The insurance giant came under scrutiny last week after it was revealed that company executives were scheduled to receive more than $165 million in bonuses following a taxpayer bailout.
In all 15 of the top 20 bonus recipients have agreed to give back the money, which equals approximately $30 million.
Our Attorney General is certainly having a busy day. Earlier today he dropped a 132 count indictment against Hank Morris for a massive pay to play scam with the state's pension fund. Now he's got that list of names from AIG detailing who got what and who has or has not given any of it back. Not bad for a day's work. He released this statement a few minutes ago:
I have received the list of AIG FP employees who received retention payouts. Mr. Liddy testified in Congress yesterday that he intended to comply with our subpoena and expressed concern for employee safety. Mr. Liddy has in fact now complied with the subpoena. We are aware of the security concerns of AIG employees, and we will be sensitive to those issues by doing a risk assessment before releasing any individual's name. The Attorney General's Office is a law enforcement agency and is experienced in making these assessments.
As we perform our review, we will simultaneously be working with AIG over the next few days to determine which employees received payments and which chose to return the money they received.
The Attorney General's Office will responsibly balance the public's right to know how their tax dollars are spent with individual security, privacy rights, and corporate prerogative.
At this moment, with emotions running high, it is important that we proceed diligently, with care, reflection, and sober judgment. We thank AIG for their compliance.
And for those looking for the New York political dimension in all this, I think it is simply that our current governor can't compete with this. Cuomo is following in Spitzer's footsteps here, becoming the new sheriff of Wall St. He's getting national attention for taking the least popular people in the world right now to task.
Paterson is stuck trying to craft a budget and save the MTA.
At least 13 firms receiving billions of dollars in bailout money owe a total of more than $220 million in unpaid federal taxes, a key lawmaker said Thursday.
Rep. John Lewis, chairman of a House subcommittee overseeing the federal bailout, said two firms owe more than $100 million apiece.
"This is shameful. It is a disgrace," said Lewis, D-Ga. "We are going to get to the bottom of what is going on here."
The House Ways and Means subcommittee on oversight discovered the delinquent taxes in a review of tax records from 23 of the firms receiving the most money, Lewis said as he opened a hearing on the issue.
"If we looked at all 470 recipients, how much would they owe?" Lewis asked.
He did not name the firms owing back taxes.
Banks and other firms receiving federal money were required to sign contracts stating they had no unpaid taxes, Lewis said. But he said the Treasury Department did not ask them to turn over their tax records.
The revelation is sure to spark outrage on Capitol Hill, where the House is expected to vote Thursday on a bill that would impose steep taxes on employee bonuses at firms that have received bailout money.
To date, the Troubled Asset Relief Program has paid out more than $300 billion to private companies, with billions more on the way.
Emphasis mine.
When do people start going to prison? That's a serious question. These firms flat out lied to get this money. Period.
Sadly, I've no confidence at all that anyone is going to be held accountable in any meaningful way. This game is rigged and it has been from the beginning. I feel ill.
Rep Gary Ackerman is feeling it today. Last month, he got to feast on the hapless SEC foils who couldn't figure out that Bernie Madoff was a crook, even though whistleblowers were banging their door for years.
This morning he gets to take a few swings at a pinata named AIG. He just delivered the quote of the day:
If they called credit default swaps 'I can't believe it's not insurance,' nobody would buy it!
Insurance companies say they have no choice but to honor contracts, and banks are pleading that their assets will be worth more if you just give them a little time.
For anyone, especially in business, who has tried to make those same arguments to insurers and bankers, to no avail, it's painfully rich.
We have to pay these ridiculous bonuses to the Einsteins at AIG or they'll jump ship from the company that they drove off a cliff, right? Actually, it seems that many o those folks, including one they gave a $4.6 million bonus to, were already gone. Really. You can't make this stuff up.
"A.I.G. made more than 73 millionaires in the unit which lost so much money that it brought the firm to its knees, forcing a taxpayer bailout," Mr. Cuomo wrote in the letter. "Something is deeply wrong with this outcome."
