Patti's Blog - Advocate for Elders, People with Disabilities and Their Families

Anger over Wall Street's big bonuses resurfaces, despite Obama policies

Patti's Comments:  Where is this anger/outrage???
 
Excerpt from Washington Post: (click for entire article)

After a yearlong effort by the Obama administration to reform how Wall Street pays its executives, some of the nation's biggest banks beginning Friday will pay out bonuses nearly as large as those in the best years before the crisis.

President Obama has repeatedly blasted the size of the payouts and Thursday called them "obscene" since many Americans "continue to face real hardship in this recession." But the administration has chosen not to address the issue that most infuriates people: the magnitude of the bonuses.

In practice, the White House regards hard pay caps as bad policy and easy to circumvent. Instead, officials have opted to reform how the payouts are structured, tying them to long-term performance, and giving shareholders greater say on compensation.

So far, the mix of harsh rhetoric and more nuanced policies have failed to defuse popular anger over executive compensation. And as J.P. Morgan Chase becomes the first large bank to unveil its pay plans Friday, renewed public furor over the size of the checks is overshadowing Obama's efforts to reform pay practices. Even members of the president's own party are calling on the administration to do more.

NY pushes for Medicaid bailout

Patti's Comments:  And what do the leaders in Michigan say????

Excerpt from SFGate: (click for entire article)

New York Gov. David Paterson is seeking a federal takeover of health care costs for the elderly poor who receive benefits under two separate government programs, in an effort to ease states' growing deficits.  Paterson and Lt. Gov. Richard Ravitch (RAV-itch) have already spoken with officials in California and other big states to try to build a coalition.  The savings to New York alone would total the projected deficit for the 2010-11 fiscal year of about $8 billion.

California's Medicaid director says that state is interested in the proposal as long as it reduces state costs.  Ravitch says the cost would be fraction of the federal government's health care spending, while averting a catastrophe for the states that would ultimately require a federal bailout.

The Bonus Boomerang

Patti's Comments:  I agree, I want some answers – how about you???

Excerpt from The Daily Beast: (click for entire article)

Tomorrow, the Financial Crisis Inquiry Commission begins, on the face of it, a hopeless task. Ten experienced professionals from across the political spectrum, with former California State Treasurer Phil Angelides as their chairman, are charged with determining what “caused” the financial crisis of 2008-09. Beyond the near-impossible task of reaching a bipartisan consensus, the commission must reconcile an overload of competing technical opinions and its rather vague mandate—in public.

The cynics have already dismissed the commission as poorly designed (at best) and an establishment whitewash (at worst).

Yet, rather against the odds, a glimmer of serious hope appears. The timing of the commission’s first hearings—beginning with the heads of four major banks, including Goldman Sachs CEO Lloyd Blankfein—coincides with the start of this year’s bonus season for those very same banks. These firms are all slated to pay out very large sums of money for performance—with headline numbers at or above the level of 2007, i.e., right before the crisis.

Banking experts agree that how bank employees are paid matters a great deal for what a bank does. If you reward people for taking risk, they’ll take risk. If you pay traders far more than you pay risk managers, the best and the brightest will go into trading and risk management will wither. And if executive pay is well-padded, irrespective of what happens, you will get some good years—when everyone is lucky—and some incredibly bad years, like 2008.

Bonuses have the chance to grab the public’s interest. No matter how you look at it, everything about the banks can be brought back to the bonuses—then and now. All other issues naturally become quite technical and even boring, but the commission’s hearings have a chance to become memorable—where technical issues cross over to catch the public imagination. This is exactly what happened in the Pecora Hearings in the 1930s and this is what needs to happen today.

Our biggest banks are blowing serious smoke. Blankfein has argued in the recent past that their compensation system is the best possible and therefore remains unchanged. Of course, such logic doesn’t explain why they needed a de facto rescue package in September 2008, via unfettered access to Federal Reserve lending.

OMB Watch Launches Recovery Act Data Tab on FedSpending.org

This is a brand new resource for checking out how much state ed. depts. and districts receive in ARRA (economic stimulus) funds and what they've reported (or not reported) re jobs created and/or saved with the ARRA funds.  You can go down to single district detail.  It also tells how much each state ed. dept. retains from ARRA funds for administering each type of ARRA grant.  And it's pretty easy to use.
Dee Alpert, Publisher
SpecialEducationMuckraker.com

Today, OMB Watch released a beta version of a new database on FedSpending.org that gives the public improved access to and searchability of Recovery Act recipient report data. The database allows users to search more than 160,000 reports from recipients of almost $159 billion in Recovery Act contracts, grants, and loans awarded between Feb. 17 and Sept. 30.

OMB Watch obtained the recipient reports through Recovery.gov, a website required by the Recovery Act and maintained by the Recovery Accountability and Transparency Board. FedSpending.org's Recovery Act data tab gives users flexibility to search, either individually or in aggregate, for prime recipients, sub-recipients, ZIP codes, congressional districts, federal awarding agencies, award amounts, and much more through a variety of means, including an Advanced Search function. Additionally, any search results can be downloaded from the site.

"We created the Recovery Act data tab to expand the options people have for searching, sorting, and analyzing Recovery Act data," said Gary D. Bass, Executive Director of OMB Watch. "The mapping features on Recovery.gov are great, but there are lots of other ways to interact with this data. We hope our website serves as a springboard for further changes at Recovery.gov."

AIG vs. Medicare

Patti's Comments:  I think we cannot simply not blame someone. The one way to avoid making the same mistakes is to learn from mistakes when they happen. We need to understand why this mistake happened in order to plan and implement public policy changes to make sure it never happens again. I am not content to sit back and let others handle this. We should never be that passive again...

