Wednesday, March 18, 2009

More Due Diligence...AIG Bonuses

Even a dog knows better than to bite the hand that feeds him. But I guess that does not apply to congressional leaders that received donations in 2008 from their arch-enemy, the "greedy American International Group- AIG."

Heading the list was none other than the Senate Banking Committee Chairman Chris Dodd and then Senator and presidential campaigner Barack Obama. But then this is Washington politics. Here is a short list of some of the recipients of AIG political contributions:

  1. Chris Dodd $103,100
  2. Barack Obama $101,332
  3. John McCain $59,499
  4. Hillary Clinton $35,965
  5. Max Baucus $24,750
  6. Mitt Romney* $20,850
  7. Joe Biden $19,975
  8. John Larson $19,750
  9. Rudy Giuliani* $13,200
  10. Dick Durbin $11,000
*presidential campaign contribution

During this 2008 cycle 55 House members and 33 Senators received these payouts. I don't hear any of them rushing to give the donations back. Democrats were the chief recipients with $442,996 while Republicans received $142,792. So where is the American public outrage. I'll wait....

The "Blame Somebody" Obama Administration claims that Senator Dodd included in the $787B stimulus bill an amendment that provided exemption for contractually obligated bonuses agreed on or before February 11, 2009 which exempted these AIG bonuses paid this week. Dodd has denied inserting the "Dodd Amendment". He claims that he did not include those dates and that when the legislation left the Senate it did not contain that language but when it returned those dates were inserted. Fine Mr. Dodd but congressional record shows that you still voted in favor of the bill. If you were so outraged by the amendment then why the yea vote? I'll wait....

Now Dodd seeks to tax the bonus recipients so that the government can recoup some of the $165M that AIG is paying out. So the politicians seek to specifically craft a bill to only tax AIG managers and executives that received these bonus payouts. This is ludicrous since the bill would only be targeted at a handfull of individuals! So you know that the actual language of the bill will target all bonuses paid to managers and executives of any company in the United States. And if any of you have ever received a management bonus then you would know that it has almost 40% Federal withholding taken out prior to you getting your money. Yet these same congress members and president signed a omnibus spending bill that had over $8 billion of earmarks ala pork and that's o.k.? On a percentage basis this is more than the 1/10th of 1% that the AIG bonuses represent.

What is not being told is that some of these financial service executives agreed to take $1 salaries for 2009 in exchange for receiving their retention bonuses. These were deals that were struck with "Turbo Tax" Timothy Geithner when he was the head of the New York Federal Reserve and arranging for the AIG bailout. So he knew that they were in there. These retention payments range from $1,000 to $6.5 Million. So the worker getting $1,000 would be ostracized by American society for receiving such a pittance of a bonus.

America please wake up before it is too late. I'll wait....

That's my word! Please post yours!

Monday, March 16, 2009

Doing Due Diligence and AIG

When buying a company you should always conduct your due diligence in examining how that company operates, is financed and what ongoing contracts or obligations it has. In other words you ask for their financial books and you begin your due diligence discovery. On May 1, 2008, Delta Airlines and Northwest Airlines agreed to create the world's largest airline through a merger of the two companies. At some point prior to this announcement they both had to open their books for financial review to see if this potential marriage would work.

Along comes our Federal Government with its gotta get something done now mentality and buys $170 billion of American International Group, Inc. better known as AIG. Former Treasury Secretary, Hank Paulson, called the Wall Street company to Washington D.C. to iron out a proposed bailout of AIG which had gotten into deep money troubles with the collapse of our financial industry. What Paulson and the rest of the Washington knuckleheads did not do was ask all of the banks that were being bailed out to allow the government to examine their financial books thoroughly. $170 billion dollars later everyone is an uproar about $165 million in bonuses being paid out by AIG. In other words all of these intellectual dimwits did not do their due diligence for the American taxpayer. You and I spend more time reading our escape clause in our cell phone contracts than what was done here.

If this had occured just maybe someone would have seen the contracts for these bonuses. Because we are a country based upon the rule of law there is nothing anyone from Barney Franks, to Chris Dodd, to Nancy Pelosi or even Barack Obama can do. These bonuses are contractual and were already in place prior to the sky falling in for AIG. One way that these bonuses could have been eliminated is to have allowed AIG to go into a controlled bankruptcy and then the people who were slated to be paid bonuses for 2008 would have to get in line with the rest of the creditors as AIG tried to emerge from bankruptcy. Another way would have been to ask that the bonuses be deferred as long as the company was in trouble and owed the taxpayers.

Now that everyone on Capitol Hill is ranting about the timing of these payouts; they should look in the mirror. They are responsible for this not AIG. Had they taken the necessary time instead of rushing to the rescue there would have been better opportunity to review all of the operations of AIG and others. Paulson also set up the bailout so that these companies did not have to report how they planned to spend the monies lent to them. No court in this land will override the decision of AIG to pay these bonuses. Contracts are binding unless there was fraud by one party and since the recipients are getting what they expected and AIG indicates these bonuses are due then who was defrauded? Not the Federal Government. They never did their due diligence.

AIG is a holding company for many different companies. AIG has businesses in general insurance, financial services, asset management and life insurance & retirement services. And because we do not know who exactly will receive these bonuses and how each of the many companies under the AIG umbrella performed; it is not prudent to assume that someone is not deserving of their bonus. Nor do we know how each of the many companies performed individually. Some divisions of this organization may have been performing well above expectations and that is what helped trigger their contractual bonus payout. If it turns out that AIG is just paying bonuses to pay bonuses without the necessary performance triggers then shame on them and they deserve the intense scrutiny they are receiving. But our government set it up that they did not have to report as to how they are spending your money. Due Diligence not done! Necessary precautions not taken! No common or business sense. Government at its very best! You see what happens when Congress does things in haste. The good thing is that Obama and his team did not set these arrangements up but he did vote yes to the $750 billion bailout as Senator and Presidential candidate.

