Message #162270

[Harconen]

            The Obama administration in general and Treasury Secretary Geithner in particular start receiving harsh criticism from lawmakers in both parties for the handling of the AIG bailout (which was orchestrated by Geithner, Paulson, and Bernanke). Senator Richard Shelby (R-AL) remarks, “There’s either competence or incompetence going on here, and it looks like a lot of incompetence. I think this is the tip of the iceberg.” Appearing on the CBS Early Show, Shelby also states, “I think Secretary Geithner does not have his hands around the details of this, and if he does, then there’s a lot more questions to be asked. I don’t know if he should resign over this. That’s up to—you know, he works for the President of the United States.” According to press secretary Robert Gibbs, Obama has “complete confidence” in Geithner. Gibbs also says that based on what he “read in the newspaper” the administration learned about the (large AIG employee) bonuses the prior week, despite having given AIG another $30 billion in early March. Many legislators believe Geithner knew of the existence of the bonuses. Congressman Scott Garrett (R-NJ) comments, “So it’s only now that it’s making headlines that the president is coming back and basically second-guessing his own treasury secretary on this. Why Secretary Geithner didn’t raise this when he first understood it is beyond me.” Republican minority leader John Boehner asks, “What is the government’s exit strategy from this sweeping involvement in private business?” [1768, 1769, 1785, 1786]

            The predicament facing Obama and Geithner with the AIG bonuses is that if they come down too hard on the executives of the firm, many may simply leave the company and let it fall even further into disarray. The whole point of retention bonuses is to provide a financial incentive for executives to remain at AIG and help get it back on a sound financial footing, rather than just let it disintegrate. If Obama removes those incentives, the executives may simply walk away from the debris. Lesser-paid, less knowledgeable newcomers will take their place, but will have a difficult time reviewing and straightening out the firm’s records. If Obama addresses the issue of the AIG bonuses in too timid a fashion, Americans will be angry that he did not do more and will be less willing to support future bailouts he may request. The issue may ultimately be decided by lawyers. [1771]

            Maurice “Hank” Greenberg, former CEO of AIG, states, “Nobody during my tenure (at AIG) had a contract, starting with me. No one was ever paid a retention bonus. You believed in the company—or you didn’t.” Greenberg had successfully run AIG for more than 40 years, until New York Attorney General Spitzer went after the company and forced Greenberg to resign. (Many argue that Spitzer was out to make a name for himself with the AIG investigations. Spitzer later successfully ran for Governor of New York, and then had to resign in disgrace after his name surfaced in a prostitution investigation.) Greenberg’s successor, Martin Sullivan, then destroyed the company to the point where it required a taxpayer bailout. Sullivan’s government-picked successor, Edward Liddy, is attempting to stay out of the public limelight. Some argue that had Greenberg remained with AIG, its problems would have been significantly less serious. Greenberg also stated that “Although AIG stockholders could have fared better if the company had filed for bankruptcy protection, other stakeholders—like AIG’s Wall Street counterparties in swaps and other transactions—would have fared worse.” (That is, Geithner, Paulson, and Bernanke orchestrated the federal bailouts to save their Wall Street friends, not the average stockholder.) [1741, 1742, 1772, 1785, 1786]

            Attorney General Eric Holder moves to use Mexico’s drug violence to frighten Americans into accepting tougher gun regulations and restrictions. Holder says, “As President Obama indicated during the campaign, there are just a few gun-related changes that we would like to make, and among them would be to re-institute the ban on the sale of assault weapons. I think that will have a positive impact in Mexico, at a minimum.” National Rifle Association (NRA) president Wayne LaPierre responds that Holder’s argument is “bizarre,” and “It’s a delusion to say that diminishing the Second Amendment in America is somehow going to stop these ruthless drug cartels in Mexico.” Holder supports H.R. 45, the Blair Holt Act of 2009, which will place significant licensing restrictions on all gun owners, and not just on “assault weapons” as Holder implies. The law also allows the attorney general to add categories of guns to a list of banned weapons, thus making Holder the sole arbiter of whether civilians are allowed to own a particular gun. (If Holder adds a gun to the list, Americans can’t own it.) Many members of Congress in both parties will be reluctant to support H.R. 45 because that vote may cause their defeat in their next election. At least 65 House Democrats say they would oppose attempts to revive the weapons ban that Bill Clinton signed in 1994, but which was later allowed to expire by President Bush. Gun critics argue that the Mexican drug warlords are obtaining their guns from the United States and claim that simply preventing Americans from owning guns will keep them from finding their way into Mexico. (According to the Bureau of Alcohol, Firearms, and Tobacco, about 17 per cent of weapons recovered from Mexican crime scenes come from the United States, but Obama, Holder, Clinton, and the media deliberately inflate that figure to 90 per cent. Other black market weapons get into Mexico from South Korea, China, Spain, Israel, the Russian mafia, Columbia, Asia, and Guatemala. There is also evidence that many of the weapons used by Mexican drug dealers and gang members come from corrupt members of the Mexican military or deserters; the passage of H.R. 45 will not prevent Mexicans from buying or stealing guns from their own government.) On the other hand, beefing up border security will reduce the flow of guns from the United States into Mexico while at the same time reducing the flow of illegal immigrants and drugs into the country. The money saved by not providing hundreds of thousands of additional illegal immigrants with welfare, health, and education benefits would more than offset the cost of increased border security. [1597, 1598, 1599, 1600, 1773, 1845, 2010, 2198]