Excerpt from The Medicare & Medicaid Center: (click for entire article)

The new present and Congress are under a lot of pressure to clean up a lot of messes. The fact that most of these messes started long ago and far away under other administrations is somewhat irrelevant. The main issue is that right now, the economy is in a mess and it is affecting a lot of things, not the least of which is Medicare.

...The latest information on AIG after they have taken plenty of money to continue operating, they have been and continue to pass out millions in bonuses and "retention" money, as well as tell the overnment and everyone who will listen that this is someting they must do and that "legally" they can't get out of the situation.

Meanwhile, Medicare is struggling to take care of those other millions of people - you know, the ones wh depend on them to get o stay healthy. Lawmakers and the president are doing all they can to get Medicare on more stable fotting. The unfortunate thing is that this whole mess started in preious adminisrations and for the most part, until this administration there has been little effort to really examine AIG or Medicare.

...If the rest of the lawmakers could simply put their partisinship aside and worry about fixing the problems rather than blaming people, a lot coud be fixed faster. Things will get fixed, there will be mistakes and oversights along the way, and these, also, will be ixed.

...It will take some time, and at east for the first time in nearly a decade, there is a trye effort to fix these issues and put the oney where it should be. Now, if we could just get everyone to stop playing the blame game and clean up the mess, things would go faster and and definitely turn out better.

Obama in Effort to Undo Bonuses at A.I.G.

Patti's Comments:  If they knew about these, the Fed should have put strings so that tax payer money could NOT be used for this.  Trying to go back after the money now is: 1) hard; 2) in response to public outrage; 3) silly, as they had the power to avoid this in the first place.
 
I am disgusted that they blame this on the “law” — this is just a HUGE mistake by the administration. Obama now putting restrictions on new money is a bit too late. Why didn't his administration do this in the first place????

Excerpt from The New York Times: (click for entire article)

President Obama and his top economic advisers scrambled to calm a nationwide furor on Monday over bonuses paid at the American International Group, even as administration officials acknowledged they had known about the issue for months.

One day after the economic advisers insisted that their hands had been tied by contracts requiring the payments, Mr. Obama ordered the Treasury Department to “pursue every single legal avenue to block these bonuses” and make the American taxpayers whole.

“In the last six months, A.I.G. has received substantial sums from the U.S. Treasury,” Mr. Obama said. “How do they justify this outrage to the taxpayers who are keeping the company afloat?”

But as anger from lawmakers escalated and criticism of the retention bonuses overshadowed other news for a second consecutive day, White House and Treasury officials offered only a general sense of how they would carry out Mr. Obama’s order and few explanations for why they had not acted earlier.

How to Stop AIG's Bonuses

Patti's Comments:  See - I am not alone!

Excerpt from Institute for Public Accuracy: (click for entire article)

Four leading analysts on finance Monday issued a statement outlining how to stop the AIG bonuses:

"AIG's decision to pay out at least $165 million in bonuses takes the bank bailout program's abuse of the public trust to a whole new level.

"This act simply cannot be allowed to stand. The only question is how to stop it.

"'Sanctity of contracts' has for some time been TARP's equivalent of Harry Potter's magic wand, the thing you waved to make difficulties disappear. AIG clearly takes the Treasury, the Federal Reserve, and the Obama administration for fools, who can be counted on to roll over yet again at the first whisper of the magic words. There is no reason for agents of the people of the United States, whose money AIG plays with, to be so sheep-like.

"Remember that this is a firm that is 79.9 percent owned by the United States government. It is therefore quite possible to abort this outrage, by decisive exercise of public authority. Within existing law, there is more than one way to do it. But a direct solution is readily at hand: Firstly, the U.S. trustees in charge of the firm must immediately instruct the corporate treasurer to make no payments of any bonuses. They also need to order him to issue stop-payment orders on any checks that fly out the door at the last minute, as with Merrill Lynch. Then the trustees need to split off the derivatives unit from the rest of the firm and separately incorporate it. This step leaves AIG's other businesses free to operate as usual. If the recipients of the bonuses refuse to waive them, then the derivatives unit should at once be thrown into bankruptcy, terminating all obligations to pay them. Right now, press reports suggest that the firm's top management waited until the last minute to inform the government of what was happening. AIG CEO Edward Liddy, accordingly, should be asked to resign at once, for the sake of public confidence and to send a clear signal that gaming the system is unacceptable. It is also past time for an investigation of the validity of AIG's past accounting and securities disclosures and its executive compensation program by the Office of Thrift Supervision, the Securities and Exchange Commission, and the FBI.

Obama Orders Treasury Chief to Try to Block A.I.G. Bonuses

Patti's Comments:  I am glad that he did this, but there should have been some ties to the money in the first place. Furthermore, how is this not a fraudulent transfer by AIG? What a mess! I say let them fail...

Excerpt from The New York Times: (click for entire article)

President Obama vowed to try to stop the faltering insurance giant American International Group from paying out hundreds of millions of dollars in bonuses to executives, as the administration scrambled to avert a populist backlash against banks and Wall Street that could complicate Mr. Obama’s economic recovery agenda.

“In the last six months, A.I.G. has received substantial sums from the U.S. Treasury,” Mr. Obama said. He added that he had asked Treasury Secretary Timothy F. Geithner “to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole.”

In strongly-worded remarks delivered in the White House East Room before small business owners, Mr. Obama called A.I.G. “a corporation that finds itself in financial distress due to recklessness and greed.”

“Under these circumstances, it’s hard to understand how derivative traders at A.I.G. warranted any bonuses at all, much less $165 million in extra pay,” Mr. Obama said. “How do they justify this outrage to the taxpayers who are keeping the company afloat?”