The Unsinkable brian cork™

Brian Patrick Cork is living the Authentic Life

AIG Shareholders are Citizens too

January9
AIG Is Thinking About Suing the Government for Bailing It Out – news.yahoo.com

It’s been almost five years since AIG‘s stock dropped 60 percent in a day leaving the company doomed to failure, when Uncle Samswooped in with $182 billion to rescue it. But AIG must have a short memory, because on Monday…

on one hand, AIG would not be around today to level a lawsuit against the government had it not been for the loan. but, if their interpretation of the law is correct, the government could have pursued a different philosophy through the loan. they had the option not to gouge AIG, right? today, AIG is simply taking a step to look-out for it’s shareholders, which is appropriate.

AIG shareholders are Citizens too. but, I wonder if AIG failed to make a contribution to the correct political campaign?

peace be to my Brothers and Sisters.

brian patrick cork

does the fed work for Goldman?

December30

This depends on how we might define work.

There’s a perspective, to be sure.

It can be argued that the Fed is intentionally holding rates at zero in the hopes of forcing investors, concerned about long-term challenges that include retirement, to invest in longer-term riskier assets instead of collecting “little or nothing (Bernarke)” on money market or CD’s.

Worse now for the Fed is the impression that monetary authorities work first and foremost for Wall Street.

Of course, Fed officials see this a bit differently… They see supporting Wall Street as their mechanism for supporting Main Street.

Ultimately, without the former, the latter is locked out of capital markets, and economic chaos could follow.

The purpose of Wall Street is supposed to be, or was designed to be (when it was founded in 1913) channeling investment funds into Main Street.

But most Americans no longer view Wall Street as ultimately working in their best interests – and, I believe they are mostly correct. This is the same Wall Street that aggressively pushed garbage loans onto the American people as policymakers praised the wonders of financial innovation. When did the purpose of finance evolve into simply a mechanism to enrich the relative few at the expense of many? And when did policymakers embrace this view? As Paul Krugman has noted, the Fed cannot envision a world not dominated by the magic of structured finance. Yet this is a world that failed us completely.

Look for my forthcoming post outlining the federally funded Goldman Scam that almost took AIG to it’s knees.

But, here’s the pattern outline, because I know you can’t wait:

1. Goldman creates or sells $23 billion (or more) of CDOs and stuffs them into AIG.

2. Goldman proclaims to the world they have no exposure to CDOs and warns that banks and insurers with CDO exposure will get downgraded.

3. Goldman initiates the mark downs of CDOs with AIG and others, acelerating the market’s downward spiral.

4. Huge mark to market losses lead insurer and bank credit to freeze, short term markets to lock up, ABCP to collapse.

5. AIG posts as much collateral as it has to Goldman, who has more aggressively marked down the exposure.

6. Bond insurers are downgraded, banks begin commutations with them.

7. AIG fails, Fed steps in, Goldman gets bailed out at par.

Come on! This is no accident. And no one in authority wants to find out where the truth lies.

Meanwhile…

The House has passed a bill to audit the Federal Reserve. However, we find ourselves hands-on-knees with a fast-action response from the the Fed claiming that an audit would interfere with its “independence”.

Sing me the song of irony.

Even though the Bill was buried, word got out, and  79% of the American people support at least the notion of a full audit.

NOTE: The Constitution does not empower what is becoming a central bank. And Congress, which created the Federal Reserve in 1913 (and, it coincided, oddly, somehow with the creation of Wall Street) which has the power to create credit and money (rather like Wall Street), and, certainly has the power to audit, dissolve, or do whatever it likes with the central bank (including stripping it of the power to create credit).

Point of reference: Can we agree that the Fed has bungled efforts to manage the economy, keeping unemployment low, and regulating banks?

Just in cases that white van finds me soon, the the independence argument is a red herring./1

Peace be to my Brothers and Sisters.

Brian Patrick Cork

______________________

1/ Something that draws attention away from the central issue.

Government + AIG = Darwin

March20

I began composing the particular post Monday, and updated it as the week played itself out.

To be candid,  I have not enjoyed this particular exercise.  I feel judgment rising in my throat. And, disappointment is weighing heavily upon me.

Nonetheless, off we go – posterity beckons, after all.

Monday joining and fanning a wave of public anger, President Barack Obama collectively blistered insurance giant American International Group Inc. (AIG) executives for:

“recklessness and greed.”

… and pledged to try to block the company from handing its executives $165 million in bonuses after AIG accepted (not took) billions in federal bailout money.

… Indian giver.

Recklessness?  What a fascinating, albeit ironic, choice of words.

What about recklessness in the form of broad statements from a global leader? What about slander Mr. President? What about honoring contracts? What precedent does this set in terms of jurisprudence? What about leading a lynch mob comprised of members of the House and Senate, and acting like a bunch of champanzees with shotguns?

