How to solve AIG's bonus problem

My friend Chris wrote me this morning:

Chris is Paris posted something on this earlier, but here’s a twist:

“In a letter to Geithner dated Saturday, Liddy informed Treasury that outside lawyers had informed the company that AIG had contractual obligations to make the bonus payments and could face lawsuits if it did not do so.”

Let’s assume that’s true, and start the countdown clock.

When the auto industry needed a bailout, the true believers in the GOP said the problem was labor costs and that the auto companies really needed to declare Chapter 11 so they could renegotiate their union contracts.

I don’t know a whole lot about bankruptcy law, but if AIG is “stuck” with a personnel payment structure that doesn’t make sense in the current climate, surely the Republicans will remember their brilliant suggestion for handling auto assembly line workers who are being “paid too much.”

Surely they’ll stick with that approach. I mean, it’s not like their argument in this would change just because now we’re talking about bankers and investment brokers. That would be ridiculous, wouldn’t it?

So I think we should give them kudos for integrity and making tough choices – by starting a countdown clock and praising them for how quickly they will no doubt get around to making the same suggestion for screwing bankers that they made for screwing auto workers.

Too bad we couldn’t run a betting pool on how long it will take. That would be a way for at least one person outside of Wall Street to make money off of this bullshit.

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Biden hits the trail to promote Amtrak

And I hope he spends even more time rallying support for more investment. I used to use Amtrak between Baltimore and New York years ago and always found it convenient. The new Accela is much too pricey and offers too little in terms of time savings (in terms of cost) but Amtrak has the framework to be a much better service. When I can I use trains for travel over here in Europe and prefer them over driving or flying except when the train costs are prohibitive.

While running around the UK for work I get to experience the glory of the current British rail system that was privatized in the post-Thatcher/let's let business show government how to run a public service. If the Republicans have their way, they would do the same to Amtrak and they would be completely wrong. The end result in the UK is a confusing system of trains that deliver shoddy quality and service at ridiculously expensive rates. I often take the train from London to Reading which is a 25 minute ride, yet almost £15 (over $21) off peak. The last time I took that train in the middle of the day and I had to stand for the almost $1 per minute ride. Privatization sure has delivered results...for someone other than the consumer.

Business is what drives our economies but business isn't the only solution. I fail to see how privatizing Amtrak or any rail system brings any real benefit to consumers or society. Biden has been an active Amtrak rider for years and it's great to see him out there stumping for the system. I only hope he continues to help Amtrak expand once they invest in the basics. The US could be doing much more to make Amtrak a decent service, if only the Republicans could move away from the same old failed strategies that they promoted for banking and every other business.

Vice President Joe Biden continued the administration's rollout of the recently passed economic stimulus package Friday, highlighting $1.3 billion in federal funding for Amtrak.

The money for the rail service, which carried almost 29 million passengers in the previous fiscal year, will go primarily to infrastructure repair and improvement.

The $787 billion stimulus plan includes a total of $8 billion for improvements in rail service, a crucial investment to help ease traffic in the congested northeast corridor running from Boston, Massachusetts to Washington, Biden argued.

It is "a necessity for a great nation to have a great [rail] passenger system," Biden said. "I'm tired of apologizing for help for Amtrak. ... It's an absolute national treasure and necessity."

The $1.3 billion will roughly double the size of Amtrak's capital investment program over the next two years, according to the vice president's office.

The largest single project funded by the stimulus money is the $105 million replacement of a movable bridge over Connecticut's Niantic River. The replacement of the 102-year-old drawbridge has been delayed for more than 20 years because of a lack of capital, Biden noted.

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"La crise" strikes again in France

It's everywhere, even in the bedroom.

Sales in the French erotic industry have fallen as the global economic crisis has driven consumers to reduce their spending on sex toys, massage oils and other kinky products, sector specialists say.

At "Big Eropolis," an erotic fair that opened Friday near Paris and bills itself as the biggest of its kind in the world, attendance was healthy but stall owners said customers were not spending as much as in previous years.

"We are hit by the financial crisis. We are not in the car industry either, so we haven't seen a drop (in sales) of 50 percent, but the financial crisis has hit us," the fair's organizer Eric Heuninck said of the industry.

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Unemployment debit card fees piling up

The banksters strike again.

"A $1.50 [fee] here, a $1.50 there," he said. "Forty cents for a balance inquiry. Fifty cents to have your card denied. Thirty-five cents to have your account accessed by telephone."

He was quoting fees listed in a brochure that goes out to every unemployed person in Pennsylvania who chooses to receive benefits via debit card. He was given the option when he filed for jobless payments: Wait 10 days for a check or get the card immediately. Like most of the 925,000 state residents who received unemployment benefits in February in Pennsylvania, he chose the debit card and only then, he says, did he learn about the fees.

"I was outraged by it," he told CNN. "I was very noisy about it. I just couldn't believe it. An outrage is just too weak a word. It's obscene."