Mr. Cuomo did not name the bonus recipients, but the numbers are eye-popping, given A.I.G.'s fragile state. The highest bonus was $6.4 million, and six other employees received more than $4 million, according to Mr. Cuomo. Fifteen other people received bonuses of more than $2 million, and 51 people received bonuses between $1 million and $2 million, Mr. Cuomo said. Eleven of those who received "retention" bonuses of $1 million or more are no longer working at A.I.G., including one who received $4.6 million, he said.
Emphasis mine.
This is nothing more than simple larceny. Nothing more, nothing less.
Bloomberg TV reporting that Attorney General Andrew Cuomo wasn't bluffing, he's just subpoenaed the clueless fools at AIG. MSNBC reporting same. Link when I get it.
New York Attorney General Andrew Cuomo has issued a subpoena to American International Group Inc. seeking a list with the names of executives receiving bonuses.
"We had given AGI up to 4 o'clock today to provide the information on the latest round of bonuses that they paid out," Cuomo said. "Four o'clock has come and gone."
Our Attorney General writes a letter and it sounds like he means business.
Dear Mr. Liddy:
The Office of the New York Attorney General has been investigating compensation arrangements at AIG since last Fall. We were disturbed to learn over the weekend of AIG's plans to pay millions of dollars to members of the Financial Products subsidiary through its Financial Products Retention Plan. Financial Products was, of course, the division of AIG that led to its meltdown and the huge infusion of taxpayer funds to save the firm. Previously, AIG had agreed at our request to make no payments out of its $600 million Financial Products deferred compensation pool.
We have requested the list of individuals who are to receive payments under this retention plan, as well as their positions at the firm, and it is surprising that you have yet to provide this information. Covering up the details of these payments breeds further cynicism and distrust in our already shaken financial system.
In addition, we also now request a description of each individual's job description and performance at AIG Financial Products. Please also provide whatever contracts you now claim obligate you to make these payments. Moreover, you should immediately provide us with a list of who negotiated these contracts and who developed this retention plan so we can begin to investigate the circumstances surrounding these questionable bonus arrangements. Finally, we demand an immediate status report as to whether the payments under the retention plan have been made.
We need this information immediately in order to investigate and determine: (l) whether any of the individuals receiving such payments were involved in the conduct that led to AIG's demise and subsequent bailout; (2) whether, as you claim, such individuals are truly required to unwind AIG Financial Product's positions; (3) whether such contracts may be unenforceable for
fraud or other reasons; and (4) whether any of the retention payments may be considered fraudulent conveyances under New York law.
Taxpayers of this country are now supporting AIG, and they deserve at the very least to know how their money is being spent. And we owe it to the taxpayers to take every possible action to stop unwarranted bonus payments to those who caused the AIG meltdown in the first place.
If you do not provide this information by 4:00 p.m. today, we will issue subpoenas and seek, if necessary, to enforce compliance in court.
This is simply stunning. The FDIC now needs a bailout. Why? Because for over a decade, the banksters, the ones we're throwing trillions of dollars at, didn't pay their premiums to the FDIC. No, really.
The federal agency that insures bank deposits, which is asking for emergency powers to borrow up to $500 billion to take over failed banks, is facing a potential major shortfall in part because it collected no insurance premiums from most banks from 1996 to 2006.
The Federal Deposit Insurance Corporation, which insures deposits up to $250,000, tried for years to get congressional authority to collect the premiums in case of a looming crisis. But Congress believed that the fund was so well-capitalized - and that bank failures were so infrequent - that there was no need to collect the premiums for a decade, according to banking officials and analysts.
I'd like to get some car, health, and homeowners insurance like that. I mean, I never have had cancer, have never wrecked my car, and my house has never burned down. Why are they still collecting premiums from me?
Senator Schumer has finally realized that things have changed, perhaps permanently, and is saying so publicly. This is a good thing.
