User 283977

How to Not Pay the AIG Bonuses

Not one cent should be paid until the new "Owners" of AIG (The US Government) sees the contracts.

Are these "contractual" obligations actually "retention bonuses". If they are, don't pay them. Let these people go out and find another job. If those contracts are retention bonuses, Fire Liddy. If they are not, and the contracts are indeed iron clad, fire Liddy and everyone that signed off on the idea of providing bonus payments not linked to profitability. Now down size the payees.

The AIG Life Insurance Numbers

The document is crystal clear. Sorkin's numbers were wrong. So best case Sorkin is careless, OR worse case Sorkin had a hidden agenda to inflate the numbers. Given the size of the error, it appears that Sorkin's "eye" is not well calibrated with respect to the size of the actual market.


Sorkin's column was devoted to making the case for saving AIG. In the correction, I note that Mr. Sorkin did NOT revise his conclusion in his origional article based on the wrong data. That says a lot about Mr. Sorkin and raises questions about his credibility. If you make a published conclusion on bad data, and later find out the data was bad, then you need to publish the ramifications of that bad data on your conclusion. The only thing you have as a columnist is your reputation. Strange that Sorkin is not doing what is necessary to protect his reputation… why?

AIG Needs Transparency, Now

A Rant:
Felix, I believe you will find the same situation with Citi. The people that have the most to loose are foreign investors in the American safe investment harbour. The pirates on Wall Street designed a Ponzi scheme selling fraudulent securities, securities rated AAA by the equally fraudulent rating agencies, securities backed by AIG. AIG had to know that the true rating of those mortgage backed securities were NOT AAA, but they went along for the ride because they did not have the moral fortitude to say no.

Propping AIG up destroys our economy and eventually robs Americans of their savings through hyperinflation. You think you have $10,000 safely invested in a CD… see what happens to the VALUE of that $10,000 when hyperinflation occurs. The actual dollars will still be there, but the value of those dollars will be sharply decreased.

Letting AIG go under destroys the financial safe harbour set up by the pirates in Wall Street with the active collaboration of the thieves in Washington for the past two decades. That financial system was designed to systematically transfer wealth out of this country through the mechanism of vastly increasing the amount of less costly imports, and of course foreign oil. In order to facilitate the transfer of wealth, the manufacturing sector in this country was effectively destroyed. Now a lot of companies are happy because they get to increase their profitability while no longer having to invest in pesky things like plant upgrades, costly American employees, and R&D for innovations. The American financial system is happy because they created supposedly "SAFE" investments for all of that wealth that was transferred out of the country and then reinvested in those fraudulent securities the pirates of Wall Street were selling. How much of the wealth transferred out of the country was then re-captured by the pirates of Wall Street?

Everything is golden, until the housing market turns, and it becomes patently obvious that those AAA rated investments were not worth spit. Now AIG is on the hook and they can't pay. They can't pay because they don't have sufficient REAL assets to cover the loss. That's an interesting way to run an insurance business. My bet is a lot of the "assets" on their books are more of those fraudulent securities… so what happened to the real assets? The only advantage of propping AIG up with a never ending supply of freshly minted money is it delays the carnage. The hope is to pump enough money into the economy to get it re-booted so the value of those mortgage based securities can be somehow re-inflated. If the market values of homes cannot be increased, than…. .

With respect to moral obligations, the last person holding the bag in a Ponzi scheme eats it. Why should that be the American taxpayer? A fraud of colossal extent has been perpetrated. Once fraud has occurred there are no more "moral obligations" to be fulfilled other then to find, convict and punish the guilty. Is the federal government backing up the investors defrauded by Madoff? No, but I do note that Mr. Madoff is still living comfortably in his luxury condominium while no one knows how many people's lives he has destroyed. But when you put it in perspective, the pirates of Wall Street make Mr Madoff look like a choir boy, and these guys have not even been charged with what is probably one of the greatest looting jobs of all time. The more money that is stolen, the less effective law enforcement ….

Bailout Accountability: Something's Rotten in the Treasury's Kingdom

The following is fiction presented for your amusement…

The stated purpose of the money was to allow banks to make loans again. No strings suggests the stated purpose provided to Congress was a spin and the funds were provided in an attempt to shore up the financial institutions to cover some kind of large common loss. Given the highly interrelated nature of the banking system, if several of the larger institutions went into insolvency, they would probably take the entire US financial system down with them. If the financial system went down, it would also take out a large number of other businesses as well.

The people that set up the program felt it was absolutely necessary to prevent the chain of dominos from falling. They also knew that trying to sell Congress on the wisdom of giving money to the financial institutions in order to forestall bankruptcy would be a very difficult sell. So they invented the spin that the funds would free up the flow of credit. Which story is an easer sell? Giving money to the financial institutions to forestall insolvency ala the automakers scenario, or telling people that the money would be used to increase individual and business access to needed credit? They reasoned that a "prevent insolvency approach" would take a lot of time, so they sold TARP with an access to credit rationale accompanied with wishful thinking that the funds would help free up access to credit.

Its an interesting possibility that explains the seemingly inexplicable stupidity of providing public funds with no guidelines with respect to their usage. Would something like this be illegal (lying to Congress), or was it a typical political ploy used to get needed financial relief to the financial institutions as quickly as possible while performing an end run around likely Congressional opposition from members of their own political party? What was the basis of that alluded to large common loss? Was it mortgage based derivatives, or was there something else, something that the Government and the large financial institutions were involved in? Something related to say …. oil speculation?

It might make an interesting movie plot… conspiracy, secret agendas, Harrison Ford figuring it out… Its kind of telling that in order to explain the complete incompetence of providing funds to financial institutions with no strings attached, I had to resort to fiction. It just does not seem realistic under real world conditions.

Oh well, I had some fun writing this up, I hope you had some fun reading it.

Cramer's Mad Money- Technical Difficulties (11/12/08)

Thursday was November 13th, not November 12th