Tuesday, March 17, 2009

Dealing with AIG / America's Fiscal Collapse

There’s been plenty of political handwringing and grandstanding over insurance giant AIG handing out $165 million in executive bonuses. The Obama Administration claims it can’t do anything to prevent AIG honoring its contracts to pay out the bonuses. Really.

What about these 4 options (some more “assertive” than others):

1. Reduce by $165 million the amount the feds are pouring into AIG to keep them afloat. If AIG execs say they need every last nickel and can’t afford to lose $165 million, they can be told where they can find that exact amount — in the wallets/foreign bank accounts of their executives.

2. Simply state that any future bailout funds will not be forthcoming unless AIG “renegotiates” with their execs to eliminate their bonuses. The fed is taking this exact strategy with the automobile corporations over union contracts. The fed is demanding if GM, Ford and Chrysler want the rest of their $40 billion aid package, they must renegotiate with labor over their existing wage and benefit contract. Why is it OK to demand that working people tighten their belts (people who, by the way, actually produce something of value), but not OK to demand that bank executives forgo their bonuses (for, by the way, running the entire economy of our nation, if not the planet, into the ground)?

3. The federal government owns 80% of AIG through prior bailout rounds. It sounds as if, however, they don’t possess much formal power over company decisions. There’s a difference between investments and control. If the fed actually controlled AIG, they could simply say, “AIG is under new ownership. The old contracts aren’t valid. No executive bonuses. In fact, all executives are fired.” Corporations take this approach when they acquire other companies. The feds should try to leverage their/our 80% company stake in AIG and see where it goes.

4. Threaten that if the executives accept their bonuses, the government will do everything they can to revoke their charter. It’s not very easy to pay bonuses if there’s no company. It can always be reorganized under new management. How about worker ownership?

There’s no reason why timid politicians can’t at least press for #1 and progressives #2. Don’t hold your breath on any of the others that are more populist inspired. To do nothing but try to score a few populist popularity points as many inside the DC beltway may try to do is unacceptable.


More than 150 signatures on petitions were submitted today to the offices of US Senators Sherrod Brown and George Voinovich calling on them to stop bailing out Wall Street and to democratize banks. Brown’s aides thanked us and said they’d pass along the petition. Voinovich’s people were none too interested.

Thanks to those of you who signed. Copies are going out tomorrow to all the US Representatives from Ohio.


Here’s a chilling and insightful piece on the federal budget as it relates to war, Wall Street and debt. You may want to be seated and out of reach of any sharp objects before reading it. Call it the print version of his recent radio interview (link sent last week)

America's Fiscal Collapse
by Michel Chossudovsky

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