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Politics : The Obama - Clinton Disaster -- Ignore unavailable to you. Want to Upgrade?

To: GROUND ZERO™ who wrote (9358)	3/16/2009 5:35:45 PM
From: DuckTapeSunroof	Read Replies (2) \| Respond to of 103300

Obama seeks to block bonus payments to AIG Experts say it will be difficult for government officials to stop the bonuses By Ronald D. Orol, MarketWatch Last update: 2:55 p.m. EDT March 16, 2009 marketwatch.com WASHINGTON (MarketWatch) -- President Barack Obama said Monday he'll try to block bonuses being paid to traders at American International Group Inc., which has received $173 billion in federal bailout money, but experts warned it will be very difficult for the government to legally stop the payments. "This is a corporation that finds itself in financial distress due to recklessness and greed," Obama said in the White House. "How do they justify this outrage to the taxpayers who are keeping the company afloat?" The president added he's asked Treasury Secretary Timothy Geithner to use the leverage the government has, from the multistage bailout of the giant insurer, "to pursue every legal avenue to block these bonuses and make the American taxpayers whole." "This isn't just a matter of dollars and cents. It's about our fundamental values," Obama commented. AIG, which posted a $62 billion loss in the forth quarter, plans to pay out $165 million in bonuses by Sunday. According to San Diego State University Accounting Professor David DeBoskey, seven employees may earn as much as $3 million in bonuses each. But blocking the bonuses will not be easy, experts said. Charles Elson, professor of corporate governance at the University of Delaware said he thinks it will be very difficult, if not impossible, to block the bonus payments because AIG has contracts with its executives that are binding. "People who have tried to rescind these kinds of contracts in the past have had major legal problems," Elson said. "The only way you can get out of the contract is if the company can prove the executive committed fraud when entering into the contract, and that is hard to do." About 80% of AIG is owned by U.S. taxpayers, who have $173 billion riding on the company's fate. Along with raising concerns about bonus payments at AIG, Obama indicated that broader reform is needed. "What this situation also underscores is the need for overall financial regulatory reform so we don't find ourselves in this position again, and for some form of resolution mechanism in dealing with troubled financial institutions so we have greater authority to protect the American taxpayer and our financial system in cases such as this," he said. "We will work with Congress to that end." University of Delaware's Elson said the employment contracts could be subject to out-of-court arbitration, which could require AIG to pay out some of the bonuses. He added that the government could pressure for changes in the bonus structure in exchange for future government funding. James Reda, managing director of executive compensation consulting firm James. F. Reda & Associates in New York, said he rejected the idea that the bonuses are necessary to retain the AIG talent needed to help the insurer recover. Reda said AIG's board should keep five to 12 of the best AIG executives and replace the next hundred top officials. "There are lots of unemployed people in the marketplace that can do this job," Reda said. However, Reda argues that the contracts are legally binding. He said the only way to legally break up the compensation agreements would be in bankruptcy. "In that situation, the arrangements can be considered null and void." Steven Balsam, professor of Accounting at Fox School of Business at Temple University, said contracts typically guarantee bonuses for a number of years. He pointed out that a provision approved in the stimulus package last month limits bonuses to no more than 50% of an individual's salary. However, the measure only applies to contracts approved after the stimulus bill went into effect. "If you have a contract and it was signed before the stimulus went into effect, then those contracts are still binding," Balsam said. One securities expert said the likelihood of getting the money back is so legally slim that he believes Obama's comments are more grandstanding than accomplishing anything. "You wonder why Obama is getting everyone's hopes up on this," he said. On Sunday, White House adviser Larry Summers said the AIG bonuses are being paid out under contracts already in place before the insurance giant became a ward of the state, and that abrogating the contracts might be impossible. End of Story Ronald D. Orol is a MarketWatch reporter, based in Washington.

To: GROUND ZERO™ who wrote (9358)	3/16/2009 5:40:31 PM
From: DuckTapeSunroof	Read Replies (1) \| Respond to of 103300

Pandit Gets Pay Package Valued at $38.2 Million March 16, 2009, 3:27 pm dealbook.blogs.nytimes.com From Eric Dash, a DealBook colleague: Citigroup handed Vikram S. Pandit a compensation package valued at more than $38.2 million in 2008, even as the bank posted five consecutive quarters of multibillion-dollar losses and turned to the government three times for help. Mr. Pandit’s compensation, disclosed Monday in Citigroup’s proxy statement, stem largely from stock and option awards that were part of his starting package last year and come on top of the nearly $80 million he pocketed from selling his hedge fund to Citigroup in 2007. The value of his stock and option awards has since fallen sharply with the price of Citigroup shares. Mr. Pandit, who declined a 2008 bonus, has said he will accept a base salary of $1 until the company returns to profitability. Citigroup’s pay practices have been under intense scrutiny since the bank received $45 billion of taxpayers’ money and watched its stock price plummet. After dipping below $1 earlier this month, Citigroup’s stock has shot up to about $2.50 on more optimistic reports of the company’s condition. Under government pressure, Citigroup’s total bonus pool for 2008 was cut in half, to about $4 billion. Still, several of Citigroup’s top executives received large payouts, according to an analysis by Equilar, an executive compensation firm. James A. Forese, a co-head of Citigroup’s markets division, received $20.9 million in stock and cash bonus awards. Stephen Volk, a Citigroup vice chairman, was paid more than $13 million. Ajay Banga, who oversees Citigroup’s Asian operations, was awarded $10.9 million. And Gary Crittenden, who also declined a 2008 bonus, was paid about $10.6 million, largely from guaranteed stock awards to make up the difference of what he left behind at American Express. All of those payouts as well are now worth only a fraction of their reported values since Citigroup’s stock tanked. Mr. Pandit’s $38.2 million pay package reflects his salary, bonus and stock awards. But adjusted for Friday’s closing price of $1.78, it would be worth about $2.9 million, according to Equilar. Still, Mr. Pandit landed a windfall from selling his investment fund, Old Lane Partners, to Citigroup for $800 million in April 2007. After Citigroup shuttered the fund last year, Mr. Pandit transferred cash proceeds of about $79.7 million into Citigroup’s private bank. Mr. Pandit will probably be able to keep that money unless he is fired, according to the proxy statement. John Havens, who oversees Citigroup’s investment banking and alternative investments businesses, received a similar payout. Citigroup’s proxy also disclosed that the bank would nominate four new, independent directors. They include Anthony Santomero, a former president of the Federal Reserve Bank of Philadelphia; Jerry Grundhofer, a former chief executive of U.S. Bancorp; Michael O’Neill, the former head of the Bank of Hawaii; William Thompson, a longtime Salomon Brothers bond trader who was chief executive of the Pacific Investment Management Company, or Pimco. Federal regulators had been pressing Citigroup to shake up its board and remove several longstanding directors. Richard D. Parsons, Citigroup’s new chairman, said that the bank was committed to reconstituting the board with a majority of new, independent directors. With the election of these candidates and the departure of several others, Citigroup’s board will have 14 members. Mr. Parsons said the board would consider future additions as well. Go to Proxy Statement from Citigroup (See Executive Compensation) » Go to Related Item from DealBook »