Taking Billions, Making Change

Democrats yesterday fashioned and passed through the House an illegal bill to manufacture a diversion from examinations of their repudiations of campaign promises.

There is not much more to say about this. Democrats have totally repudiated their own calls for transparency, for accountability (unless it includes exposing private citizens to threats of murder), and for respecting the rule of law. When people do the right thing they are forced to accept government interventions in spite of their good behavior. Then, purient Democrat theologians go into self-reich-teousness mode to show us in the opposition camp what sorry slime we will appear to be to the proletariat.

The AIG hyperbole is no more than a smoke screen for this monument to hypocrisy.

All this from people who are trying to cozy up to nations who murder their outspoken opposition.

Is it a grand thing to live in historic times or what?!?

Posted by Lee Emmerich Jamison at March 20, 2009 10:45 AM
Comments
Comment #278088

“self-reich-teousness” - cute play on words Lee, I am impressed.

Posted by: j2t2 at March 20, 2009 11:17 AM
Comment #278096

Lee Jamison-
First: Illegal? My understanding is that they made it sufficiently broad in the language to avoid being targeted simply at AIG execs to avoid bill of attainder, and as for Ex Post Facto, the consensus on that is that this is a civil, rather than criminal matter, and therefore not covered at all. We’ll see what the courts say about it, but until then, it’s constitutional, and therefore legal.

Second, the US Taxpayer is essentially AIG’s majority stockholder. We have a right to know who got bonuses, how the company is being run in general. If the people involved end up getting death threats, we can loan them a few of our corporation’s security personnel to keep them from harm. We seem to have a few on hand we can spare.

Third, what good behavior? Setting up a booby trap of a contract for these bonuses, essentially bringing derivatives into default if the ones selling them aren’t given their bonuses, regardless of performance, regardless of whether they stick around? That sounds like a highly irresponsible way to do business.

Lastly, who are you kidding? We made deals with the Soviets. Why making deals and negotiating with Iran is somehow irresponsible by comparison, you don’t say. You just simply assume that we either give them the silent treatment, or go to war with them. That, or suddenly, magically they reform themselves and all is good and right with the world. If we defeated commies with diplomacy, why can’t we beat mullahs and jihadis?

Lately, all Republicans do nowadays is vent their spleen about how terrible Democrats are doing. Glad we cand be of help in taking their minds off of their recent and current failings.

Posted by: Stephen Daugherty at March 20, 2009 12:47 PM
Comment #278098

I loved this argument on Fox last night. Hannity more or less stated that congress cannot legislate to make any past behavior illegal. So what’s the point of having a congress? We don’t need any new laws, nothing is ever discovered to be wrong in the past.

At least now I know that Marijuana laws are completely unconstitutional because in the past it was legal. Yay!

Ya gotta love these dumb arguments.

Posted by: gergle at March 20, 2009 1:16 PM
Comment #278099

Stephen,
Good behavior: From one of the articles I linked- “Kovacevich gave a talk at Stanford University, complaining about how unfair it is that the government forced his bank to take $25 billion in bailout money last year when it could have easily raised private capital — and then compounded that outrage by changing the terms of the deal and forcing Wells to cut its dividend.”

Here the government is assuming ownership rights in a firm in which it does not own a majority, or any save that which it has imposed, stake.

Illegal: If it is an illegal act it is illegal, just as murder is always illegal, even before adjudication. It would also, in the behavior of a private firm, be considered fraud for the firm to do as the government has clearly INTENTIONALLY done. There is no end of documentation of this including a C-Span clip of Geitner being questioned on March 3 about the “162 million” dollars in bonuses guaranteed to AIG employees, about which he obviously knew. You can defend this behavior only at the risk of your credibility. It would be illegal in your own eyes, no matter who the stockholders were, if it were a private firm.

Your stance places the government above the law. And you are not embarrassed.

Exposing private citizens to mobs: Pure tyrranical intimidation tactic. How soon will you be apologizing for sending “unpatriotic citizens” to live in huts in central Alaska for cultural reprogramming?

Don’t worry. I’ve read volumes on the behavior of civilized peoples in times dominated by such tactics. They are always able to justify and live comfortably with these “corrections” by their newfound saviors. You’ll be just fine.

Posted by: Lee Jamison at March 20, 2009 1:17 PM
Comment #278101

M. Daugherty asks; “If we defeated commies with diplomacy, why can’t we beat mullahs and jihadis?”

Obvious answer…No Reagan, No Thatcher, No John Paul II. We have no giants in leadership position anywhere in the world today. Instead, we have midgets standing in the light from the liberal glow that makes their shadow appear large.

Here’s an interesting piece from the Cincinnatus blog.

AIG paid $165 million in bonuses, but angry lawmakers and administration officials insisted the money belonged to taxpayers and vowed to get it back. The clamor over compensation overshadowed AIG’s weekend disclosure that it used more than $90 billion in federal aid to pay out to foreign and domestic banks, including some that had multibillion-dollar U.S. government bailouts of their own. The counterparty list is a veritable who’s who of the world’s top financial institutions, including Goldman Sachs (GS), Bank of America (BAC), British bank Barclays (BCS) and Germany’s Deutsche Bank (DB). The question arises - Why did the United States Government insist on honoring these legally questionable obligations?

