Fedreral Reserve Announces New $1.2 Trillion Bailout Of Fannie & Freddie – Additional $1 Trillion Bailout In Planning Stages

Mar 18, 2009 6:15 pm US/Central

Fed Launches New $1.2T Effort To Revive Economy

WASHINGTON (AP) ― With the country sinking deeper into recession, the Federal Reserve launched a bold $1.2 trillion effort Wednesday to lower rates on mortgages and other consumer debt, spur spending and revive the economy. [READ: To buy bad credit card debt, bad auto loan debt, bad student loan debt, and sub-prime mortgage debt and place those debts squarely on the backs of the American taxpayer – the additional $1.2 Trillion will increase the spending of the New Democratic Administration to just over $10 Trillon in just under 3 months – the average American family share now exceeds $100,000 per family]

The Fed’s plan to buy government bonds and the sheer amount — $1.2 trillion — of the extra money to be pumped into the U.S. economy was a surprise. [ The surprise – there is no end to the Government spending – if reckless excess spending cretaed our problems – just as the President claimed when he called for fiscal discipline – just what will this unbelievable excess lead to? Exactly how does quadrupling – increasing by 400% – the total Natoinal debt help the Country’s future?]

The Fed will spend up to $300 billion to buy long-term government bonds and an additional $750 billion in mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac. [The original plan to “modify mortgages, released less than two weeks ago – started as a $75  Billion program – in two weeks that amount has increased to $750 Billion – a 1000% increase. As this writer has noted in prior posts – there  is $7 Trillion Dollars in “toxic mortage exposure” in the global economy – the Government shows no sign that their is any end to Government spending in sight]   

“The Fed is clearly ready, willing and able to be the ATM for the credit markets,” said Terry Connelly, dean of Golden Gate University’s Ageno School of Business in San Francisco. [An ATM filled with taxpayer money – the Fed may print the money but the taxpayers create the wealth that backs those dollars up]

The dollar fell against other major currencies. In part, that signaled concern that the Fed’s intervention will spur inflation over the long run. [The additional spending also mandates additional taxation which in turn reduces the disposable income and savings of the working class and the profits and dividends received or paid by the business class – the spending will create a short term stimulus and will, unquestionably, create a significant long term detriment to future economic growth – over $10 Trillion in National Debt]

The Fed chief and his colleagues again pledged to use all available tools to make that happen, and economists expect further steps in the months ahead. [A classic CYA – there is no certainty that this will help acheive the desired results – in fact these steps may exacerbate the problem by spurring additional lending to the “same bad credit risks” that got us here in the first place – thus the need to keep the door open to yet additional spending despite the unprecedented spending of the last 3 months] 

Since the Fed last met in late January, “the economy continues to contract,” Fed policymakers observed in a statement they issued Wednesday. [READ: What we have done so far has not worked – rather than wait to see if a positive or negative result occurs lets just rush ahead with more of the same – even if that means “pouring gasoline on the fire”]

“Job losses, declining equity and housing wealth and tight credit conditions have weighed on consumer sentiment and spending,” they said.
The Fed’s announcement that it will spend up to $300 billion over the next six months to buy long-term government bonds was something that in January it had hinted it would do. But some officials had seemed to back off from the idea in recent weeks.
The goal behind all the Fed’s moves is to spur lending. More lending would boost spending by consumers and businesses, which would revive the economy. [Lending to “good” or “bad” credit risks is the question]

The Fed also said it would consider expanding another $1 trillion program that’s being rolled out this week. That program aims to boost the availability of consumer loans for autos, education and credit cards, as well as for small businesses. [Another Trillion – before the last has even been spent – to make loansds to whom – those just coming out of foreclosure or bankruptcy? Loans made whith whose tax money? Does the Treasury think this is “Monopoly Money”?]

