Why Didn't Obama Stop the Checks?

by: David Sirota

Wed Mar 18, 2009 at 11:06


If Barack Obama is sincere in his stated desire to do everything possible to stop AIG's bonuses, and more generally, stop the abuse of taxpayers by bailed out banks, then I think it's fair to ask why he didn't take action to do just that before these bonuses were paid out?

Per the OpenLeft Quick Hits, the Washington Post reports that Obama was actually "informed about the $165 million in bonuses due to employees of the American Insurance Group the day before they were paid out last week." If that's true, and if Obama insists he's been outraged about this taxpayer abuse, why didn't he act to stop the bonus checks from being cut, before they were cut when he was told they were going to be cut?

I mean that figuratively, of course. The president can't exactly stop AIG's checks. But he could have publicly berated the proposed bailouts and he could have promised punitive legislation if the bonuses went forward. Why didn't he?

I think that's a fair question...isn't it?

David Sirota :: Why Didn't Obama Stop the Checks?

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Why Didn't Obama Stop the Checks? | 61 comments
Because he's not really outraged (4.00 / 5)
Because he's not really outraged and continues to be surprised at how many bullshit hurdles get thrown in his way by a media that allegedly represents some imagined populist anger.
This. n/t (0.00 / 0)

[ Parent ]
heeelarious (0.00 / 0)

[ Parent ]
yep (0.00 / 0)
Unfortunately you appear to be correct. Obama had such a hard time feigning anger yesterday he choked on his words, and then laughed it off with a joke about being "choked up with anger." Paying AIG bonuses is a joke to him, a pittance, he only takes people like Geithner and Summers seriously. People who argue that we can get through this if we pump enough money into the financial system and avoid interfering with these companies contracts and operations.

We shall see if this series of outrages forces Obama to change his behavior, but I continue to believe that our best leverage is through Congress.

[ Parent ]
Why Is Obama Your Whipping Boy On This? (2.00 / 4)
I don't understand the obsession with pinning this on the President and his team.  

I guess the very second he learned about this he should have dropped everything and made a public relations announcement that he was "shocked, shocked" to learn that gambling was going on at AIG.

Then of course the criticism would have been that he was a populist grandstander, blah, blah, blah ...

Poor beleagured Obama.... (2.67 / 3)
Well, there are many reasons to blame Obama and his team.

First, as the Associated Press reports, Obama and company knew about this months ago.  

Second, Obama and company proposed toothless regulations on salaries that did not apply retoractively - thus exempting AIG.  

Third, Senator Dodd (in a blatant political ploy) passed an amendment to the stimulus package that contained very strict rules on executive salaries and bonuses that applied RETROACTIVELY.  The Obama administration disagreed and said that it would speak to Dodd on the issue. Magically, the retroativity requirement vanished from the amendment during the conference committee negotiations.

Fourth, Obama and comany are responsible for administering TARP; thus, they get the blame for its successes and failures.

Fifth, Obama is responsible because even before he was inaugurated, President-elect Obama threatened to veto a measure blocking the release of TARP money until the government placed more constraints on its use.

Finally, Obama opened the door to scrutiny of his admnistration's actions by blowing a gasket over the issue in the first place.

More here: http://dissentingjustice.blogs... and here: http://news.yahoo.com/s/ap/200...

[ Parent ]
Smokes Screen (2.00 / 4)
Frankly I think it's a smoke screen at this point and probably was planned that way by the Admin from the get go.

When it comes down to it the amount is a tiny percentage of the bailout monies sent to AIG. I think this is just pseudo outrage in an attempt to get the American people to shift their anger from D.C. in general because of all the bailouts to another party.

There's a swell across the land that I imagine DC is finding disconcerting and my feeling is that we can see more of this blame game in DC.

It's either that or it's proof that the government really is clueless when it comes to running a company.

Take your pick. It's bad news for us either way.