I am not opposed to anyone at AIG or any other bailout company receiving bonus payouts that were agreed to as long as the terms of the performance were met. Mr. Obama issued more of his rhetoric today, that Treasury Secretary, Timothy Geithner would be using any legal means necessary to stop or reverse these payments. This is the same Mr. Geithner that has yet to produce the plan for shoring up our financial and banking industry. The same Treasury Department that has yet to get a Deputy Treasury Secretary to assist Mr. Geithner. When is he going to have the time for this assignment? I'll wait......

That's my word! Please post yours!

Cuban Missile Crisis, Part Deux

Think back to yesterday, well O.K., back to October when Sheriff Joseph Biden shot off his six gun mouth while on the campaign trail and said the following:
"Mark my words, It will not be six months before the world tests Barack Obama like they did John Kennedy. The world is looking. We're about to elect a brilliant 47-year-old senator president of the United States of America. Remember I said it standing here if you don't remember anything else I said. Watch, we're gonna have an international crisis, a generated crisis, to test the mettle of this guy."

oming on the heels of the Hillary Overcharge Button gaffe, the Russian government says that it may deploy strategic bombers in Cuba and Venezuela. So much for the reset of relations, huh Hillary! Now as Secretary of State what will you do? Looks like the Sheriff was right. Obama's mettle will be tested within six months of taking office.

In my estimation, Russia is no longer content to watch as the United States flexes its muscle and power around the world. How dare we have the "audacity" to be the most powerful nation on the planet. Now Russia wants to check us on this. Being numero uno has its consequences wouldn't you say. Just like the Pittsburgh Steelers will find at the start of next football season, everyone wants to knock you off your perch. Russia is a proud former super power and they want to regain that honor at our expense.

How will Obama handle this crisis? Remember that his administration's mantra is "not to let a good crisis go to waste." Trying to pretend to be a world leader will not work. He will have to tackle this one head on. Just like JFK, will he be able to stare into the eyes of an enemy and get him to blink. This crisis will require that he and his State Department bring their "A" game. That is if they have an "A" game to bring. Our country has recently show
n that we have no idea how to deal effectively anymore on the world stage. Snubbing the British Prime Minister, presenting Russia with the Easy Button and promising $900M to help rebuild Hamas controlled Gaza even though we did not destroy it. Since he is still in the early days of his administration he can just claim that he inherited this mess too.

Cuba already has the long landing strips necessary for these bombers to land and take off. With Cuba being only 90 miles from Florida you can easily see why this is a potential problem and embarrassment for the administration. I guess Hillary wanted to reset the Russian-U.S. relationship back to 1962. With everything else going on in this country will the Obama administration, more importantly the State Department, be able to navigate this crisis. I think not. Let's just Hope that they do not have 14 days in October to deal with it.

Sheriff Joe, you called it and here it is. Have your boss answer the test. Deal with it now before we have Russian and Cuban paratroopers landing in our backyards ala the movie "Red Dawn". And we do not need another trillion dollars spent on this crisis. Maybe once again we will remove our missile defenses out of Turkey or some other place to close this out. We will wait!

That's my word! Please post yours!

Sunday, March 15, 2009

It's Over Now! "The Economy is Sound..."

...despite the temporary "mess" it's in, so says the White House economic adviser, Christina Romer.

Is this deja vu? Did I hear this somewhere before? Did someone get ridiculed for making this statement some time ago? Short answer is yes.

Then Republican Presidential Candidate John McCain made these statements on Monday, September 15, 2008: "the fundamentals of our economy are strong"even though as he described "tremendous turmoil in our financial markets and Wall Street." Although at the time the U.S. economy was experiencing relatively low unemployment (6.1%) and had seen some modest growth. On this same day the Dow Jones Industrial Average plummeted by 498 points or 4.4%. Barack Obama's campaign issued this statement to those comments:
"Today of all days, John McCain's stubborn insistence that the 'fundamentals of the economy are strong' shows that he is disturbingly out of touch with what's going on in the lives of ordinary Americans...apparently his 26 years in Washington have left him incapable of understanding that the policies he supports have created an historic economic crisis."
Now the Obama administration would have you believe that the economy is sound? We have lost over 12% off the DJIA since January 20, 2009. Unemployment currently sits at 8.1% and we are to believe that the economy is sound! This from the same president who wrote in an op-ed piece in the Washington Post that the "recession could linger for years and our economy could lose 5 million jobs." Did something happen this week that I missed? Was it because we had the best week in many months on Wall Street they came to this conclusion? That I doubt since our President told us to not look at the "gyrations" of Wall Street as a measuring stick. I can't understand it. What a difference a day makes.

There is a silver lining is this announcement though. And that is finally this President and his team of "know-it-all's" have finally wised up and ceased with the FEAR tactics. I blogged about Obama's Hope over Fear a month ago. But it seems as though someone somewhere finally got to them and gave them a clue. If you keep saying its bad then it will continue to be bad. They may be trying a little psychology here with this sound economy strategy. Let's see, it just might work. I want to think that he is now trying to lead instead of scaring us into believing that it will get better even though he has now used FEAR on our food supply, but that's a story for another day. And maybe Santa Claus will come down my chimmney on April 15th too!

That's my word! Please post yours!