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Politics : Politics for Pros- moderated -- Ignore unavailable to you. Want to Upgrade?

To: Neeka who wrote (296638)	3/16/2009 2:25:25 PM
From: Neeka	Respond to of 793964

Obama Asks Geithner to Find Way to Rescind AIG Payouts By JONATHAN WEISMAN and CHAD BRAY 1:02 pm Monday WSJ President Barack Obama, trying to contain a political firestorm, instructed Treasury Secretary Timothy Geithner "pursue every legal avenue" to block $165 million in bonuses to AIG executives who were in part responsible for the company's near collapse. "This is a corporation that finds itself in financial distress due to recklessness and greed," Mr. Obama said ahead of announcing a plan to rescue small businesses through a raft of new lending options. "Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. How do they justify this outrage to the taxpayers who are keeping the company afloat?" "This isn't just a matter of dollars and cents. It's about our fundamental values," he added. Meanwhile, New York Attorney General Andrew Cuomo asked AIG to provide details on who's receiving bonuses in its AIG Financial Products subsidiary by 4 EDT p.m. on Monday or face subpoenas. M For the president, AIG's announcement that it would award huge bonuses to the executives involved in the exotic financial instruments that forced the bailout has become a critical test. If anger at the bonuses consumes the electorate, any additional funds the administration might need for its financial rescue could become impossible to extract from Congress. Mr. Obama, for weeks now, has been trying to project himself as a defender of Main Street, not Wall Street, even as he tries to explain why more funding for ailing big banks might be necessary. Monday was supposed to be devoted to a small business rescue rollout. The small business package includes raising the federal guarantee on small business loans through the Small Business Administration to 90% from the 50% to 85% traditionally covered. Messers. Obama and Geithner were also to announce that the government is prepared to purchase up to $15 billion in small business loans that are bundled into securities and sold on the open market. SBA loan fees are also to be temporarily suspended. The White House is saying small business owners are being crushed by a credit market that is drying up through no fault of their own. In essence, these businesses are the victims of companies like AIG, which used instruments like credit deferred swaps to insure speculation and risk. But that message is being swamped by the furor over the AIG bonuses. Rather than tamp down that anger, Mr. Obama has decided to show his sympathy. "All across the country, there are people who work hard and meet their responsibilities every day, without the benefit of government bailouts or multi-million dollar bonuses. And all they ask is that everyone, from Main Street to Wall Street to Washington, play by the same rules," Mr. Obama said. In Mr. Cuomo's letter to AIG Chief Executive Edward Liddy on Monday, the New York attorney general requested a list of individuals who are to receive payments under the unit's retention plan, as well as details of each individuals job description, information on their performance and copies of any contracts requiring the payments. The attorney general asked that AIG provide the information by 4 p.m. EDT Monday. "We were disturbed to learn over the weekend of AIG's plans to pay millions of dollars to members of the Financial Products subsidiary through its Financial Products Retention Plan," Mr. Cuomo said. "Financial Products was, of course, the division of AIG that led to its meltdown and the huge infusion of taxpayer funds to save the firm." Mr. Cuomo said he's looking into whether any of the individuals receiving payments were involved in conduct that led to the insurer's near collapse; whether the contracts may be unenforceable for fraud or other reasons; and whether the payments may be consider fraudulent conveyances under state law. "Covering up the details of these payments breeds further cynicism and distrust in our already shaken financial system," he said. An AIG spokesman declined comment.

To: Neeka who wrote (296638)	3/16/2009 4:05:17 PM
From: Nadine Carroll	1 Recommendation Read Replies (1) \| Respond to of 793964

I am wondering if we (U.S.) is actually paying back loans to foreign banks? Is this what is really happening? It's not loans, it's insurance payments. The European banks bought enormous quantities of derivatives, both mortgage based and collateralized loan obligations, which were all rated AAA because AIG had insured them with credit default swaps. Many of the derivatives have dropped in value because of the toxic assets they are partially based on, and now AIG has to begin paying on the insurance it sold. But it had no reserves to pay out CDS claims, because it wasn't required to have any. So that's where the bailout money is going, to pay the claims.