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Really, learcapital.com? (0.00 / 0)

[ Parent ]
I don't agree with goldtracker (0.00 / 0)
but I think that the troll rating here is unjustified. His is a valid opinion, and no more implausible or unpleasantly personal than anything else on the thread. It's hard to have a debate when these rating wars start. Maybe a solution would be to have a disagree rating, and more carefully define when a troll rating is to be used. In fact, Chris, if you're reading this thread, how about this as a modification to incorporate into the upcoming site redesign?
[ Parent ]
bec he (and all the rest of them) don't believe in mandated regulations or restrictions on any private industry they feel is vital (3.43 / 7)
 -- he made that clear ages ago, way before he got into the WH.

They all agree that these firms should have a free hand and be given whatever they need to survive and thrive -- all of them.

in the fall, when he went to Congress to work for TARP's passage, he didn't lift a finger to (3.33 / 6)
ensure any restrictions, mandates or regulations were attached to any of it.

now that he's President, he still won't do so -- not for any  with real teeth, at least.

[ Parent ]
uprated to counter-troll (4.00 / 1)
Nothing trollish about that comment.  He totally supported the first TARP; his support ensured its passage.
[ Parent ]
it's why dumping Geithner does nothing to change the policy and their ideology -- (4.00 / 3)
even if you dump Summers, Geithner, and all the finance/wall st guys in the administration, we'd still have a "free-market" president who values the private sector (some of them, at least) over all else -- we see it in health "reform", education "reform", banking, the 90% "private-sector jobs" stimulus, etc

-- and for us citizens, we get "sacrifice", "tough choices", and cuts.

[ Parent ]
I couldn't agree more! (3.33 / 6)
He's been on the side of private industry every step of the way.  There is just no debating this point.  They have refused to impose meaningful restrictions on anything the banks do, and continue to shovel as much money as necessary to them.  Every time anyone in Congress has attempted to impose oversight and restrictions, Obama has pushed it back.  Now the interesting thing, is that despite this fact, he is still getting attacked by the media (the right) for being a raging socialist even though they won't even breathe on nationalization for these major players.  

This situation is Obama's fault because he personally intervened to prevent Dodd's bill with compensation restrictions from passing in it intended form.

[ Parent ]
"despite this fact, he is still getting attacked by the media (the right) for being a raging socialist" (4.00 / 3)
and that kills the party -- and all hope for real progress for the rest of us in multiple damaging ways.  

-- that this "free-market" conservative -- and his policies -- are painted as liberal and socialist means actually getting needed and vital things, like true universal healthcare and equality and a government that acts for us instead of them -- becomes even more unlikely if not impossible, for another generation.

[ Parent ]
I know, I know (3.00 / 4)
Since Obama isn't a perfect progressive he is therefore the enemy and thoroughly in bed with Wall Street (a place by the way where he is absolutely hated, but that's neither here nor there).

Circular firing squad indeed.  Yesterday the AP ran a story that his $600 billion set aside for health care reform is woefully inadequate for true universal coverage and quotes many nabobs as complaining how it only adds to the health care problem.

He cannot win for losing from all sides.  Tells me he is doing something right, not wrong.  Republicans gave George W a total pass for 8 years.  Progressives can't dare give our President the benefit of the doubt for a measly two months.

[ Parent ]
Is your advice to be more like republicans? (4.00 / 6)
"Republicans gave George W a total pass for 8 years.  Progressives can't dare give our President the benefit of the doubt for a measly two months."

It was WRONG to give GWB a "pass" and it would be WRONG to give one to President Obama.



"It sounds wrong...
     ...but its right."

[ Parent ]
uprated to counter mis-used troll rating (4.00 / 1)

[ Parent ]
He'd probably say that I was told that there was nothing that could B done (2.00 / 2)
To which I'd say, then what the hell was that little performance you put on the other day about telling geithner to do everything he can do to get this bonus money back about?  you know the one with the clapping seals in the background.  But I know the answer to that question, it was to create a soundbite becoz it wasn't more than a few hours later that they came out ... actually reiterated what geithner had said the day b4 ... and said that they couldn't do anything about it.