Sen. Chuck Schumer, who has raised millions in campaign dollars from Wall Street, had a stern message Monday for his one-time benefactors: your go-go days are over.
"Compensation will likely never return - and shouldn't - to the stratospheric levels that it reached," he said in his toughest comments to date on Wall Street's system of awarding giant bonuses to top executives.
But Schumer, the Senate's No. 3 Democrat, argued that new, tougher rules would actually boost confidence in Wall Street over the long-term.
"Going forward, strong regulation will cause money, business and jobs to come here and stay here," he told a Crain's NY Business breakfast.
The days of collecting absolutely absurd compensation completely divorced from any results are over. The sooner the Wizards of Wall St, many of whom are managing firms that now exist solely because of massive infusions of public money, realize that they'll never be able to take home billions for driving their companies and the global economy in to the ground, the better.
I'm glad to see that Senator Schumer gets this as well. Schumer's admission of this fact has to be the clearest indicator yet that the party is indeed over.
You remember John Thain, don't you? He's the thoroughly odious former CEO of Merrill Lynch, the guy who spent $1.2 million bucks redecorating his office as he was laying off employees left and right and driving his once thriving company off the proverbial cliff. He's also the guy who decided to speed up Merill's bonus payment schedule so as to loot what was left of the company before its forced absorption by Bank of America, essentially stealing a whopping $4 billion dollars from you. He's a real piece of work.
Andrew Cuomol rightly decided to look into this naked larceny last month. Apparently, Thain and BoA have decided to tell our Atorney General to stuff it.
New York State Attorney General Andrew Cuomo filed a motion Monday asking former Merrill Lynch Chief Executive John Thain to provide more information about bonuses paid out on the eve of the bank's merger with Bank of America last year.
Cuomo's office alleges that Thain is not answering the questions under instructions from Bank of America, and as a result, the bank is interfering with its investigation of the bonus payments.
In a deposition last week, Thain refused to answer questions about how the bonuses were determined for certain individuals, citing instructions from Bank of America attorneys.
...
Two weeks ago, Cuomo accused Merrill Lynch of "secretly" accelerating bonus payments last year and giving at least $1 million to each of nearly 700 employees, even as the brokerage was amassing billions of dollars in losses.
The bonuses stirred controversy because Merrill's bigger than expected loss prompted Bank of America to seek more government bailout money to complete the acquisition. The government agreed to give Bank of America an additional $20 billion in January to absorb Merrill, which Bank of America agreed to buy last September amid the credit crisis.
Cuomo's office is focusing on allegations that the timetable for the bonus approval was accelerated given the $15 billion fourth-quarter loss at Merrill, sources said.
Meet Aubretia Edick, Wal-Mart employee for 8 years, of Hudson, NY.
"I'll take a sandwich to work and that's about it," says Aubretia Edick, who is 58 and works in the pharmacy department of a Wal-Mart in Hudson, New York. "I drink a lot of tea. Once in a blue moon I'll go into Save-A-Lot and I'll get some meat. Eggs is kinda like a luxury kind of thing."
Edick first landed a $6.40-an-hour gig at Wal-Mart back in 2001, and over time her wages inched upward, reaching $10.50 last year. But with inflation factored in, it isn't that much better than when she first started. To make matters worse, while Edick was technically full time, her manager often slashed her hours due to the slowing economy. In mid-2008, she was grossing roughly $297 a week-$195 after taxes and deductions.
...
Edick's monthly take-home pay-about $800 at the time I visited-doesn't go far either. She lives in a tiny apartment with a broken stove and mostly empty fridge that barely works. Rent and utilities run about $450 a month; when it's cold outside, she often sets the thermostat to 50 degrees to lower her bill. Gas and car insurance cost another $160 or so, depending on prices at the pump. And then there are the doctor visits, covered only after a $1,000 deductible-plus medicines for a thyroid problem, chronic anxiety, and osteoporosis.
