treasury by holding the economy hostage. If they still have the same mindset that led them to believe spending nearly a half-million dollars on a retreat less than a week after the first government loan to them is a brilliant idea, they still don't get it.

*removes tinfoil hat*

Ah, it seems New York AG Cuomo is hot on their tail:

The contracts shockingly contain a provision that required most individuals' bonuses to be 100% of their 2007 bonuses. Thus, in the Spring of last year, AIG chose to lock in bonuses for 2008 at 2007 levels despite obvious signs that 2008 performance would be disastrous in comparison to the year before.

So they're not Merrill, but they're still plenty weaselly.

----

It's sad that we've reached a point where 'government service' is a dirty word... If we're the greatest country on earth, maybe we can have the greatest government.

Lewis Black

Law schmaw.  The best I can say in Obama's defense is that he:

1.  Was caught off guard by the news of the bonuses last week, rightly or wrongly, and needs time to address this situation,

and

2.  Feels that we have nothing to gain by making it look like the federal government is interfering with private contracts.

What bothers me the most is that we didn't make the $180 billion taxpayer takeover of their this failed, useless corporation contingent upon a renegotiation/elimination of such bonuses.  

As Robert Reich points out:

Had AIG gone into chapter 11 bankruptcy or been liquidated, as it would have without government [taxpayer] aid, no bonuses would ever be paid; indeed, AIG's executives would have long ago been on the street.

 

Here is the time line I heard today...I think I have the days of the week correct....

Geitner found out about the bonuses on Tuesday.

Geitner called Liddy of AIG on Wednesday to try to stop them.

Geitner told Obama about the bonuses on Thursday.

The bonuses were paid over the weekend

Now we all know that any president has too much on his plate to see to each thing on his own.  That is why he has a Cabinet, staff and advisers.  They meet with the president daily to keep him informed, and get his orders and/or input.  Am I correct so far?

Why didn't someone, anyone, know about the bonuses before last week?   How did Geitner find out about them?  Should they have been found as far back as when the Fed first gave AIG money?  Does the lack of staffing in Geitner's department make too much work for Geitner to handle?

Finally, if this time line is accurate, that is a pretty crappy mess to hand to the President at the last minute.  

 

It seems that the above stated timeline is correct.  Here is a very informative article from ABC News that chronicles the whole thing, beginning with the Fed.

The article also includes information on an amendment to the stimulus package that could have prevented this mess, but was stripped out and replaced by one by Sen. Dodd, exempting bonus agreements signed before Feb of this year.

<in February, the Senate unanimously approved an amendment restricting bonuses over $100,000 at any company receiving federal bailout funds, but during the closed-door House and Senate negotiations the provision was stripped out and replaced with a measure by Dodd exempting bonuses agreed to prior to the passage of the stimulus bill on February 11, 2009.>

There could possibly be a rationale for this change, and if there is, I would like for Senator Dodd to explain it to us.  Why isn't anyone questioning this?

Thnk you, Suzi, for researching this. I also heard about Dodd's amendment. Don't worry-the questions will come. I doubt there is any rational reason for that to be added. I think this is where the "influence of lobbyist" warnings by Pres. Obama come into play. I see the spin by the GOP will be "why didn't Obama stop this?" but clearly time was against his efforts. Ofcourse, where was the GOP when it came to regulations that got us into this mess? Again, it comes down to lobbyist influence, which thankfully Obama is trying to address. Fineman (Newsweek) predicts the GOP will try to pin this on Obama but that such efforts will fall flat, given their "blind eye" on matters over the past 15 years. Anyway, part of me wonders if Obama has another one of those patient plans of action looking at future legislation. Look at the outrage by the GOP. I think Pres. Obama has some plans in mind for taxes and regulation and it will be hard for the GOP to stand against them given their statements on these bonuses. Pres. Obama is a smart politician when it comes to these things. Even if it looks like the GOP is winning a small battle, Obama may win the big battles ahead.

And the questions have begun....Chris Matthews of MSNBC is all over it.

From other reasearch I'd done before hearing Chris, I learned that the amendment inserted was "Dodd's language", but no one is sure yet who actually put it in there, as it was done behind closed doors.  It also turns out that Dodd seems to have voted against regulations too.  I even found a Daily Kos diary asking for outside help to try to find a way to absolve Dodd.  lol  The bottom line so far is that it was Dodd's original idea, but it's unknown who the actual guilty party is.  Soooooo....

Matthews and a guest ( who had previously written a very timely expose` of Wall Street) did a lot of explaining as to how big donations give lobbyists "access" not only to legislators, but at times even to the committee meetings themselves.  (What a shocker, huh?..yea right)   I think as this unravels it will be very revealing about the influence of lobbyists, on both sides of the aisle, which our President is so opposed to.  Matthews said he is determined to get to the bottom of this.