Z

Funny how they found a way around the labor contracts (4.00 / 2)
between the automakers and the unions, then forced renegotiation in order to get TARP funds, but somehow these executive contracts are sacrosanct.


"It sounds wrong...
     ...but its right."
[ Parent ]
labor contracts (0.00 / 0)
Require renegotation in order to modify them. A breaching company can face lawsuits or even a civil enforcement action by the US government.  The equivalent action in this situation would have been for AIG to renegotiate the terms of the contracts with its employers -- not for the company to breach its agreement.  
[ Parent ]
OK (4.00 / 2)
Then we need to start asking Treasury why they felt it was not necessary to to treat the banks and insurance companies the same way they treated the auto-workers.

Apparently it was possible for the Federal Gov. to require renegotiation of the contracts as a pre-requisite for getting a share of the TARP, so why was it only applied to the autoworkers, and not the financial execs?  

"It sounds wrong...
     ...but its right."

[ Parent ]
A fair question (4.00 / 4)
Unfortunately, we already know the answer. Some of us wish we didn't, and a few even deny that we do, but it keeps hanging there, grinning back at us....

No one in Washington, including Obama, takes anything seriously which isn't happening in Washington. The Administration and the Congress both believe in trickling stuff down, because they simply can't imagine any reason not to service the elites first. Saying that they lack imagination doesn't help much, I'm afraid. There has to be a demonstration of negative consequences, perhaps even a massive one.

I remember an incident briefly reported from Florida on that infamous Black Monday in October, 1987. A local brokerage firm had unplugged the phones, pulled down the shades, locked the doors, and begun frantically selling its own shares. A distraught client, unable to reach them with his sell orders, showed up in the middle of the afternoon with a shotgun, and killed as many of them as he could before they scattered.

Obama won the election by identifying -- correctly -- an underappreciated source of political power in a country numbed by decades of self-congratulatory and stultifying propaganda from the right. The irony is that having gotten himself behind the wheel, he seems to believe that he's now free to drive without any further distractions from the back seat.

In my opinion, David Sirota has the clearest vision in Left Blogistan about what might very well happen next. While Obama continues to issue his platitudes from the Oval Office, representatives from the hungry left, and the even hungrier right, are lining up to see who can best surf the angry populism a collapsed economy is slowly making inevitable.

Perhaps it'll go nowhere...perhaps Tim Geithner will succeed in putting the genie back in the bottle, and Obama's beatific smile will beam on untroubled by any serious political conflict. I wouldn't bet on it. He's as likely at this point to turn into Kerensky as FDR. One thing I'm sure of, though. Neither his outraged critics nor his sycophantic supporters have any idea at this point which it will turn out to be.

[ Parent ]
he's losing credibility that he never had earned to begin with (4.00 / 1)
dana milbank said that obama was smiling just prior to putting on a serious face of feigned outrage for his press conference/performance yesterday ... of course with his clapping seals in the background. He used clever semantics to act like we are all getting screwed here ... no dick, we are getting screwed, not you and you are part of the reason that we are getting screwed. Hell, he could barely keep himself from laughing when he made his claim of being choked up with anger ... the people there had seen him smiling just a short while ago b4 his staged outrage. His claim that he was having geithner look into taking any steps necessary into getting the money back was purely sound bite material becoz it wasn't more than a few hours later that they came out ... actually reiterated what geithner had said the day b4 ... and said that they couldn't do anything about it.

his whole demeanor about this whole fiasco is pretty much "watch this, I got this all under control ... I know how to deal with these outraged little people. just leave it to me, I'm good at this". i don't know who he thinks he is ... some of you will say president like it means king, but to me it means public servant, that's what he is supposed to be ... but he obviously is used to dealing with crowds of pissed off citizens being a community organizer, but this ain't a group of less than a hundred people you are dealing with here bozo. and if I was him, I wouldn't be so damn cocksure that I can maintain control over 300M, many justifiably enraged, variables with a bunch of meaningless words and some concerned facial expressions.

he's losing credibility that he never had earned to begin with.