To balance the budget, Edick often skimps on food, some weeks spending little more than $10 on groceries, about one-quarter what the federal food stamp program calculates is needed for three "thrifty meals" a day. She patronizes the grimy discount stores whose prices run even lower than Wal-Mart's, and can tick off their notable sales going back for months. "I had some oranges," she recalls with a self-deprecating smile. "A couple of months ago, they had grapes on sale." And, "If it's less than three dollars for a package of six steaks, that looks like a good deal to me." (She tries not to think too hard about the quality of a 50-cent steak.) Her staples include PB&J, canned ham salad, soup: "I'll get chicken noodle or Campbell's Chunky. There's meat in there. You can pour it over noodles and put butter on it. It's like a delicacy."
...
For her part, Edick, unlike many Americans, hasn't resorted to handouts. (An estimated 28 million people were on food stamps as of last April, up from 17 million in 2000.) "There's times I'm hungry, and I'll look in the refrigerator for something-I'll find a snack pudding. Some leftover rice," Edick says softly. "I'm not starving or anything like that."
So Citigroup (C) has proposed that the US taxpayer and other preferred shareholders convert up to $75 billion of preferred stock into common stock, thus bolstering the company's tangible equity and putting it in less desperate need of a complete takeover.
And what will the US taxpayer get for this preferred stock conversion? 40% of the company for some of its $45 billion of preferred, say reports. The reports add that Citigroup's goal here is to keep the US's ownership under 50%, so this won't be a de facto nationalization.
Well, that's nice for Citigroup...and another ream-job for taxpayers.
Citigroup's common equity is currently worth $10 billion. If the US were to convert all $45 billion of its preferred at the current stock price, it should end up with 80% of the company, not 40%.
For the US to convert $45 billion of preferred to common and only get 40% of the company, Citigroup's existing common equity would have to be valued at $65 billion, not $10 billion, and the conversion price would have to be about $10 a share. Or the US would only be able to convert $4 billion of its $45 billion, which wouldn't help Citigroup's tangible equity ratio much.
So is that what Citigroup is trying to do here? Persuade the US goverment to convert to common stock at a price miles above the current trading price, screwing the US taxpayer yet again?
I'm not sure what exactly these two stories have to do with each other -- maybe nothing -- but, I think most people could look at these stories and come to the conclusion that something is most definitely wrong here.
It was just this past Sunday that we witnessed something rather odd on This Week. Republican Senator Lindsay Graham stated that, though he wasn't thrilled with the prospect, that nationalizing some banks should remain an option. Wingnut wonder Peter King agreed. It was then that Chuck Schumer disagreed and said, "I would not be for nationalizing. I don't think government is good at making these decisions." (He failed to mention that the bankers apparently suck pretty bad at such decisions as well.)
Today, the de facto temporary nationalization of at least a couple of the largest "zombie banks" seems increasingly likely. Bank of America and Citi seem to be the likeliest targets and their stock has lost about a quarter of its remaining value today, making the prospect of being temporarily seized even greater.
Sen. Charles Schumer (D-N.Y.) believes that failed "zombie" banks, no matter what their size, should be taken over by the government, which should then wipe out shareholders, fire management, clean up the banks and quickly resell them into the marketplace. Such a move, he cautioned, should come only if the "stress tests" being conducted by Treasury Secretary Timothy Geithner determine a bank to be insolvent.
...
There is a good type of nationalization. I think that the [Treasury] Secretary was wise to do these stress tests," he said. "They're going to find some banks that are hopeless, that are zombie banks."
Those zombie banks, once discovered, he said, should be nationalized.
"Instead of keeping them alive for a long time," he said, "I do agree with people like Roubini or Mishkin -- and I think people would support this -- that the government should come in. And what the government would do would be: wipe out the shareholders, put in new management -- wipe out the old management and put in new management -- and then let the bank run sort of independently without day-to-day government intervention."
