By: Chris Bowers from Open Left
Due to the overwhelming public backlash at the AIG executive bonuses, the federal government will write new rules into the contract for the $30 billion they are about to give AIG:
[T]he administration would use a $30 billion installment of bailout funds approved March 2, to bring some pressure to bear. The official said before AIG can draw down funds from the $30 billion, new rules would be written into AIG's contract. The idea: to ensure no government money goes toward paying financial products division bonuses and that the cost of bonuses already paid would be recouped for the taxpayer.
However, the official said, Treasury has determined there is no way the government can actually extract the money from the individuals who received the bonuses.
This isn't nothing, but it still raises several questions, all of which come to point at Larry Summers and Timothy Geither:
1) Why weren't these rules written into the AIG contract in the first place? Geithner is in charge of that department, both as Treasury Secretary now and as the backer of the original AIG bailout when he was head of the New York Federal Reserve. Given that he was in charge of both AIG bailouts, why isn't he taking a lot more of the blame for this? More than anyone else in the government, Geithner could have prevented these bonuses. He failed.
2) Further, given that we were promised improvements in TARP under the Obama administration, why did it take a public outcry to actually improve these contracts? Larry Summers sent a letter that dissuaded Senator Chris Dodd from passing legislation to legally mandate improvements TARP. Given the promises that were made, why aren't there guarantees against this sort of excess in all TARP contracts written by the Obama administration? Larry Summers promised us there would be. He failed. Maybe its time for the "very severe hostility" Chris Dodd had threatened?
3) Why isn't everyone at AIG involved in the scandal about to be fired? We own 80% of the company, so we should be able to hire and fire people, right? And even if we can't just hire and fire people, we can apparently still change the contract. As such, why can't we make firing people involved in the scandal conditions in the contract? Everyone involved in this should be fired.
They took $170 billion in government money than used it to line the wallets of already wealthy employees. Fire them now.
4) Finally, there is a fairly obvious legislative solution that will allow us to get the money back: just pass a law requiring a 100% tax on bonuses paid to employees at companies that have received bailout funds. In fact, Representative Carolyn Maloney is about to introduce a version of said legislation. In the current political environment, where only 14% of the country opposes giving back these bonuses, it probably has about a 99% chance of passing. As such, why do Summers and Geithner keep saying there is no way to get the money back? Clearly, there is a way. Are they lacking in imagination, or are they protecting the executives?
I am getting really sick of Geithner and Summers. If they were serious about fixing TARP, then conditions against employee bonuses would already have been in the contracts they wrote (Geithner) and promised us they would write (Summers). If they were serious about punishing the people involved, they would include requirements to fire those people in the new contracts (which they are not talking about doing), and they would not have incorrectly stated that there was no way to get the money back (they would have at least said they were looking into it).
It is becoming hard to avoid the conclusion that Geithner and Summers are working to protect the Wall Street executives at the financial institutions that are receiving TARP money. Its either that, or they are demonstrating a lot of incompetence. No matter which is the case, I have created a petition asking President Obama to replace Geithner and Summers on his economic team. We need people who are serious about changing TARP to be running TARP. Geithner and Summers ain't it.
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