Z

[ Parent ]
he's losing credibility that he never had earned to begin with (0.00 / 0)
dana milbank said that obama was smiling just prior to putting on a serious face of feigned outrage for his press conference/performance yesterday ... of course with his clapping seals in the background. He used clever semantics to act like we are all getting screwed here ... no dick, we are getting screwed, not you and you are part of the reason that we are getting screwed. Hell, he could barely keep himself from laughing when he made his claim of being choked up with anger ... the people there had seen him smiling just a short while ago b4 his staged outrage. His claim that he was having geithner look into taking any steps necessary into getting the money back was purely sound bite material becoz it wasn't more than a few hours later that they came out ... actually reiterated what geithner had said the day b4 ... and said that they couldn't do anything about it.

his whole demeanor about this whole fiasco is pretty much "watch this, I got this all under control ... I know how to deal with these outraged little people. just leave it to me, I'm good at this". i don't know who he thinks he is ... some of you will say president like it means king, but to me it means public servant, that's what he is supposed to be ... but he obviously is used to dealing with crowds of pissed off citizens being a community organizer, but this ain't a group of less than a hundred people you are dealing with here bozo. and if I was him, I wouldn't be so damn cocksure that I can maintain control over 300M, many justifiably enraged, variables with a bunch of meaningless words and some concerned facial expressions.

he's losing credibility that he never had earned to begin with.

Z

[ Parent ]
Uh... (4.00 / 2)
Then we need to start asking Treasury why they felt it was not necessary to to treat the banks and insurance companies the same way they treated the auto-workers.

These were retention bonuses.  They were in place because the receivers might quit.  It is hard to threaten someone with laying them off when they are already likely to quit on their own.

I was in a flailing, failing company at the hight of the dotcom bubble.  People would often joke "what are they going to do, fire us?"  People would say they can't make a meeting because they have a job interview at that time; openly!

The relationship between management and highly demanded employees is nothing like the relationship between management and union labor.

I'm not trying to justify Wall Street greed or these bonuses, but candide is right that many have seriously fallen off the "reality-based community" horse lately.  If you don't start with reality, you'll never get to a reasonable solution.

[ Parent ]
One can disagree without being a fool (0.00 / 0)
Highly demanded employees seems to me to be the operative phrase here. Highly demanded by whom? Certainly not by any of the millions of us who've been offered a double buggering as the blissful solution to the country's -- an our -- economic problems.

Perhaps one of the ancient and still formidable intellectual underpinnings of the left should be repeated here: politics always trumps economics. Always.

[ Parent ]
Highly demanded by people who will pay their salaries (4.00 / 3)
The point is these people can quit whenever they want and work somewhere else; at lease, so we are told.  You can't threaten to lay them off like you can an autoworker who has no place to go.

But the politics is real, as you say.  One could take receivership of all the big banks and refuse to hire these guys, I guess.

I suggested yesterday that Obama use his Bush-given power to declare anyone he wants a terrorist and hold them forever without habeas corpus.  Those responsible for bring down the world's finances would seem to qualify, no?  Perhaps we can hold that over their heads.

[ Parent ]
Do not let the door hit their ass on the way out (0.00 / 0)
"The point is these people can quit whenever they want and work somewhere else"

One word answer to that: "goodbye"


"It sounds wrong...
     ...but its right."

[ Parent ]
Sure (0.00 / 0)
But that wasn't the point.  The question was raised why these weren't renegotiated in the same way auto worker wages were.  That option was not available.
[ Parent ]
No (0.00 / 0)
The question is why is the option of renegotiation not available. Congress, Treasury, and/or the White House could have put some restrictions on the bail-out, but chose not to do so? Why?