Where does the Fed get all the money? It prints it.
The Fed’s series of radical programs to lend or buy debt has swollen its balance sheet to nearly $2 trillion — from just under $900 billion in September. The Fed’s balance sheet could grow to $5 trillion over the next two years.
The Fed has said it’s mindful of the risks of pumping more money into the economy, bailing out financial institutions and leaving a key rate near zero for too long. There’s the potential to plant the seeds for higher inflation, put ever-more taxpayer money at risk and encourage “moral hazard.” That’s when companies make high-stakes gambles knowing the government stands ready to rescue them.
But even in this best-case scenario, the nation’s unemployment rate — now at quarter-century peak of 8.1 percent — will keep climbing. Some economists think it will hit 10 percent by the end of this year.
The recession, which began in December 2007, already has snatched a net total of 4.4 million jobs and has left 12.5 million searching for work.

Fed Reserve Adds Additional $1.2 Trillion To Debt In New Bailout – $750 Billion On Bad Mortgages

Mar 18, 2009 6:15 pm US/Central

Fed Launches New $1.2T Effort To Revive Economy

WASHINGTON (AP) ― With the country sinking deeper into recession, the Federal Reserve launched a bold $1.2 trillion effort Wednesday to lower rates on mortgages and other consumer debt, spur spending and revive the economy. [READ: To buy bad credit card debt, bad auto loan debt, bad student loan debt, and sub-prime mortgage debt and place those debts squarely on the backs of the American taxpayer – the additional $1.2 Trillion will increase the spending of the New Democratic Administration to just over $10 Trillon in just under 3 months – the average American family share now exceeds $100,000 per family]

The Fed’s plan to buy government bonds and the sheer amount — $1.2 trillion — of the extra money to be pumped into the U.S. economy was a surprise. [ The surprise – there is no end to the Government spending – if reckless excess spending cretaed our problems – just as the President claimed when he called for fiscal discipline – just what will this unbelievable excess lead to? Exactly how does quadrupling – increasing by 400% – the total Natoinal debt help the Country’s future?]

The Fed will spend up to $300 billion to buy long-term government bonds and an additional $750 billion in mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac. [The original plan to “modify mortgages, released less than two weeks ago – started as a $75  Billion program – in two weeks that amount has increased to $750 Billion – a 1000% increase. As this writer has noted in prior posts – there  is $7 Trillion Dollars in “toxic mortage exposure” in the global economy – the Government shows no sign that their is any end to Government spending in sight]   

“The Fed is clearly ready, willing and able to be the ATM for the credit markets,” said Terry Connelly, dean of Golden Gate University’s Ageno School of Business in San Francisco. [An ATM filled with taxpayer money – the Fed may print the money but the taxpayers create the wealth that backs those dollars up]

The dollar fell against other major currencies. In part, that signaled concern that the Fed’s intervention will spur inflation over the long run. [The additional spending also mandates additional taxation which in turn reduces the disposable income and savings of the working class and the profits and dividends received or paid by the business class – the spending will create a short term stimulus and will, unquestionably, create a significant long term detriment to future economic growth – over $10 Trillion in National Debt]

The Fed chief and his colleagues again pledged to use all available tools to make that happen, and economists expect further steps in the months ahead. [A classic CYA – there is no certainty that this will help acheive the desired results – in fact these steps may exacerbate the problem by spurring additional lending to the “same bad credit risks” that got us here in the first place – thus the need to keep the door open to yet additional spending despite the unprecedented spending of the last 3 months] 

Since the Fed last met in late January, “the economy continues to contract,” Fed policymakers observed in a statement they issued Wednesday. [READ: What we have done so far has not worked – rather than wait to see if a positive or negative result occurs lets just rush ahead with more of the same – even if that means “pouring gasoline on the fire”]

“Job losses, declining equity and housing wealth and tight credit conditions have weighed on consumer sentiment and spending,” they said.
The Fed’s announcement that it will spend up to $300 billion over the next six months to buy long-term government bonds was something that in January it had hinted it would do. But some officials had seemed to back off from the idea in recent weeks.
The goal behind all the Fed’s moves is to spur lending. More lending would boost spending by consumers and businesses, which would revive the economy. [Lending to “good” or “bad” credit risks is the question]

The Fed also said it would consider expanding another $1 trillion program that’s being rolled out this week. That program aims to boost the availability of consumer loans for autos, education and credit cards, as well as for small businesses. [Another Trillion – before the last has even been spent – to make loansds to whom – those just coming out of foreclosure or bankruptcy? Loans made whith whose tax money? Does the Treasury think this is “Monopoly Money”?]