At the heart of this transfer of billions of taxpayer dollars to the world’s leading financial institutions is Credit Default Swaps (CDS). Undecipherable CDS contracts were written with the intent of creating a quasi-insurance product for the financial industry that avoided traditional insurance regulations and permitted investors to make huge bets even though they did not have an “insurable interest”. (i.e. In essence investors did not own the bonds that were being “insured”.) One could view the $60 trillion CDS business as a giant unregulated betting parlor where one could bet on anything. For example, some investors bet that Lehman Brothers would default on certain of their bonds within a six-month period, even though they didn’t own any!

In the convoluted world of Credit Default Swap contracts, the parties have neither an “insurable interest” nor are they at “risk” if there is a default on the underlying asset. Therefore, CDS’s are not legally an insurance contract. Courts in New York and London ruled on this matter more than a decade ago. These opinions opened the unregulated door to this odious business. In my view CDS are a form of wagering contract, which can be declared null and void using the same legal theory that States have used to declare other wagering contracts void. Cancelling these bets (i.e., declaring them null, void, and legally unenforceable) would let swap sellers off the hook. It would virtually leave the swap buyers high and dry. But remember, these were theoretically long-shot bets and the “premiums” where minuscule.

I do not mean to suggest that AIG was an innocent victim; they were in fact, at the center of the CDS scam. For reasons that are not clear both the Bush and Obama administrations appear to have had the power to cancel all of the CDS contracts and not use AIG as a stealth conduit to funnel billions of dollars to favored financial institution. Instead they choose a path less well-traveled to shore-up anointed financial institutions with tens of billions of dollars of taxpayer money. Why? How did this decision benefit the economy and the taxpayers?

The critical question remains will the main-steam media ask the tough questions or are they in the tank for the Obama administration? Stay Tuned!

Posted by: Jim M at March 20, 2009 1:26 PM
Comment #278102

Jim M,

Good work.

Posted by: Lee Jamison at March 20, 2009 1:29 PM
Comment #278103

gergle writes; “Hannity more or less stated that congress cannot legislate to make any past behavior illegal. Ya gotta love these dumb arguments.”

That’s not what Hannity said…”more or less”. I believe you understand that one can not be arrested and tried in court for past behavior which was legal at the time.

On the other hand, government can use taxes to punish folks for behavior which it deems inappropriate…(ie) tobacco use, alcohol use, etc. and now, in NY, the drinking of non-diet soda. If PO and his liberal congress has their way we will soon be taxed even more for heating our homes and other disgusting energy uses via the proposed carbon tax.

Liberals, I expect, will have no problem warming themselves and lighting their homes in the glow emanating from their beloved leaders.

Posted by: Jim M at March 20, 2009 1:42 PM
Comment #278107

stephen

“Lately, all Republicans do nowadays is vent their spleen about how terrible Democrats are doing.”

if that aint the pot calling the kettle black, i don’t know what is. just what was it the democrats did for the last 8 years during the bush administration? now we’ve got democrats outraged over bonuses they knew damn well were to be paid out. talk about sh#ting in your own house and trying to hide it under the carpet thinking no one will ever smell it. good thing thier in charge.

Posted by: dbs at March 20, 2009 2:07 PM
Comment #278109

Jim M,
On the making hay out of things formerly not illegal, that is exactly what the D.A. in Austin tried to do with Tom Delay. It is also why there will never be a trial.

Gergle,

Your statement is false. Hannity is stating a truth when he states that a law can’t be created to make past legal behavior illegal and then retroactively penalize people for that behavior.

Misstating a good argument for the sake of reaping the folly of your restatement is a rhetorical trick. First graders do it.

It is not a better tactic in the hands of an adult.

Posted by: Lee Jamison at March 20, 2009 2:36 PM
Comment #278111

lee

“Jim M,
On the making hay out of things formerly not illegal, that is exactly what the D.A. in Austin tried to do with Tom Delay. It is also why there will never be a trial.”

unfortunately this is typical of the democrat machine. they couldn’t defeat him on the house floor, so they resorted to the politics of character assination, and unfortunately it worked. he was tried in the media, so it doesn’t matter whehter there was any truth to the allegations. only the seriousness of the charges.

wonder what that peice of crap ronny earl is doing now.

Posted by: dbs at March 20, 2009 3:16 PM
Comment #278116

dbs asks; “wonder what that peice of crap ronny earl is doing now.”

Go wash your hands, you just wrote a “dirty name”.

Posted by: Jim M at March 20, 2009 3:57 PM
Comment #278153

Lee Jamison-
Kovacevich’s company acquired Wachovia with it’s TARP money, along with a big tax break. So I’m skeptical this was forced on them.

Step back for a moment, and Remember that TARP money is goverment money bailing out the banks. Should it be pleasant? Should it be given out with minimal oversight? Should we not do something to figure out which banks will be able to stay afloat without further help, and which ones we’ll have to do more than continue to prop up?