Your answer seemed to be that the bank execs have other options that autoworkers do not. If they have those options, let them exercise them.


"It sounds wrong...
     ...but its right."

[ Parent ]
Bleh (4.00 / 1)
I, for one, doubt that these "retentions" bonuses are worth the effort. Its illogical. Why seek to retain execs that ruined your business so badly that you have to beg money from the government? Clearly, it is not because they are so damned good at their jobs.  Well, unless part of their job was to figure out how to benefit (personally) from the profitable period, and pin the debt on the tax-paying dupes. That's the job they did very, very well.

Fuck em. If they don't want to stick around and pitch in with the task of helping the economy recover unless they get huge paychecks for doing so - publish their names and addresses so that their fellow citizens can let them know how we feel about being stuck holding the bag.

If they are so great and their bonuses so deserved, why are they hiding out like criminals?  

"It sounds wrong...
     ...but its right."

[ Parent ]
Agreed, but (4.00 / 1)
What you say blows a hole in Liddy's arguement.  These will do nothing to keep employees around this year and really, who cares either way.

However, I'm not sure you are getting the point that the bonuses were agreed to last year.  In other words, a year ago a contract was signed that if the employees stick around another year, they will get some specific sum of money.  My guess is this worked fairly well to keep people from quitting before the bonuses went out.  However, they are free to leave now, obviously.

[ Parent ]
I get that part of the logic (0.00 / 0)
What I don't get is why those contracts are so special that they can't be renegotiated.  

"It sounds wrong...
     ...but its right."
[ Parent ]
"Negotiate" means two sides (0.00 / 0)
I don't get what you are missing.  To renegotiate means two sides meet and negotiate a new deal, replacing an old one.  Two sides.

For auto workers, the conversation is like this:

1) "This company is about to go under unless we do something about the money we owe you.  If we keep our contracts in place, most of you will loose your jobs."

To which the autoworkers, who have no where else to go, say "sure, lets figure this out".

2) "This company is now run by the U.S. government and taxpayers do not want to pay these bonuses.  Lets renegotiate them."

To which the banking execs and employees say "screw you, I'll just quite the day after bonuses are due.  And then I'll sue you're ass for breach of contract."

Not exactly apple and oranges.

I guess is was worth a shot.  Perhaps they could have said "sure, we're patriots, let's renegotiate in good faith for the good of the country".  But even then, there is no union.  This would need to be done with each and every individual.

Now, if we put AIG through formal receivership and bankruptcy, proceedings, we could then break whatever contracts we felt was prudent.  There may be other answers as well, like taxing.  But renegotiation simply would not have worked.

[ Parent ]
I agree with that (0.00 / 0)
I agree that there was a greater rush to "dump" on autoworkers by demanding concessions, etc. In fact (and I blogged on this at the time), when the auto deal first started being debated, members of Congress, including Dodd, suggested that the auto industry should fire their CEOs in order to qualify for federal assistance. They did not make the same demands on the banks, but the banks are among the most culpable parties in the financial ruin.  I agree with your sentiment. I am simply responding the way I did because I have seen a lot of people suggest that parties can breach contracts without consequence. That's not true.  
[ Parent ]
Everything legally possible (1.71 / 7)
Of course, you left out the word "legally".

Because, Mr. Sirota, the President of the United States is not just sitting there waiting for shit to do. I hate to break the news to you, but he's kind of busy dealing with the cluster**** handed to him from the previous Administration. These bonuses are a minor issue! You are using 20/20 hindsight to attack him. It's far more important for him to pay attention to whether credit is flowing in the economy as opposed to this stupid symbolic shit.

And now that the timeline undercuts you and Chris, and now that Obama IS dealing with bonus issue, you just can't let it go. Instead of apologizing, which you should do, you keep posting jackass diaries.