Where does the Fed get all the money? It prints it.
The Fed’s series of radical programs to lend or buy debt has swollen its balance sheet to nearly $2 trillion — from just under $900 billion in September. The Fed’s balance sheet could grow to $5 trillion over the next two years.
The Fed has said it’s mindful of the risks of pumping more money into the economy, bailing out financial institutions and leaving a key rate near zero for too long. There’s the potential to plant the seeds for higher inflation, put ever-more taxpayer money at risk and encourage “moral hazard.” That’s when companies make high-stakes gambles knowing the government stands ready to rescue them.
But even in this best-case scenario, the nation’s unemployment rate — now at quarter-century peak of 8.1 percent — will keep climbing. Some economists think it will hit 10 percent by the end of this year.
The recession, which began in December 2007, already has snatched a net total of 4.4 million jobs and has left 12.5 million searching for work.

Fannie Mae & Freddie Mac – New Bailouts In Hand – Announce New Round Of Employee Bonuses – Will This Never End

The Wall Street Journal

MARCH 18, 2009, 4:54 P.M. ET

Bonuses Expected at Fannie, Freddie

More financial companies that are being propped up with federal money are facing political heat over bonus payments to executives.

Fannie Mae is due to pay retention bonuses of as much $470,000 to $611,000 this year to some executives despite enormous losses at the government-backed mortgage company. Fannie’s main rival, Freddie Mac, also plans to pay such bonuses but hasn’t yet provided details.

The Fannie bonuses are still considerable and come at a time when Fannie and Freddie are receiving increasing amounts of funding from the Treasury. For 2008, Fannie and Freddie reported combined losses of about $108 billion,  stemming from a surge in home-mortgage defaults. The U.S. Treasury has agreed to provide as much as $200 billion of capital apiece to Fannie and Freddie in exchange for preferred stock.  [By comparison AIG has received $180 Billion total – less than half the Fannie/Freddie payout] The two companies have said they will need a combined $60 billion of that money to cover their losses so far.

James Lockhart, director of the Federal Housing Finance Agency, of FHFA, which regulates Fannie and Freddie, said the bonuses they are paying are “critical” to retain people needed to support the mortgage market and work on foreclosure-prevention efforts. [Haven’t we heard this before? The only people who can fix the problem are the ones who created it!] After the companies’ chief executives were ousted in September, “it would have been catastrophic to lose the next layers down and other highly experienced employees,” he said. Mr. Lockhart added that compensation has declined for many employees because other types of bonuses weren’t paid last year and “past stock grants are virtually worthless.” [Lets not forget that the stock is worthless because Fannie & freddie lost 100’s of billions of dollars – bonuses were not paid as Companies that lose hundreds of billions of dollars are “bankrupt” and have no money to pay bonuses. The problem is obvious – the “entitlement philosophy” that assumes employees deserve bonuses even when they bankrupt the company that employs them] 

A recent Fannie securities filing says that Michael Williams, the company’s chief operating officer, is due to receive cash retention awards of $611,000 this year, atop a similar award of $260,000 in 2008. His base salary is $676,000 a year.

The company also disclosed plans to pay retention awards this year of $517,000 to David Hisey and $470,000 each to Thomas Lund and Kenneth Bacon. All three of them are executive vice presidents.

The bonuses this year are to be paid in two installments, one in April and the second in November. Those installments are to be paid only if the executives remain in their posts at the payment dates.

Hundreds of other Fannie employees also are eligible for retention awards, but the company disclosed only the largest of the bonuses. It said there are no plans for a retention bonus for the chief executive officer, Herbert Allison, who elected to serve without any salary or bonus in 2008.

Freddie has a similar retention-bonus plan but hasn’t yet disclosed the amounts due to be paid to its top executives. That disclosure is due by the end of April.

