Yes, it’s an AIG Thread. Discuss.

The peasantry appears ready to pick up the pitchforks and storm the castle over the AIG bonuses.  So what sayeth the King’s men?  What’s the word from our Regent’s best?  Well, here’s the real bottom line according to the NY Times.

New York’s efforts against A.I.G. have overshadowed those of the Treasury secretary, Timothy F. Geithner, the official who is responsible for the financial bailout, along with the Federal Reserve. The White House and Treasury have been besieged by questions about why Mr. Geithner did not know sooner about the bonus payments due this month, and whether he could have done more to stop them, prompting White House officials to assert President Obama’s continued confidence in Mr. Geithner.

“He more than has the president’s complete confidence,” said Rahm Emanuel, the White House chief of staff. As angry as the president is at the news about A.I.G., which he learned Thursday, Mr. Emanuel said, “his main priority is getting the financial system stabilized, and he believes this is a big distraction in that effort.”

It appears the henchman let slip something important.  It’s all a ‘big distraction’.  POTUS is so angry he can tell a joke. Meanwhile, more and more comes out concerning ‘what the President knew and when he knew it.”  I have to say one thing, we got the time line for this immediately after the request came at yesterday’s press conference.  Gibb’s may not be the most eloquent of Press Secretaries but when he promises missing information, he does deliver.

CNN’s Wolf Blitzer and Ali Velshi are reporting that they reported on the bonuses back in January 28 so why the kerfuffle today?  Also, who is going to be the Judas Goat for this one?  FDL’s Jane Hamshear calls Dodd the ‘sin eater’  here and thinks the President is trying to protect Geithner.  Jane puts together a time line that more aptly reflects the idea that the President had to hear about the bonuses way back when but didn’t really LISTEN until they became a problem.

Here’s Jane’s take on Dodd’s original provision (removed by Geithner and Summers) on executive pay.

Dodd’s version prohibited TARP recipients from paying out bonuses, retention awards or incentive compensation to the 25 most highly compensated employees. It also prohibited any employee of a company receiving TARP funds from making more than the President. Both provisions would have been in effect so long as a company was receiving TARP funds. Since AIG just paid out $1 million in bonuses to 73 employees, Dodd’s version limiting all employees to what the President made (roughly $500,000) would have substantially nipped that in the bud.

So, at this point we have to ask a question.  Do we have a renegade Secretary of the Treasury in cahoots with the President’s personal Economics adviser or a President who probably knew what was going on and didn’t really care until the peasants made an issue of it?   Now we have an issue with which congress critters of both parties can make hay.  Geithner is going to testify before the House next week on March 24 and 26 according to the WSJ about the AIG bonuses.  Meanwhile, AIG’s current CEO testified and plans to ask employees to return the bonuses.  ( Pretty, Pretty please, give back at LEAST HALF).

AIG Chairman and Chief Executive Edward Liddy, appearing before a U.S. House subcommittee, said the company has asked employees at its financial-products division who received more than $100,000 to “step up” and return at least half the payments.

“We’ve heard the American people loudly and clearly these past few days,” Mr. Liddy said, claiming that some employees have already volunteered to give up their entire bonus.

He warned, however, that the request could backfire if the employees who received the retention bonuses decide to resign from the firm. “They will return it, but they will return it with their resignations,” Mr. Liddy said.

So after a good yammering, I mean hammering from congress, Liddy once again explains the role of the bonuses.

Mr. Liddy said that the “cold realities of competition” for customers and employees played a role in the firm’s decision to make the payments, which have spurred a public backlash given the roughly $170 billion the government has used to prop up the troubled insurer.

“Because of this, and because of certain legal obligations, AIG has recently made a set of compensation payments, some of which I find distasteful,” Mr. Liddy said.

Describing the financial-products division, Mr. Liddy called it an “internal hedge fund” that exposed the company to extreme market risk. The result, he said, was that “mistakes were made at AIG on a scale few could have ever imagined possible.”

“Those missteps have exacted a very high price, not only for AIG but for America’s taxpayers, the federal government’s finances and the economy as a whole,” said Mr. Liddy, who took over AIG as part of the government’s rescue of the firm in September.

It seems every one finds them distasteful.  Even the president “coughed” and joked with “anger” after being properly motivated by his teleprompter.  So once again, congress critters will draft legislation to control executive compensation at companies receiving TARP money.  Barney (the congressman, not the dinosaur) wants the President as ‘de facto CEO’ of AIG to institute a lawsuit to get the funds back.  But wait, they did do that during drafting of the stimulus package.   Dodd edited it. Summers and Geithner removed it.   What next?

Meanwhile, over at the FED they continue to try break up AIG into pieces.  They also appear to be more the source of Wall Street attention that both the hearings and today’s Presidential work-avoidance trip to California.   The market rallied on news of the latest from the FOMC. They’re letting loose the printing presses to ease credit.  So evidently, while the peasantry revolt, the congressmen act revolting, and the President flies to give another speech and appear on Leno,  the bankers are at play.

Let’s just grab some popcorn and discuss.