Dealing with the bonus issue? (4.00 / 4)
Are you kidding me?  If dealing with the bonus issue means deducting the cost of the bonuses from future bailouts of 30b, while allowing the individuals to keep the money is "dealing with" they I want some of what you're smoking, buddy.  Ohhhh, we're going to recoup the money, ooohhhhhh.  Thank goodness for that.  We can all move along now.  Seriously, dealing with this means clawing back the f'ing money.  They do not deserve a dime, their division lost hundreds of billions of dollars - these were not bonuses paid for revenue generation for individual employees who did well.  
[ Parent ]
And you keep (4.00 / 2)
kicking and screaming all over their diaries with no coherent argument as to why the rest of us should consider this a non-issue.  

I thought you said you were leaving.  If you have nothing to add to the discourse other than your ad hominem outbursts then perhaps you should do us and your blood pressure the favor of making good on that intention.

[ Parent ]
Because righteous anger only works one way? (4.00 / 1)
Everyone needs to tone it down a bit and stop troll rating each other.  That goes both ways, as I see amberglow has been troll rated a few times as well.
[ Parent ]
I'm not sure why (4.00 / 1)
you've directed that comment at me.  I'd not troll rated Semblance, just tried to get her/him to engage is some meaningful discourse rather than running to each new diary on the subject and commenting with the equivalent of "Nuh-uh, shut up!  This is dumb and you're stupidheads!"  I'm genuinely interested if Semblance has a meaningful argument about these issues, but Semblance continually refuses to offer one.  
Moreover, I'm not encouraging contentless anger.  But, whether you agree or not, Chris and David are at least making arguments rather than simply spouting off.
[ Parent ]
Some enterprising reporter should be (0.00 / 0)
asking Obama, what was your response, exactly, when you heard about those bonuses the day before they were issued?

I'm having a slight hunch that that will be a very embarrassing question for Obama to answer.

He was, um, the President, the Decider. He was, um, "outraged" by the bonuses. In short, he had the power and he had the motivation.

So what happened that thwarted him? Who and what, exactly, stood in his way?

today the Fed's supposed to announce their trillions for "toxic assets" for the same companies -- (0.00 / 0)
Obama's onboard with that too --

...  The Fed's Open Market Committee was expected to offer more guidance on its economic outlook and its plans to shore up the financial system in a statement to be released at 2:15 p.m. Wednesday, after a two-day meeting in Washington.  

Economists expect that the Fed will not touch its target interest rate, which are at record-low levels near zero, but hoped for details on the Fed's plans to buy asset-backed debt and unfreeze the credit markets.

...

 -- http://www.nytimes.com/2009/03...
obama just mentioned "separating bad assets from good" while discussing what they're gonna do (0.00 / 0)
to exert more control, etc. -- right now on tv.

pathetic.

[ Parent ]
"nobody here was responsible for supervising AIG" (4.00 / 1)
he just said -- unbelievable.

and -- "the most imp thing we can do is stabilize the financial system"

[ Parent ]
It's not a bullshit issue, it's a real issue (3.60 / 10)
President Obama probably agrees those here who take issue with what David and Chris are saying, but so what?  The political side of governance cannot be wished away.  Obama knows this, which is why he's belatedly trying to do something about it.

He could easily have gotten out in front of this issue, and undoubtedly would have, in spite of his ideological predisposition not to, had he known the outrage would be so great.

Ordinary Americans have been told to "suck it up" and "stop whining" for 25 years as their economic livelihoods were pulled out from under them.  They don't understand why the "Masters of the Universe" get to continue to be lavishly compensated instead of being told to suck it up after having fucked things up.

If Obama does not take a firm stand here, he puts his whole agenda at risk and breathes new life into what surely ought to be a dying Republican party.

Why is that so hard to understand?

sTiVo's rule: Just because YOU "wouldn't put it past 'em" doesn't prove that THEY did it.