A Government Regulator seized management control of Fannie and Freddie in September under a legal process called conservatorship. That resulted in a crash of the companies’ stock prices to less than $1 as investors concluded that the companies will be unable to pay dividends to common shareholders again for years, if ever, as they struggle to support preferred-stock dividend payments to the Treasury. Until last year, Fannie and Freddie executives were compensated largely in the form of common stock, no longer an appealing option. [Past Executives received payments in excess of $20 Million Dollars a year plus bonuses – leading some of those very same executives to “cook the books” to maximize their bonus payouts while hiding the true financial results of the sub-prime mortgage crisis, the very crisis that lead to our current financial collapse].

Of Bailouts & Bonuses – Fannie & Freddie To Pay Bonuses – When Will This End

The Wall Street Journal

MARCH 18, 2009, 4:54 P.M. ET

Bonuses Expected at Fannie, Freddie

More financial companies that are being propped up with federal money are facing political heat over bonus payments to executives.

Fannie Mae is due to pay retention bonuses of as much $470,000 to $611,000 this year to some executives despite enormous losses at the government-backed mortgage company. Fannie’s main rival, Freddie Mac, also plans to pay such bonuses but hasn’t yet provided details.

The Fannie bonuses are still considerable and come at a time when Fannie and Freddie are receiving increasing amounts of funding from the Treasury. For 2008, Fannie and Freddie reported combined losses of about $108 billion,  stemming from a surge in home-mortgage defaults. The U.S. Treasury has agreed to provide as much as $200 billion of capital apiece to Fannie and Freddie in exchange for preferred stock.  [By comparison AIG has received $180 Billion total – less than half the Fannie/Freddie payout] The two companies have said they will need a combined $60 billion of that money to cover their losses so far.

James Lockhart, director of the Federal Housing Finance Agency, of FHFA, which regulates Fannie and Freddie, said the bonuses they are paying are “critical” to retain people needed to support the mortgage market and work on foreclosure-prevention efforts. [Haven’t we heard this before? The only people who can fix the problem are the ones who created it!] After the companies’ chief executives were ousted in September, “it would have been catastrophic to lose the next layers down and other highly experienced employees,” he said. Mr. Lockhart added that compensation has declined for many employees because other types of bonuses weren’t paid last year and “past stock grants are virtually worthless.” [Lets not forget that the stock is worthless because Fannie & freddie lost 100’s of billions of dollars – bonuses were not paid as Companies that lose hundreds of billions of dollars are “bankrupt” and have no money to pay bonuses. The problem is obvious – the “entitlement philosophy” that assumes employees deserve bonuses even when they bankrupt the company that employs them] 

A recent Fannie securities filing says that Michael Williams, the company’s chief operating officer, is due to receive cash retention awards of $611,000 this year, atop a similar award of $260,000 in 2008. His base salary is $676,000 a year.

The company also disclosed plans to pay retention awards this year of $517,000 to David Hisey and $470,000 each to Thomas Lund and Kenneth Bacon. All three of them are executive vice presidents.

The bonuses this year are to be paid in two installments, one in April and the second in November. Those installments are to be paid only if the executives remain in their posts at the payment dates.

Hundreds of other Fannie employees also are eligible for retention awards, but the company disclosed only the largest of the bonuses. It said there are no plans for a retention bonus for the chief executive officer, Herbert Allison, who elected to serve without any salary or bonus in 2008.

Freddie has a similar retention-bonus plan but hasn’t yet disclosed the amounts due to be paid to its top executives. That disclosure is due by the end of April.

A Government Regulator seized management control of Fannie and Freddie in September under a legal process called conservatorship. That resulted in a crash of the companies’ stock prices to less than $1 as investors concluded that the companies will be unable to pay dividends to common shareholders again for years, if ever, as they struggle to support preferred-stock dividend payments to the Treasury. Until last year, Fannie and Freddie executives were compensated largely in the form of common stock, no longer an appealing option. [Past Executives received payments in excess of $20 Million Dollars a year plus bonuses – leading some of those very same executives to “cook the books” to maximize their bonus payouts while hiding the true financial results of the sub-prime mortgage crisis, the very crisis that lead to our current financial collapse].