According to the U.S. Department of Labor, 30 states offer direct deposit cards to the unemployed. Many of the nation's biggest banks have contracts with the individual states. JP Morgan Chase, for instance, has contracts with seven states and has pending deals with two others, according to Chase spokesman John T. Murray. About 10 states, the Labor Department says, pay by check only.

The National Consumer Law Center says fees range from 40 cents to a high of $3 per transaction, if the debit card is used at an out-of-network ATM. Most banks give jobless debit card users one free withdrawal per deposit period, which averages every other week in most states. But consumer advocates, including the Law Center, say the unemployed "should be able to obtain cash and perform basic functions with no fees."

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Market direction? Take your pick

Three "experts" and three different takes on the market direction. For me, Peter Lynch and Burton Malkiel both have strong arguments with Bill Gross being the most incorrect. I refuse to accept any argument that suggests regulation will destroy the market because it was exactly the opposite that has brought us to where we are today. Yes it's going to take years to recover after eating a heavy diet of credit for so long but there's no doubt in my mind that we will see growth again, possibly even by the end of Obama's term. For his sake and for the sake of our future direction, that has to happen or else the US will get thrown back into the gambler mentality that the GOP (with Democratic support) wants to promote. Obama's economic team may be lacking and full of too many people who led us into this mess or sat idle while it happened, but the Republican "hands off" policies would be an economic death sentence.

Read the article and see if you agree with any of the three. If nothing else, it does provide a good overview of where many camps are in this debate. Read More......

Cheney is back to lead the GOP attack on Obama

As predicted, Dick Cheney is using his CNN appearance and using CNN's host, John King, to bash the Obama administration. CNN had promised to keep the Obama administration "honest" during pre-inauguration advertising. I found that almost hysterical since CNN never kept the Bush administration honest -- especially when John King was their gung-ho White House reporter. And, King and Cheney go way back as he points out in his CNN bio:

King also contributed to CNN's Emmy-winning 2006 mid-term election coverage as well as to coverage of the 2004 presidential race, the Iraq War, the Sept. 11 terrorist attacks, the tax-cut debates of 2001and 2003 and the war on terrorism. In 2006, he reported an hour-long special on executive authority, "Power Play." He has conducted one-on-one interviews with an array of senior officials, including President George W. Bush, first lady Laura Bush, Vice President Dick Cheney, former Secretary of State Colin Powell and current Secretary of State Condoleezza Rice.

King traveled with Cheney to the Middle East in March 2002 as the administration began to build support for confronting Saddam Hussein.

One should never expect much from John King when it comes to holding anyone from the Bush-Cheney administration accountable. That's why Cheney is on CNN with John King today. From the early reports CNN is already pushing out in advance of the broadcast, Cheney is on an Obama-bashing mission:

Former Vice President Dick Cheney told CNN's John King Sunday that he believed President Obama's decision to eliminate the use of many of the most controversial interrogation practices used under the former administration had put the country at risk.

Asked whether he thought those moves had made the United States less safe, Cheney said he did. "I think those programs were absolutely essential to the success we enjoy, of being able to collect the intelligence that let us defeat all further attempts to launch attacks against the United States since 9/11," he said on State of the Union. "I think it's a great success story. It was done legally, it was done in accordance with our constitutional practices and principles…"

Obama campaigned against those practices, said Cheney, "and now he's making some choices that in my mind will raise the risk to the American people of another attack."

Actually, it's probably good for Obama to have Cheney attack him. Cheney and George Bush are responsible for the massive financial mess Obama inherited. Having Cheney out there talking -- and putting his face in front of the American people again -- just reminds us of that.

Last time Cheney reared his ugly head was when he announced his endorsement of McCain. Obama had a lot of fun with that:

I hope Team Obama has his much fun with Cheney's latest appearance.

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Sunday Talks Shows Open Thread

The evilest of the evil returns to t.v. today. Dick Cheney is on CNN with John King. The network is promoting the hell out of this interview. It's hard to imagine Dick Cheney will actually answer any questions or that John King will actually push him to give real answers. My bet is that Cheney's mission is to attack and takes some swipes at Obama. That'll be the news.

The rest of the shows are dedicated to the economy. Lawrence Summers and Christine Romer will explain how Obama is trying to fix the economy. Mitch McConnell and Eric Cantor should explain why Republicans are trying to prevent Obama from fixing the economy.

And, everyone should weigh in on the outrageous behavior of AIG. $100 million in bonuses?

Here's the lineup:

ABC's "This Week" — Lawrence Summers, director of the National Economic Council; Sen. Mitch McConnell, R-Ky.

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CBS' "Face the Nation" — Summers.

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NBC's "Meet the Press" — Christina Romer, head of the White House Council of Economic Advisers; Rep. Eric Cantor, R-Va.

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CNN's "State of the Union" — Former Vice President Dick Cheney; Rep. Joe Sestak, D-Pa.


"Fox News Sunday" _ Austan Goolsbee, member of the White House Council of Economic Advisers; Sen. Bob Corker, R-Tenn.; Rep. Barney Frank, D-Mass.; Mark Zandi, chief economist at Moody's Economy.com.