Republicans would be doing the same thing (0.00 / 0)
It makes no sense why the alternative political choice for folks who have populist rage at Obama would be the Republican Party.  They will be even more committed to protecting the bankers than Obama!  They will engage in even bigger bailouts to protect the system than Obama.  So for people who are pissed at Obama for not letting the banks fail or for not reigning in compensation to run and vote republicans into office makes no sense.  Now in reality we all know this will happen, but it will be only because the media is too lazy to portray the reality of the situation.  It's all about who's up and who's down, and unfortunately, there's only two choices.

[ Parent ]
They don't have to switch to the GOP to hurt Obama (0.00 / 0)
The GOP is trying to throw sand in the gears.  All they have to do is force a standstill and they hurt Obama.  By letting them do this, Obama weakens himself.  The public only gets to vote every two years.  But scaring the Dems in the Congress weakens Obama for the whole two years.

And working-class people voting Republican never made any sense but it continued for all too long nonetheless.  Obama needs to convince the people he's on their side, but this toothless moral condemnation approach he's taken doesn't do the job.

sTiVo's rule: Just because YOU "wouldn't put it past 'em" doesn't prove that THEY did it.

[ Parent ]
There seem to be a large contingent (4.00 / 6)
of people who have shown up the last day or two whose assembled neurons seem to have managed to put together only one real opinion: Leave Obama aloooone!!

I smell desperation in the air. (Maybe we could hang some of those little pine deodorant thingies around OpenLeft?)

I'm sorry (4.00 / 1)
But he could have publicly berated the proposed bailouts and he could have promised punitive legislation if the bonuses went forward. Why didn't he?

What he did on Monday was what exactly? An Irihs jig?  

I think the problem was that (4.00 / 1)
he expressed his shock over the gambling taking place in this establishment at the same time someone handed him his winnings.

The timing was off.

[ Parent ]
What "winnings" was Obama handed? (0.00 / 0)
I don't see any "win" for President Obama on this issue. Maybe you can explain?

"It sounds wrong...
     ...but its right."
[ Parent ]
It's called a metaphor (0.00 / 0)
If Obama had expressed his shock and outrage on the day before the bonuses were handed out, and/or done something to stop them, then his shock and outrage would make sense to normal people.

But when he hears about those bonuses the day before they're handed out, simply accedes to business as usual, then, days later, when the public demands outrage, suddenly expresses his outrage, it doesn't make sense to normal people.

The timing of the outrage is off.

And that was the point of the metaphor. If you really need to so literal minded as to get the exact analogue for the "winnings", then I guess it is the favor curried with the finance industry by acceding to their desires.

[ Parent ]
Sorry (0.00 / 0)
I thought you had actually figured out a way that Obama "won" something in this political fight.  All I see are losses. There was no question that the political class, including President Obama, will accede to the desires of their campaign contributors. Why else would they donate?

"It sounds wrong...
     ...but its right."
[ Parent ]
because he sucks, David! (0.00 / 0)
You've said so a hundred times.  Must be true.  Dammit I wish McCain was in there.  Then you could attack Democrats every day but for different reasons.
The real question is, (0.00 / 0)
why can't the president stop AIG's checks? The Federal Government owns the goddamn company - why can't the POTUS override the CEO and other executives who ought to be working for him/us?

And before all the apologists jump on this, the only reason he can't stop the checks is that he has chosen not to be able to stop them. AIG would/should be bankrupt without the huge bailout it's gotten. AIG should be operating under conditions approximating those of bankruptcy. The only reason it's not is that the POTUS has some ideological block against acknowledging that government control is really the best course.

Rules of the game (0.00 / 0)
Under the current rules of the game, there is little they could do the break the contracts.  But, as you say, they could change the rules of the game.

I disagree the only block is ideological, though.  Receivership will be perhaps even more expensive then what we are currently trying and is not guaranteed to work.  Politically, it is more risky, because Obama would then own the result more than he does now.