The Story Behind AIG’s Collapse – Bad Mortgages, Credit Default Swaps & Accounting Irregularities

By David Voreacos and Elliot Blair Smith
Bloomberg News
November 26, 2008
Nov. 26 (Bloomberg) — Prosecutors are examining statements by former American International Group Inc. executive Joseph Cassano to see if he misled auditors and investors on subprime mortgage-related losses, said people familiar with the probe.

Investigators are asking auditors at PricewaterhouseCoopers LLP about memos they wrote last fall on how Cassano and other AIG executives valued contracts protecting $62 billion in mortgage-backed securities, the people said. The government is also looking at AIG’s reliance on valuations that have been questioned by auditors and banks.

PWC told Martin Sullivan, then AIG’s chief executive officer, on Nov. 29, 2007, that auditors had challenged the insurer’s financial controls, according to company records. On Dec. 5, Sullivan and Cassano told investors gathered at New York’s Metropolitan Club not to fear losses on AIG’s portfolio of ‘super senior” credit-default swaps, which insured bond losses tied to the U.S. housing market.

“It is very difficult to see how there can be any losses in these portfolios,” said Cassano, 53, according to a transcript of the investor meeting. Though he said the contracts had dropped in value by $1.1 billion in October and November 2007, Cassano told investors the “losses will come back.”

Cassano, who ran AIG’s London-based financial products unit, made no mention of PWC’s concerns at the meeting, according to the transcript. Cassano also didn’t discuss a running dispute with Goldman Sachs Group Inc., one of its counterparties, about valuing the underlying collateral. The securities firm had made collateral calls by the time of the conference.

‘We Are Confident’

“We are confident in our marks and the reasonableness of our valuation methods,” said Sullivan, 54, at the meeting.

On Feb. 11 of this year, AIG said the contracts declined more than sixfold in November, for an unrealized loss of $5.96 billion. AIG also said PWC found a “material weakness” in how it valued the credit-default swaps.

AIG posted what was then its biggest quarterly loss on Feb. 28, writing down $11.1 billion on the swaps. AIG announced Cassano’s resignation as president and CEO of AIG Financial Products a day later.

Cassano’s lawyer said in a statement that his client is cooperating with investigators and acted lawfully.

“His actions were appropriate, including during the valuation of AIG’s credit-default swaps,” said attorney F. Joseph Warin in an e-mailed statement. “He provided full and complete information to investors, his supervisors and auditors.”

Ousted Sullivan

AIG’s board ousted Sullivan on June 15, pegging paper losses on the contracts at $26.1 billion. While the New York- based insurer said it will probably never realize those losses, it got an $85 billion loan from the Federal Reserve in September. The U.S. this month increased the aid to more than $150 billion.

The Justice Department in Washington and the U.S. Attorney’s Office in Brooklyn, New York, have joined with the Securities and Exchange Commission to determine whether AIG executives committed crimes or merely exercised bad judgment, the people said.

PWC spokesman Steven Silber declined to comment on behalf of the auditing firm and its employees.

One way for prosecutors to build a fraud case is to show executives made public statements “inconsistent with what they knew to be true,” said former U.S. prosecutor Joshua Hochberg, now at McKenna Long & Aldridge in Washington.

“Prosecutors will look for as sharp a contrast as they can find between what an executive said and the information he actually had available,” said Andrew Hruska, a former federal prosecutor now at King & Spalding in New York.

Brooklyn College

Cassano graduated from Brooklyn College in 1977 with a degree in political science. He later worked two years at Drexel Burnham Lambert, the defunct investment bank. In 1987, AIG hired him to help found the financial products unit.

Cassano’s business drew attention from authorities. In 2004, he signed an agreement on behalf of the company to defer prosecution on a charge of aiding and abetting securities fraud. U.S. prosecutors alleged the unit helped Pittsburgh-based PNC Financial Services Group Inc. improperly remove assets from its balance sheet. AIG paid $126.4 million to resolve the case.

Cassano’s unit sold credit-default swaps on securities backed by corporate loans, mortgages, auto loans, credit cards and other assets. Those securities, known as collateralized debt obligations, are sliced into layers carrying different risks. AIG sold credit protection on the top layer, or AAA-rated portion, which is typically the last to suffer in a default.

