The insurance giant A.I.G., which is at the center of the current economic meltdown, is going to pay $165 million in bonuses according to the NY Times.  The company, one of the main purveyors of credit-default swaps, has already received $170 billion in taxpayer money.  So their bailout amounts to nothing more than socialism for the rich, an upward distribution of income from regular Americans to the already wealthy. It’s an old story: those most responsible for economic disaster are rewarded while everyone else suffers.

A.I.G. claims it is legally obligated to make the bonus payments as a result of contract agreements made prior to the company’s demise.  But looking deeper into the Times article you see the bonus plan for the financial products unit (the section of A.I.G. that “sold hundreds of billions of dollars’ worth of derivatives, the notorious credit-default swaps that nearly toppled the entire company last fall) was locked into place in early 2008 just as the mortgage crisis was becoming most apparent.  So rather than merely trying “to encourage people to stay” as the article alludes, at least some of the bonuses are because these corporate crooks simply saw the writing on the wall and wanted to get their legally guaranteed loot – probably knowing the American taxpayer would come to their rescue if the worst ultimately happened.

Unsurprisingly, a senior government official claimed under the cloak of anonymity the Obama administration is outraged by the bonuses but, despite American taxpayers owning 80% of A.I.G., they are powerless to stop the theft:

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.

But the official said the administration will force A.I.G. to eventually repay the cost of the bonuses to the taxpayers as part of the agreement with the firm, which is being restructured.

If the now government-controlled insurer will have to pay back the bonuses, why even let them make them in the first place?  I say let these A.I.G. executives sue for their fraudulent bonuses; even if they win at least the administration will take a strong stand.  And if the government is upset and it is actually policy that A.I.G. will have to repay taxpayers then why does the official have to speak off-the-record?  The cleptocracy spreads far and wide.

Technorati Tags: A.I.G., Capitalism, economy, Wall Street bailout

Here’s a great video of a brief exchange between Sen. Bernie Sanders (I-VT) and Treasury Secretary Timothy Geithner discussing the details of the bailout.  While there are some important and valid criticisms of Sen. Sanders regarding his support for nativist, reactionary policies against immigrants recently, in this video he does rightly challenge Geithner and the new Obama administration over whether they will hold the very Wall Street executives responsible for the current crisis accountable to the American taxpayer.

The Treasury Secretary does his best avoiding Sanders’ questions about whether we should change the leadership on Wall Street at this time due to their failures and the vital issue of transparency concerning where taxpayer’s money is spent.

Technorati Tags: Bernie Sanders, Capitalism, economy, Timothy Geithner, Wall Street, Wall Street bailout

Here’s economist Joseph Stiglitz interviewed on the Colbert Report.

Technorati Tags: Capitalism, economy