We already own AIG.  Most of the issues we see with AIG (though probably not this) would still be in play with receivership.  I agree Obama should take this step, but I think most supporters oversimplify the effect and act like it is some kind of silver bullet.  It isn't.

[ Parent ]
Ownership (4.00 / 1)
I should add, I hope this controversy pushes Obama to receivership.  It should be very apparent now that he fully owns the banking solution, anyway.  Sure, he got this from Bush, but that fact won't help him much politically, as long as we see controversies like this.
[ Parent ]
I disagree. (0.00 / 0)
Yes, there is the remote possibility that receivership would be more expensive: if all the stars align and Geithner's betting the house on hedge funds and their ilk being able to recapitalize the banks actually worked, it would probably be cheaper.

But receivership IS guaranteed to work, while Geithner's big bet has only a slim chance of working. Moreover, Geithner's big bet creates so much opacity about what's going on that the only measure of whether it actually worked is if the system doesn't blow up again - how long does the system have to be functional before we know for sure that the toxic assets have been fully accounted for and won't trigger a new meltdown?

Receivership will be costly, but the full potential cost to the government would be known within about 6 months - as soon as the government has been able to fully reconcile all the bank's books. A pretty good estimate could be made of the full cost within a month or so of opening the books.

Once the bad stuff is separated from the good, we'd have a functioning financial industry again. The only remainder to the story at that point is how long and at what cost does the government maintain control of the bad stuff.

The alternatives all rely on a lack of transparency creating an illusion of solvency which then attracts capital and allows the banks to regain solvency. It's really just a shell game: Geithner's trying to figure out the best pattern and speed to use in moving the shells around to make investors forget which shell the toxic assets are under, and hoping he can confuse enough people that they'll start buying toxic assets at higher prices.

[ Parent ]
Guaranteed to work (0.00 / 0)
Well, ok.  Given unlimited funds receivership is guaranteed to work eventually, assuming the US itself doesn't go under.  However, given unlimited funds you could say that about just about any plan.

My main point was political ownership.  There is more political risk to receivership, in the sort term, at least.  Obviously, that is a bad reason to not do it, but even then one could weigh this against healthcare and such.  The more political capital Obama spends on this the harder it is to do other stuff.

That's why I kinda like the fact Obama is forced to spend political capital, anyway.  I think it increases the chance we'll do the right thing.

[ Parent ]
I still disagree (0.00 / 0)
Receivership would strengthen, not weaken, the US Government financial position, the way I see it. At the moment, the perception is that the US Government is tacitly guaranteeing unlimited financial losses. Nobody knows how big those losses will eventually be, and nobody knows how much bailout money it will take to plug the hole. Receivership would put a number on it: this is the maximum amount of money the government could potentially lose. Given that even under the "unlimited" guarantee, the government is still having no trouble borrowing, placing a limit on the potential downside of the government position shouldn't make it harder to borrow. On top of that, it's pretty difficult to see how the US Government could get into a position of defaulting on its loans without basically every other government also collapsing. Not going to happen.

Right now, we're dealing with the prospect of unlimited funds. Receivership places a limit on it.

Politically, I don't see a downside. While "nationalization" still seems to be a bad word, I think the polls support the idea that people want the government to control the banks, not just bail them out. I really think that's the reason people are pissed about the bonuses: the bonuses make it undeniably clear that the banks are controlling the Treasury rather than the other way around. There's a discussion of that here: http://www.pollster.com/blogs/...

Moreover, Obama made a promise that bailout funds won't be used for extravagant compensation. The only way he can keep that promise is through real government control, and I suspect part of the anger about the bonuses is that people trusted Obama when he said things would change, but in this respect so far nothing seems to have changed. Firm and obvious government control would reassure people that Obama actually was serious about change.

[ Parent ]
Why Didn't Obama Stop the Checks? | 61 comments
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