‘Losing $1’

“It is hard for us, without being flippant, to even see a scenario within any kind of realm or reason that would see us losing $1 in any of those transactions,” Cassano said on an Aug. 9, 2007, investor call, according to a transcript.

AIG sold CDO protection worth about $441 billion as of June 30, 2007, including $64 billion backed by subprime mortgages, according to company documents.

AIG paid Cassano $280 million in the eight years before he resigned, according to U.S. Rep. Henry Waxman, chairman of the House Oversight and Government Reform Committee. After Cassano stepped down, the insurer paid him $1 million a month as a consultant.

AIG stopped paying Cassano the $1 million-a-month consulting fee before Waxman’s committee held a hearing about the insurer on Oct. 7, according to company spokesman Nicholas Ashooh.

At the Dec. 5 conference at New York’s Metropolitan Club, Sullivan said AIG’s risk was “very manageable.” Cassano didn’t disclose that Goldman had already made collateral calls when investors asked about demands from trading partners, according to the transcript. A buyer of the credit protection may demand cash from AIG when the value of the underlying CDOs dropped or if their credit ratings were lowered.

‘Collateral Calls’

“We have, from time to time, gotten collateral calls from people,” Cassano said at the meeting, according to the transcript. “Then we say to them, ‘Well, we don’t agree with your numbers.’ And they go, ‘Oh.’ And they go away.”

Former AIG auditor Joseph St. Denis wrote on Oct. 4 of this year to the Waxman committee that AIG should have disclosed more information on collateral calls because it was of “critical importance” to investors. St. Denis also said Cassano told him to avoid the swaps-valuation process before St. Denis’s resignation Oct. 1, 2007.

“I have deliberately excluded you from the valuation of the super seniors because I was concerned that you would pollute the process,” Cassano told St. Denis, according to the letter.

AIG’s valuation of the swaps, and the underlying CDOs, was based on a mathematical model known as the binomial expansion technique developed by Moody’s Investors Service in 1996 to estimate losses on collateral.

BET Methodology

AIG, after refining its BET methodology in late 2007, discovered “substantially higher” paper losses on the swaps portfolio, according to minutes of a Jan. 15 audit committee meeting released by Waxman. Audit committees regularly keep minutes.

“While it provides useful back-of-the-envelope risk metrics, there are much more accurate techniques,” said John Kiff, a structured-finance analyst at the International Monetary Fund in Washington. Kiff co-wrote an analysis in 2004 that concluded the model’s formula understated potential losses.

Moody’s began to phase out the BET technique in 2005. In a technical paper the credit-rating company published on its Web site in September of that year, the company described the replacement model, the correlated binomial method, as able to “better assess” potential losses in mortgage-dominated CDOs.

AIG’s computer modeling was a subject that PWC raised with management at a meeting, according to audit committee minutes.

Prominent Partners

Some of PWC’s most prominent partners attended audit committee meetings. They included two members of its global board, Tim Ryan and Robert Sullivan, and the U.S. chairman and senior partner, Dennis Nally. AIG paid $384 million in fees to PWC between 2004 and 2007, according to company filings.

On Nov. 29, 2007, six days before AIG’s investor conference at the Metropolitan Club, Ryan met Sullivan and then-Chief Financial Officer Steven Bensinger, according to minutes of the Jan. 15 audit committee meeting. Ryan said he worried about a “material misstatement or omission” in AIG’s second-quarter disclosures on securities lending.

On Jan. 15, Ryan told the audit committee that a “significant deficiency” in financial controls at AIG may amount to a “material weakness,” according to the minutes. Ryan said his concerns extended to the insurer’s securities- lending program and the credit-default swap portfolio.

At that meeting, Elias Habayeb, who then was CFO of AIG’s financial services group, said valuing the swaps “is not going as smoothly as it could,” according to the minutes.

AIG Swaps Portfolio

By then, another accounting firm, KPMG LLP, had also begun valuing the AIG swaps portfolio.