The fact that Schumer has turned the corner on this issue is pretty much the clearest signal one could possibly have that this is indeed going to happen. Given that today is Friday and the last day of the week is now becoming known as "bank failure Friday", it could happen sooner than most folks think.
Queens Congressman Gary Ackerman has been on a roll lately. Last week, he launched withering questioning of the hapless SEC regulators who still couldn't uncover the $50 billion dollar ponzi scheme perpetrated by Bernie Madoff, even after having the entire case delivered to them wrapped in a bow several times over a decade. Today, he's got 8 CEOs of the largest banks in the country, banks that have taken well over $125 BILLION dollars in so called "TARP' funds over the last few months, though none of them seem to be lending any of it.
In this video from the folks at TPM, Ackerman asks JP Morgan CEO, Jamie Dimon, "What did you do with (our) $25 billion dollars?" The good stuff begins at about the 3:35 mark.
Dimon's response can be roughly translated as, "We didn't use it for new lending."
I was going to dub the new financial plan TANF 2 - temporary assistance to needy financial institutions, without, you know, any of the means-testing or work requirements involved when poor people get help.
But Jamie Galbraith (private communication) has trumped me; he says it's the Bad Assets Relief Fund.
Our Attorney General has subpoenaed John Thain, the former CEO of Merril Lynch. You may have read about this clown recently. He's the guy who spent over a million bucks redecorating his office as his company was sliding ever closer to oblivion. More importantly, he's the Wall St wizard who sped up Merrill's bonus schedule so as to pay out roughly $4 BILLION DOLLARS in bonuses to himself and the rest of the geniuses who had just presided over a $15 billion dollar loss for their company in the final three months of 2008. What makes this even worse is that Merrill was about to be absorbed by Bank of America with a ton of taxpayer money and Thain most likely knew that those bonuses for being so awesome would probably never paid out once the folks at B of A realized what a stupendous mess they were buying with, um, your money.
The New York attorney general on Tuesday issued subpoenas to former Merrill Lynch chief executive John Thain and Bank of America's chief administrative officer, J. Steele Alphin, amid an investigation into bonuses Merrill paid executives just before being sold to Bank of America.
Thain, 53, was serving as the head of the newly combined company's wealth management division before he resigned last week. The resignation came shortly after reports surfaced that billions of dollars were paid to Merrill executives in late December.
Those bonuses were paid as Merrill was about to report a $15 billion fourth-quarter loss, and while Bank of America was seeking more federal funds to help it absorb the mounting losses at the New York-based investment bank.
Attorney General Andrew Cuomo's investigation will center on trying to determine why the timetable for paying the bonuses was moved up to December from its normal period in January; who knew about the bonuses; and how Merrill could justify spending billions of dollars on bonuses knowing its was on the brink of reporting a multibillion loss for the quarter, a person familiar with the probe told The Associated Press. The person spoke on condition of anonymity because the investigation is ongoing.
At first glance, this looks like nothing more than simple theft, albeit on a rather grand scale. Thieves should go to prison.
Remember that $50 million private jet that Citigroup, an entity that has taken close to $50 billion in taxpayer bailout funds so far, was buying? Well, it seems they've had a change of heart.
The high-flying execs at Citigroup caved under pressure from President Obama and decided today to abandon plans for a luxurious new $50 million corporate jet from France.
The decision came 24 hours after the banking giant, which was rescued by a $45 billion taxpayer lifeline, defended buying the state-of-the-art Dassault Falcon 7X -- one of nine to be flying in U.S. skies -- as a smart business deal.
ABC News has learned that on Monday officials of the Obama administration called Citigroup about the company's new $50 million corporate jet and told execs to "fix it."
And Citi's response?
The company today issued a statement saying, "We have no intent to take delivery of any new aircraft."
A small victory to be sure, but it is at least some sort of acknowledgment from those taking fantastic sums of public money that things have changed.
Maybe now we can get Citi to change the name of the new Mets stadium in Queens. Perhaps, we could call it "Taxpayer Stadium" or, at least, "City Field."