What suprises me yet again, is that RFO was on this before the media....lol  Remember we had a lot of that during the election season. 

It looks like the GOP is going to spin it as Geitner's fault, in order to keep the spotlight off of their deregulation mess.  We will have to see how this plays out.  Misty needs to get busy, as we are going to need a lot of virtual popcorn as this plays out.  

magus, that is what is so sad in all this. This is bonus's for 2008, yet Obama new in office is takeing the heat for it. Along with a brand new treasury secretary. They'd like to use this to say obama was sitting out on his job, an missed the mark.  Yet, this is what happens when nothing is regulated, as it should be. Is it no wonder between Banks doing stuff like this to us, and the cost of the Iraq war that we are in a recession. I blame it all on Bush, as it began before he even took office. But I do blame him for takeing a job that he wasn't able to do, and surrounded himself with thiefs like Rove and these big CEO's. It certainly is time for change, and bringing all this to a head gives this prez a lot of time to clean it up Don't blalme it all on Bush (sorry). mis print!

Baffling stuff from the MSNBC article. If true, we have some seriously suspicious activity going on. Was it legal? That's the hard part to determine right now.

Talking Point 4: “AIG also claims that retention of individuals at Financial Products was vital to unwinding the subsidiary's business. However, to date, AIG has been unwilling to disclose the names of those who received these retention payments making it impossible to test their claim. Moreover, as detailed below, numerous individuals who received large ‘retention’ bonuses are no longer at the firm. Until we obtain the names of these individuals, it is impossible to determine when and why they left the firm and how it is that they received these payments. If AIG were confident in its claim that those who received these large bonuses were so vital to the orderly unwinding of the unit, one would expect them to freely provide the names and positions of those who got these bonuses.”

Talking Point 5: Millions of dollars went to people who didn’t deserve a dime. One person got more than $6 million, and 11 people “who received ‘retention’ bonuses of $1 million or more are no longer working at AIG, including one who received $4.6 million. (See full letter below for specific amounts received.)

Talking Point 6: “[T]hese payments were all made to individuals in the subsidiary whose performance led to crushing losses and the near failure of AIG. Thus, last week, AIG made more than 73 millionaires in the unit which lost so much money that it brought the firm to its knees, forcing taxpayer bailout. Something is deeply wrong with this outcome."

 

So these guys haVe never heard of the IRS and  how WE CAN GET 95% of america to SUPPORT TO TAX THOSE  ILL GOTTEN GAINS  TO DEATH?

Obama IS looking into what can be done !!!!!!!!

and maybe they aren't too big to fail after all.

 

 

 

 

.

different strokes

If you had listen close to what had been said by congress yesterday, you'd notice they were trying to beat up on liddy who came out of retirement and getting only $1.oo month to clean AIG up. SOme those who got bonus were ask to do a short term clean up job, and left with a bonus when mission was accomplished. Some need to return those bonus's, and Liddy had already ask them to do that before this broke loose. Seems to me this was a big fat witch hunt and Political postering and nothing alse. On Obama's new stimulus he handed out there is a provision to with draw bonus's back if given under the cloud of deceit or not earned or made transparent. So now he can look at bank America and those and go after them, if they did this under Obama's stimulus package. So not all is lost. It's time to move on! Like Obama said, even though he didn't make up these contracts and no one in his administration did that let AIG get away with this, That he will take the blame, and the Buck stops on his door step. It won't be the first or last mistake we see the Bush Administration/congress left this administration to clean up. So while were up in arms, lets be sure the right people must ans. the music, rather Obama wants to take the blame or not---------It's not just that he takes it for Bush/congress mistakes too.
Also as I said, contracts are tricky things. It is not right that the average joe sends terrorist threats to these people or their families and some even to their young children of those who recieved bonus's! This has gone to far! It must end here, and we have to get on with changeing things we can change and quickly. Congress needs to do a better job, and this lays at their feet as they wrote it in the bill for these bonus's to legally go through on a loop hole. This is the change we need to badly in washington. But we can't threaten women/children because we are mad at their parents or parent takeing bonus's we find unfair. Congress witch hunt trial yesterday was a farce that just fueled the haters of this country and for no other reason but to save their own behind. It was sick/sad when we see congressmen/women who job was to prevent this, and they caused this go after a innocent man who had nothing to do with it. It wasn't only chris Dodd either. So get that out of your head. It's best we get on with changeing and stop playing the blame game. Action is being taken to right this wrong, and that in itself is change from what would have happened in the Bush years!

Follow RFO:

TwitterCafe PressFacebook

RSS

 

 

RFO Gear

Subscribe to General RFO Newsletter

General news and announcements for republicansforobama.org. We will never share or sell your email address.