When AIG’s audit committee met again Feb. 26, Ryan said a Goldman collateral call after the second quarter led AIG to increase third-quarter losses to $350 million from $45 million, according to the minutes of the meeting.

In the fourth quarter, Ryan said at the meeting, PWC and AIG managers discussed “the subjectivity of the valuation process and key issues such as the impact of the collateral calls on the valuation judgments,” according to the minutes.

When AIG’s full board met May 8, Bensinger told directors that while the insurer’s models estimated the loss at $1.2 billion to $2.4 billion, an independent valuation by JPMorgan Chase & Co. pegged it at $9 billion to $11 billion. JPMorgan assumed sharper declines in housing values, according to minutes of the board meeting.

Cassano discussed collateral calls in detail with investors and “specifically noted that some counterparties had different valuation estimates,” Warin, his lawyer, said in his statement. “We are disappointed by the rehashing of allegations of wrongdoing that are misleading, incomplete, and in some cases just wrong.”

http://www.bloomberg.com/apps/news?pid=20601103&sid=a6m_BOe9Ftk4&refer=news

To date AIG has received $180 Billion Dollars Of Taxpayer Money – There may be $2 Trillion in additional bad debt on the AIG books.

White House -Treasury Officials Engineered AIG Bonuses Reports Salon Magazine

The attempt to blame Dodd is based on a patently false claim that was first fed to The New York Times on Saturday by an “administration official” granted anonymity by Times reporters Edmund Andrew and Peter Baker (in violation, as usual, of the NYT anonymity policy, since all the official was doing was disseminating pro-administration spin) The accusation against Dodd is that there is nothing the Obama administration can do about the AIG bonus payments because Dodd inserted a clause into the stimulus bill which exempted executive compensation agreements entered into before February, 2009 from the compensation limits imposed on firms receiving bailout funds.  Thus, this accusation asserts, it was Dodd’s amendment which explicitly allowed firms like AIG to make bonus payments that were promised before the stimulus bill was enacted. [Lets not ignore the fact that Dodd obviously agreed to the Amendment and until the recent fire storm, never raised a single objection to the demanded changes]

