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I just heard Liddy talk on C-Span... He was defending the bonuses, which I expected.  But what surprised me was what I heard later in his testimony.   Apparently, when pushed on exactly how many people were involved with the risky derivatives trades - trades that could have collapses the US economy - it wasn't the whole financial 400+ person side of AIG, but a sub-group, consisting of a mere 20-25 people!  

Furthermore, AIG did have quite a bit of risk oversight in their company (after all, it is an insurance company, that is to be expected).  But the strange thing is that the people checking for risk were not allowed to make risk assessments of the financial division-- so the types of hedging and derivates deals went unchecked!  The US government had to bail them out, but I find them totally unworthy.  Now I see them as just a bunch of reckless gamblers.

Also, it was clear that AIG is sitting on some landmines: besides the almost 2 trillion in "traditional" derivatives left to unwind, they have a very risky bet against long-term interest rates going up (if the congressman is correct, they would have to pay out 500 billion dollars if the long-term rate were to go up 1% and short term rates stay the same).  

Anyway, this should disgust us... and the bonuses just reflect this kind of culture they have... their bubble.  The bonuses don't disgust me as much as this...

It is eerily similar to Iceland-- where only a handful of people bankrupted the entire nation and almost brought down several other countries...

Originally posted to yammatal on Wed Mar 18, 2009 at 03:34 PM PDT.

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Comment Preferences

  •  a winning bet today (6+ / 0-)

    they have a very risky bet against long-term interest rates going up (if the congressman is correct, they would have to pay out 500 billion dollars if the long-term rate were to go up 1% and short term rates stay the same

    See not everything is bad.

    Long-term treasury rates (as measured by the 10-year) just fell about 50 basis points today (that's 1/2 of 1 percent for the uninitiated in bonspeak), the largest decline in yield in more than 45 years.

    Now, you thought the Fed action was to help the economy. Perhaps so. It also had the side benefit of helping AIG's position.

  •  The bonuses are directly related (7+ / 0-)

    to the problems AIG has.  The bonuses were consolation to people used to far far larger bonuses.  They might even be hush money.  And the earlier bonuses were based on unsustainable deals.  The fact that an insurance company would not allow its risk assessment people look at this division means they knew it wouldn't stand up.
    So, there you have it.  Bonuses given to people that made deals they knew would not fly.  

  •  similar to the 11 people it took... (4+ / 0-)

    similar to the 11 people it took to take away Americans right to a trial and their right to not be searched with out a warrant.

    In that case, 9 hijackers and a President and Vice-President who were too scared and cowardly to believe that the U.S. Constitution is the law of the land both in times of peace AND in times of attack.

  •  Financials = 900% of (3+ / 0-)
    Recommended by:
    PeteZerria, Nailbanger, yammatal

    Iceland's GNP, 450% of Britain's and 150% of U.S. GDP. (See tonight's Lehrer Newshour). With all this paper swapping going on who the fuck is providing real goods and services? Hmmm.

    The frog jumped/ Into the old pond--/ Plop! (Basho)

    by Wolf10 on Wed Mar 18, 2009 at 04:33:15 PM PDT

  •  If these people were FIRED - as they deserved (2+ / 0-)
    Recommended by:
    phonegery, saildude

    then the 'bonus' issue would be moot.

    FIer them for cause and NO contract regarding bonuses - or anything else - applies.

    A few people LITERALLY BANKRUPTED their employer - with faulty financial instruments.

    The Credit default 'insurance' they offered was NOT priced according to the risk involved and people were allowed to buy insurance MULTIPLE times to cover the same debt.

    This is akin to selling hurricane insurance that covers EVERYTHING (ANY possible damage)for pennies - AND allowing you to buy an insurance policy on all your neighbors property at the same rate.  OF COURSE when a storm hits the insurer goes belly up because it can't pay off all the claims.

    The question is WHY are we the taxpayers paying off this crap insurance?

    The money would be better spent allowing people to stay in houses - making the mortgages good - and avoiding the majoprity of defaults.  But that doesn't benefit Wall Street.

    COngress and the Pres are being played for fools - by the same people that caused this mess.  Those on the inside will NEVER see that their model is fatally flawed.  They will keep trying to revive a corpse - with OUR money.

  •  This is the crux of the issue (3+ / 0-)
    Recommended by:
    phonegery, shann, yammatal

    Denninger:

    So you have a situation here where the entire banking regulatory system has declared these contracts worthless in the aggregate and yet company after company continues to claim in their financial statements and results that these contracts are "money good"!

    Well? Shall we go? At least that man is gone.

    by whenwego on Wed Mar 18, 2009 at 05:54:07 PM PDT

  •  They had the help and support of the (0+ / 0-)

    Republican Congress and Republican Administration.  I am just saying.

  •  fair enough since 20-25 people run the US economy (0+ / 0-)

    its a big boat, the rest of us are merely along for the ride.

    "There are many truths of which the full meaning cannot be realized until personal experience has brought it home." John Stuart Mill

    by kuvasz on Wed Mar 18, 2009 at 07:29:57 PM PDT

  •  Sounds to me like (0+ / 0-)

    the PTB are gearing up to have 20-25 people blamed for this mess and send them to jail as the poster children.  Every crisis has to have a few whipping boys; it seems to be something this country needs in order to "move on".  And heaven knows, we NEED to move on or we're going back to the Stone Age soon.

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