DOWNTIME Part 15 – Bailout Bonanza Gone Bananas
American International Group has received to date $170,000,000,000 of U.S. tax-payer’s money. The zeroes start swimming in my vision with numbers like that, as my eyes cannot focus on numbers so wide. If the numerals were letters, that’d be enough letters for three four-letter words. Don’t know why I think of four-letter words in the context of AIG, which is only a three-letter word.
First, The Bananas
Maybe it’s because of news this week that they are using 165,000,000 of that to pay additional executive bonuses. Showing unprecedented restraint, the chairman of the board has agreed to try to trim these bonuses down a little … next time. Now that just puts my head in a whirling dervish like a washing machine on a spin cycle, for this very same month AIG reported that those superlative (or is that expletive?) executives created the largest quarterly corporate financial loss in world history — $61,700,000,000 down in one quarter. I’m not sure what the opposite of cross-eyed is, but my eyes are splitting like a chameleon’s just to read that wide number.
Next my head launches from its spin cycle into orbit upon news that the U.S. government is accepting this with a mild request that AIG try to notch it down. Notch it down? AIG says, they cannot because it is a pre-existing contractual obligation. First, how many alligator-brained corporations do we have that are writing contracts that guarantee bonuses if you obliterate the company? Second, the government has every legal right to stipulate that no bailout money will go to corporations whose executives are receiving any bonuses at all. That would put the onus on the executives to sign consent to their loss of bonuses or lose their jobs because their business fails and, so, lose their bonuses anyway due to corporate bankruptcy. There are ways to terminate the bonuses. Instead, American people are losing their homes while these gluttons are being given money from said foreclosed individuals on a scale that will allow them to buy those same foreclosed homes with cash!
The real problem here is lack of governmental spine. So long as the government is afraid to require severe disciplinary action before using everyone else’s money to bail out corporate giants from their own greed and folly, why should the giants short themselves? Of course, the Treasury Secretary would hardly want to start slugging people with whom he drinks martinis after a good day’s hard work.
If the government mandated that every executive involved in AIG’s failure be fired before AIG ever received a cent, is it conceivable that AIG’s Board of Directors would choose to let the company die, rather than do the severe pruning necessary to get the government aid? Since when can contracts with employees not be broken when their ineptitude is so high as to create the largest financial losses in world history, even to the point of bringing a nation to its knees? Is it even remotely possible that AIG could perform worse than it already has if it were run by chimpanzees with bonnets on their heads?
My mistake. It is run by chimpanzees with bonnets on their heads.
The chairman of AIG’s board, Edward Liddy, stated from under his bonnet to U.S. Treasury Secretary Timothy Geithner, “We cannot attract and retain the best and brightest talent to lead and staff the AIG businesses, which are now being operated principally on behalf of the American buy ambien from us taxpayers — if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury.” (Always the same excuse.)
Retain the best and the brightest? Does he mean the chimpanzees that are smart enough to wear their bonnets right-side-up? Is he referring to the ones who know how to eat with a fork? Or just to the ones who don’t defecate in their own hands?
I say, let the corporation die, or fire everyone responsible and replace them with apes from the wild, which may be smarter than those raised in cubicles. Every time the new chimps accidentally do something that causes the company to make a dollar, give them a banana. In no time, they’ll be outperforming the current menagerie ten to one.
Elsewhere in the News
Stephen Schwarzman, chairman of the corporate buyout firm Blackstone Group, said that “There will be a [government] program set up soon to buy troubled assets from the banks. The private sector will wind up making some good money.”
Of course they will. All the rotten meat will be carved out and handed to U.S. taxpayers, and the little bit of choice meat will be sold at a bargain to wealthy private individuals and groups. It’ll be more of the largest movement of money from the poor and middle class to the few remaining rich ever seen. It’s not the people caught in foreclosure who will be in any position to buy these newly scrubbed-up troubled assets. They just get the effluent.
Last week I wrote that the U.S. is going to start feeling the squeeze as China would soon be seriously questioning the wisdom of financing the United States’ mushrooming debt. Sooner than I thought (as in Friday of the same week), China’s premier went public with statements about his concern over China’s massive holdings in U.S. Treasury bonds. “To be honest, I’m a little bit worried.” When the premier of a nation the size of China says “he’s a little bit worried” publicly, he’s a lot more than a little bit worried. Of course, he may just be trying to talk up the interest the U.S. has to pay, but that was my point.
J.P. Morgan economist Frank Gong, summed up, “Inside China there has been a lot of debate about whether they should continue to buy Treasuries.” If they stop, the government will not be able to finance its debt, as its interest alone will become unpayable and unfinanceable in the present economy.
I also said last week that China’s production claims don’t add up. It reported that factory productivity was up through the last three months when it has closed 70,000 factories. This week’s news says that China’s February exports were down 25%. If production is up in China, one has to wonder for whom are they producing? Maybe it is a communist supply-side philosophy: “If you build it, the orders will come.” The current generation of Chinese dictators are new at free markets, so I suppose they have not figured out yet that you have to have someone who wants and is able to buy your product before you raise production.
On a final note, the U.S government reported this week that the estimate of illegal immigrant employees in the country is 11.6 million. That’s an interesting number, as it almost exactly matches the number of unemployed legal U.S. workers.