That is simply not what happened.  What actually happened is the opposite.  It was Dodd who did everything possible — including writing and advocating for an amendment — which would have applied the limitations on executive compensation to all bailout-receiving firms, including AIG, and applied it to all future bonus payments without regard to when those payments were promised.  But it was Tim Geithner and  Larry Summers who openly criticized Dodd’s proposal at the time and insisted that those limitations should apply only to future compensation contracts, not ones that already existed.  The exemption for already existing compensation agreements — the exact provision that is now protecting the AIG bonus payments — was inserted at the White House’s insistence and over Dodd’s objections.  But now that a political scandal has erupted over these payments, the White House is trying to deflect blame from itself and heap it all on Chris Dodd by claiming that it was Dodd who was responsible for that exemption. [Exactly how hard did Dodd argue – the prohibition mentioned in this article was not authored by Dodd as reported, it was authored by Senator Snow (see below) – that language – language prohibiting bonuses/retention payments was stricken in “behind closed door” meetings at the White House without any public debate or review – This statement is clearly a self serving alibi for Dodd. He, Dodd, is now attempting to spread the blame to those who should rightly share it with him – The White House the Treasury and the Democratically controlled Congress that rammed the legislation through without adequate review or debate]
At that same time, The Hill reported that “President Obama and the chairman of the Senate Banking Committee [Dodd] are at odds on how to rein in the salaries of top executives whose companies are being propped up by the federal government” and that “most of the administration’s concern stems from the Dodd’s move to trump Obama’s compensation provisions by seeking more aggressive restrictions.”  Let’s repeat that:  the Obama administration was complaining because the compensation restrictions Dodd wanted were too “aggressive.”
Now the Obama administration is feeding reporters the accusation that it was Dodd who was responsible for the exemptions that protected already-vested bonuses.   The Times article from Saturday that started the Dodd scandal thus contains this outrageously misleading claim:
The administration official said the Treasury Department did its own legal analysis and concluded that those contracts could not be broken. The official noted that even a provision recently pushed through Congress by Senator Christopher J. Dodd, a Connecticut Democrat, had an exemption for such bonus agreements already in place. And yet another New York Times article from today (“Fingers Are Pointed Across Washington Over Bonuses”) — this one by David Herszenhorn — contains this White-House-mimicking, misleading passage: “But Mr. Reid mostly ducked a question about whether Democrats had missed an opportunity to prevent the bonuses because of a clause in the economic stimulus bill, part of an amendment by Senator Christopher J. Dodd, Democrat of Connecticut, that imposed limits on executive compensation and bonuses but made an exception for pre-existing employment contracts.”
That was the exact provision that Geithner and Summers demanded and that Dodd opposed.  And even after Dodd finally gave in to Treasury’s demands, he continued to support an amendment from Ron Wyden and Olympia Snowe to impose fines on bailout-receiving companies which paid executive bonuses (which was stripped from the bill at the last minute).  But now that Treasury officials are desperate to heap the blame on others for what they did, they’re running to gullible, mindless journalists and feeding them the storyline that it was Dodd who was responsible for these provisions.  And today, during his White House Press Conference, Robert Gibbs advanced this dishonest attack by repeatedly describing the offending provisions as the “the Dodd compensation requirements.
“Rather oddly, the NYT article I quoted above, by David Herzsenhorn, has been moved on the NYT site and is now at this link (see here).  Most importantly, it has been re-written to reflect that fact that it was not Dodd who inserted the exception for past contracts:
In the place of the Herzsenorn article is now this article by Jackie Calmes and Louise Story that also includes the Dodd version of events:
Something in the last couple of hours caused The New York Times to change the way it is reporting this matter so that it is no longer mindlessly reciting the false White House attempt to blame Dodd for the bonus exemption, but instead is at least including a version of the truth.  http://www.salon.com/opinion/greenwald/2009/03/17/dodd/
The specific terms, amounts and dates of the bonus/retention payments were made known to the White House and Treasury Department on 11/09/2008 – Those disclosures were made in the original AIG bailout agreement signed by AIG and the Treasury Department on that date. Claims to the contrary are simply false.

 hypocrisy  – hy⋅poc⋅ri⋅sy – 

1. a pretense of having a virtuous character, moral or religious beliefs or principles, etc., that one does not really possess.

2. a pretense of having some desirable or publicly approved attitude.

3. an act or instance of hypocrisy.

Origin: Greek – play acting, to play a part.   1. See deceit.

 

 

 

AIG Bonus Scandal – Senator Dodd Claims White House & Treasury Demanded AIG Bonuses Be Paid

THE BUSINESS INSIDER

By various accounts, it appears that Dodd initially wanted the bonus limitations in the Stimulus deal, but that it was Obama and the Treasury Department that fought heavily for the clause that allows for the payment of the AIG bonuses.

Now we’re not necessarily against the clause [statement made by Salon Magazine & Business Insider Magazine], which prevented bonus limitations from being made retroactive. Retroactive limitations are problematic.  But it seems that the smears on Dodd may be coming from Treasury as well as the White House.

Glenn Greenwald at Salon has a full narrative, and the official word out of Dodd’s office:

Dodd’s Office States:

It was Obama officials, not Dodd, who demanded that already negotiated bonus payments be maintained And it was Dodd, not Obama officials, who wanted the prohibition applied to all compensation agreements, past and future.  The provision which shielded already-promised bonus payments from the executive compensation limits ended up being inserted at the insistence of Geithner.  A spokesperson for Dodd, who is now consumed by these completely unfair attacks, finally confirmed today that these provisions were inserted at the direction of Treasury officials: Senator Dodd’s original executive compensation amendment adopted by the Senate did not include an exemption for existing contracts that provided that these types of bonuses be eliminated. Because of negotiations with the Treasury Department and the bill Conferees, several modifications were made, including adding the exemption, to ensure that the AIG bonus would not be subject to the restrictions in the final stimulus bill.

http://www.businessinsider.com/the-faux-dodd-scandal-is-another-black-mark-on-geithner-2009-3

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