Have a good Sunday morning.

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AIG is doing it again

What the hell does it take to get someone to shut this team down? The AP is reporting $165 million in bonuses while the Wall Street Journal claims the number is $450 million. They obviously have too many friends in all the right places because this is disgraceful and unacceptable. AIG has clearly convinced too many in power - throughout this administration and Congress - that if they don't allow bonuses, everyone will walk. Let. Them. Walk.

American International Group is giving its executives tens of millions of dollars in new bonuses even though it received a taxpayer bailout of more than $170 billion dollars.

AIG is paying out the executive bonuses to meet a Sunday deadline, but the troubled insurance giant has agreed to administration requests to restrain future payments.

The Treasury Department determined that the government did not have the legal authority to block the current payments by the company. AIG declared earlier this month that it had suffered a loss of $61.7 billion for the fourth quarter of last year, the largest corporate loss in history.

Treasury Secretary Timothy Geithner has asked that the company scale back future bonus payments where legally possible, an administration official said Saturday.

Golly, well if Timmy Geithner said so, AIG will act. Geithner has been such a firebrand, standing up for the American investor who has lost their retirement plans. It's hard to understand how so many people believe Geithner is in deep over his head and not up for the job. Sure, he sat on his hands and did nothing for years while working at the NY Fed, but can't they see that he kindly asked AIG to scale back bonuses after they rolled out yet another round just to kick sand in the face of the American public? I hear he asked very sternly and insisted they would all be very naughty if they ran over him again.

The leadership out of the Obama administration has been oh so impressive and investors become happier by the day as they watch such forceful displays of executive power. What red blooded American doesn't like to be abused by Wall Street and lose their retirement money? Heck, there's no way the public would ever start pointing the finger at Obama for failing to stand up to Wall Street with this response. Nope, never, ever, never. Read More......

The Republicans really know how to lose wealth for America

And they think they are the financial experts...why? Remind me again how they benefited the American public?

The financial crisis has weighed heavily on American households, and millionaires are no exception, according to a report released Wednesday.

The number of American households with a net worth of $1 million or more, excluding the value of their primary residence, fell 27% to 6.7 million in 2008 from an all-time high of 9.2 million the year before, according to a report from market research firm Spectrem Group.

"America has a lot fewer millionaires than when this economic crisis began," said George Walper, president of Spectrem Group, in a written statement.

But don't weep only for the 2.5 million fewer millionaires. The report, which is based on surveys of 3,000 affluent households, also showed the number of both multi-millionaires and aspiring millionaires plummeted last year.

Affluent households, defined as those with a net worth of $500,000 or more, declined 28% to 11.3 million from 15.7 million.

Even the very rich have not been immune. Households worth $5 million or more, excluding primary residence, fell 28% to 840,000 last year from 1.16 million households in 2007.

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France promotes abstinence

But not quite the same as in the US. Drunk driving has long been a problem here and in recent years the government has started to implement policies to crack down on the problem. As someone familiar with the problem in America - my brother and a few years later, my best friend from high school were killed by drunk drivers - the attitude in France seemed to be decades behind the US. Today it's improving in France though programs for designated drivers and related cultural changes are still in their infancy. Besides the driving problem, doctors are now being instructed on the dangers of alcohol consumption. In the end, the local wine industry is going to have to modernize and compete in a global market and the government is going to have to influence social change.

Today, every advertisement for wine in the French press, whether it be for Château Lafite or Dom Pérignon champagne, has to carry the warning notice, “L’abus d’alcool est dangereux pour la santé, consommez avec modération.” (Alcohol misuse is dangerous for your health, consume moderately.)

All wine bottled for sale in France now has to carry an image of a pregnant woman with a prohibitive line through it. Any form of alcohol-related sponsorship by even the smartest champagne company is banned. And it is thought so likely that internet advertising of wine will also be forbidden that some important sites, such as Orange.fr, are reported to have been refusing to take wine-related ads.

As if to rub salt in the wound, the French government recently circulated a brochure to French doctors, based on the national cancer research institute’s report on alcohol and risk late last year, which recommends total abstinence from wine.

Ten days ago French politicians voted on a healthcare bill that put a stop to the so-called “open bar” phenomenon, whereby unlimited supplies of alcohol are poured – particularly to students who pay a small ticket price for the privilege of getting slammed at a brand owner’s expense. Wine producers were concerned that one effect of this bill could be that they would no longer be allowed to serve tasting samples in their cellars and at trade fairs.

In fact, the health minister Roselyne Bachelot, whose own constituency is in the heart of Muscadet country, made a last-minute exception for professional wine tastings. But it is a reflection of the current anti-wine climate in France that the majority of vignerons genuinely thought it possible there would be an outright ban on what for many of them is the only sales technique they know.

As an outsider I shake my head in disbelief at how they can take such nice products - products with character as opposed to the monolithic and forceful New World tastes that have infected France as well - and blow a previously dominate position. Read More......