Bonuses Paid to AIG and Recent Cover Up of Credit Default Swaps that Brought Them Down

The Big Banks are at it again with their bonuses. So what's going on?

Over one hundred and eighty two billion dollars of tax payers money was paid to AIG in the big bank bailout of 2009. Ron Paul appeared on CNN in March of 2009, saying, "Congress reacts minute to minute," and "blindly appropriates money" without considering the long-term effect. The stimulus bill was not available for our elected officials to read and review in full before it was passed and lots of little earmarks were placed in the bill. One of them included a clause allowing AIG to continue paying out these big bonuses. Ron Paul says it is "Congresses fault" that things are not running the way they should. SEE FULL INTERVIEW ON CNN

Now AIG is paying another $100 million in bonuses to their corporate employees on Wednesday, February 3, 2010. And what was Washington's Response? Iowa Republican, Senator Charles Grassley, top Republican on the Senate Finance Committee, received a ton of flack in 2009 saying that AIG executives should "resign or go commit suicide" like the Japanese honor death ritual Seppuku. He now holds strong to his take on the situation saying "AIG has tax payers over a barrel. The Obama Administration has been outmaneuvered and the closed-door negotiations just add to the skepticism that the taxpayers will ever get the upper hand."

The payout, which was agreed upon prior to the bailout, is supposed to go to their Financial Products Unit. Ironically the same employees were deemed responsible for the AIG collapse that required the government to step in and rescue the financial giant in the first place.

In an interview on ABC News, Kenneth Feinberg, Federal Pay Czar, defended AIG saying there are 3 points we need to consider regarding their situation at AIG.

One - Bonuses were contracts enacted before the bailout. They are legally binding and AIG is obligated to pay. However, that also means the government was aware of the contracts before bailing out AIG and this was either taken into consideration by Obama's administration or AIG did not disclose it. Going back to what Ron Paul said, Congress reacts quickly without fully understanding what they are getting into.

Two - AIG is working to reduce the amount they have to pay. They have been able to reduce the payouts by $20 million, which is huge, they didn't say how they were trying to accomplish this. Many executives honorably turned down bonuses that were due to them when the government bailed them out in 2009. All AIG employees should be honorable and follow suit, which brings us to Feinberg's third point.

Three- Feinberg said that the same employees that received bonuses last year agreed to pay back $45 million of which about $39 million has already been returned to the taxpayers, about 6.5 million short of their promise but his attitude was like, "give them an 'A' for effort."

Earlier this week, Timothy Geithner, Secretary of the Treasury, took the hot seat when Representative John Mica pressed him about his involvement in a cover up on how money from the bailout was spent by AIG especially where credit default swaps were concerned. In emails According to major media sources, e-mails obtained by Representative Darrel Issa, member of the House Oversight and Government Reform Committee, New York Fed's told AIG to keep quiet about this information and not to disclose it to the public. AIG paid banks 100% (100 cents on the dollar) of the Credit Default Swaps they bought from them, banks like Goldman Sachs and Societe Generarle. The Fed "crossed out" reference to the payments and AIG excluded the reference as well when they made their filing public on December 24, 2008. Because Geithner had been in charge of the Fed at that time, they are saying he was aware of the non-disclosure and could have been the one to cover it up.

While the AIG situation is complex and difficult for the average American to understand, I found an article that provides the basis for AIG's failures and explains the nature of Credit Default Swaps. "AIG and The Trouble with Credit Default Swaps" explains, "The more traditional aspects of AIG's business continue to perform fairly well. But a few years ago, AIG got involved in a new aspect of the financial system: It joined in the selling of so-called credit default swaps. A credit default swap, or CDS, is essentially, insurance on debt." READ FULL ARTICLE:

Despite who is at fault or the reasons behind what has been done, Obama and his administration is losing credibility and popularity at the polls, according to Rasmussen.

"The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows that 31% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Thirty-seven percent (37%) Strongly Disapprove, which gives Obama a Presidential Approval Index rating of -6 " SEE CURRENT TRENDS

SOURCES:

RASMUSSEN REPORTS

Youtube.com "Ron Paul talks AIG Bonuses on CNN American Morning" 03/20/2009

C-span congressional hearing of 01/27/2010