If this is conservatism to find fault with policies that prevent financial institutions from becoming parasites on the taxpayer, then there’s little evidence that Republicans have truly reformed as conservatives.

As for the bonus tax being illegal, this is what I’m lead to understand: they’ve spread the focus of the tax greater than just the folks in AIG, and it doesn’t convict anybody of a crime, so it’s not a bill of attainder in its language. Every expert I’ve heard from says that ex post facto prohibitions deal with criminal laws, meaning that a civil measure like a tax is not affected. So, for the most part, it seems constitional, and as an act of Congress would be law, hence definitively legal.

You can talk about what you think is constitutional, and what’s not, but it will only be talk, and nothing more until some judge, and finally a supreme court justice rules otherwise. Murder is a crime, but let me remind you that under our system, it is not considered somebody’s crime until a judge and jury have convicted them of that. So a law, even if you and others consider it unconstitutional, is not definitively so, until a court decides that.

As for whether I’m embarrassed? What embarrasses me is the Geithner and others let things get this bad, and were too friendly with the very people they should have been strict with. This is taxpayer money, and the taxpayers deserve better supervision. I know you don’t like people taking a hardline with the business community, but when we’re socializing their losses, there’s no room for the error of letting the money flow endlessly without oversight.

As for exposing private citizens to mobs? Give me a break. Bernie Madoff certainly isn’t popular, but we have police and federal agents able to protect those who the government is interested in looking at.

There’s a side issue here, which is probably more important than this minor controversy over bonuses. Simply put, there’s evidence that they’re might have been fraud at this particular unit of AIG, where the most egregious excesses took place. Perhaps you want to just leave those poor people alone. But what if, what we’re dealing with here is essentially hush money? What if somebody’s trying to conceal something massively illegal here?

We’re footing the bill, and our economy is dependent on the outcome of our investigations into this. If the finances of this company become opaque, if we don’t know who’s doing what, who’s getting paid, some people may get away with some serious crimes that did serious harm to our country.

I’m sure you want better results than we’ve got, but I’m not sure the Republicans, or you in particular are willing do the kinds of things necessary to make sure money isn’t being wasted, even when your people are footing the bill for that waste.

Your statement is false. Hannity is stating a truth when he states that a law can’t be created to make past legal behavior illegal and then retroactively penalize people for that behavior.

His mistake is the association. The tax in front of Congress doesn’t make the bonuses illegal. It simply puts 90% of their government-originated money back, with not one person convicted of a crime, unless they try to evade the tax, which was generally illegal before the fact.

Jim M-
I think your point is tainted by the Orwellian need to redefine what’s good diplomacy in partisan terms. If I bring up Roosevelt, folks might ignore the lend-lease arrangement, If I bring up Truman, they’ll probably gloss over the formation of the UN and Containment policy. If I bring up Kennedy, folks from the right will probably float that idea that somehow the Cuban Missile Crisis ended badly for us. I bring up Carter, and they’ll point to the Iranian hostage crisis, while utterly failing to recall the Begin Sadat peace accords, which knocked Egypt off of Israel’s list of immediate enemies.

I’m fully willing to admit that my party doesn’t have the sum totality of all good diplomats. Unfortunately, the tradition of Republican diplomacy has been overshadowed by a faction within the Republican party that treats international law as a hindrance rather than a tool, and looks for excuses to justify wars, rather than ways to get what we want short of it.

As for that blogger’s point about CDS’s? Derivatives do need to be defined and regulated better, but I think your source has go the situation wrong, and the solution even further wrong. The problem is, both sides have these contracts basically listed as assets, whether they were selling them or buying them. The real question is, what would their balance sheets look like if you took away all that paper?

If this was all as simple as declaring these contracts null and void, it would have probably been done. Unfortunately, like many businesses, these banks structured their balance sheets around the assets they thought they had. Derivatives were included amongst these.

Republicans have had a bad habit of suggesting simple solutions that when you really think them through make things worse.

Posted by: Stephen Daugherty at March 20, 2009 8:28 PM
Comment #278156

Jim M,

Contrary to your comments, most holders of CDS contracts do have an “insurable risk” in the underlying security or bond. Some, however, do not have any direct interest in the underlying security and are simply betting on the default of the referenced instrument (naked CDS). The former are simply attempting to hedge their risk and the latter are simply gamblers.

Posted by: Rich at March 20, 2009 9:39 PM
Comment #278193

M. Daugherty writes; “If this was all as simple as declaring these contracts null and void, it would have probably been done.”

It was just that simple and I will leave it for you to decide why PO and the liberal congress felt it was obligated to get involved in private gambling.

In the convoluted world of Credit Default Swap contracts, the parties have neither an “insurable interest” nor are they at “risk” if there is a default on the underlying asset. Therefore, CDS’s are not legally an insurance contract. Courts in New York and London ruled on this matter more than a decade ago. These opinions opened the unregulated door to this odious business.

Posted by: Jim M at March 21, 2009 12:31 PM
Comment #278364

Warren Buffet’s Berkshire Hathaway is Wells Fargo’s largest shareholder.

Posted by: bugger at March 23, 2009 5:10 PM
Comment #378425

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