See, this is what happens when you rush the hill (Capital Hill – get it?), carrying, a banner for “change” without thinking ahead. In the first days of his administration President Barack Obama couldn’t work fast enough to hurl (with big fanfare no less) money at AIG (and other companies, like banks, that have done the same thing AIG did) and demonstrate his proactive plan for the people. Obama approved the AIG bailout (that was set into motion back in November) in the first days of his Presidency. Problem is, no one asked enough audit-oriented questions, and apparently forgot what “business as usual” means when they promised the funds to begin with. Then, when it’s realized our new leaders failed to implement appropriate oversight and wrote blank checks, they can’t help but go all bug-eyed and point the fingers fast enough.

Walk with me.

Obama asked:

“How do they (that would be AIG and not Congress that approved the funds) justify this outrage to the taxpayers who are keeping the company afloat?”

And, then apparently added:

“This isn’t just a matter of dollars and cents. It’s about our fundamental values.”

So is taking responsibility when you make a huge blunder.

So…

What about the fact that those bonuses were openly reported in the reports submitted to the House and Senate for approval?

By the way… Ninety percent (90%) of AIG performed well in 2008. Only ten (10%) can account for the financial melt down that ended the year (under Government regulation and oversight). Our finger-wagging fearless leader deflects blame by arbitrarily stating that (all) AIG executives are collectively “greedy” – even though they are operating under employment contracts established last March when they agreed to work for $1 annually beginning in 2009. Apparently, the bonuses were paid legally; part of a program that had been disclosed in advance in filings that AIG made with the government. So, it might be argued that many of the executives meant to receive bonuses might have earned them. And, working for $1 sends a rather powerful message in terms of commitment and a desire to effect go-forward change.

I have not heard of, or read about, any one single Congressman or Senator offering to work for $1 until the American economic situation is under full steam and recovery.

NOTE: I understand that the bailout constitutes a “substantial change in circumstances” under contract law which has been used to render contracts null and void by way of precedent. However, that is not an excuse to use such legal language as leverage to bully citizens with legislation.

For example… New York Attorney General Andrew Cuomo told AIG he wanted a list of employees set to receive bonuses. He said his office will investigate whether the employees were involved in the company’s near collapse, and whether the $165 million in bonus payments were fraudulent under state law.

That is flat-out creepy. What next Mr. Cuomo – visiting their homes at dusk? Abducting their children?

Why isn’t issuing the funds and then bullying and intimidating American citizens using retroactive legislation as a blunt-edged weapon fraudulent under state and federal law?

Just to add more drama, no doubt, House Speaker (the voice of reason?) Nancy Pelosi, D-Calif., said:

“I call upon the executives at AIG to right the wrong they have done to American taxpayers, who are footing the bill for the most expensive government rescue in history.”

[…]

Jumping on the bandwagon, Iowa Sen. Charles Grassley then suggested that AIG executives should take a Japanese approach toward accepting responsibility for the collapse of the insurance giant by resigning or killing themselves.

The Republican lawmaker’s harsh comments came during an interview with Cedar Rapids, Iowa, radio station WMT. They echo remarks he has made in the past about corporate executives and public apologies, but went further in suggesting suicide.

Grassley:

“I suggest, you know, obviously, maybe they ought to be removed,”

“But I would suggest the first thing that would make me feel a little bit better toward them if they’d follow the Japanese example and come before the American people and take that deep bow and say, I’m sorry, and then either do one of two things: resign or go commit suicide. And in the case of the Japanese, they usually commit suicide before they make any apology.”

[…]

Never mind that Senator Grassley’s annual salary is almost four times that of his states average constituent – and, he receives health benefits equal to that of the President, while twenty one percent (21%) of Iowans don’t have ANY benefits.

Update:  Tuesday, Congressional Democrats vowed Tuesday to all but strip AIG executives of their $165 million in bonuses as expressions of outrage swelled in Congress over what they choose to refer to as eye-catching extra income for employees of a firm that has received billions in taxpayer bailout funds. Just to be clear, AIG would not be the only firm named by either Democratic bill, but there was no question whose executives inspired the legislation.

Senate Majority Rascal Leader Harry Reid, from the Senate floor declared:

“Recipients of these bonuses will not be able to keep all of their money.”

Chuck Schumer of New York gamefully added:

“If [you] don’t return it on your own we will do it for you.”

One more:

“They’re not going to get the financial benefit of those bonuses,”

…bleated Senate Finance Committee Chairman Max Baucus, D-Mont.

In the House, Reps. Steve Israel, D-N.Y., and Tim Ryan, D-Ohio, introduced a bill that would retroactively tax one hundred percent (100%)  of the bonuses above $100,000 paid by companies that have received federal bailout money.

Such stirring (and uninspiring if ill-informed) bravado from what appear to be federally supported brigands and bullys.

Interestingly, and not to be left out of the ugliness, it should be noted that Republicans are of the opinion that President Barack Obama’s administration should have done more to stop the bonuses.

Such inspiring wisdom, and insightful leadership.

I suppose it never occurred to those same geniuses paragons of virtu Representatives to consider doing their home work and having a clear understanding of the actual utilization of funds in advance of deployment. Actually… They probably did. It’s just that the 21st century media, and that spotlight, is such a bitch.

I wonder if the House and Senate plan on, and somehow rationalize, penalizing these executives for loss tax revenue based on reduced income.

Prediction:

President Obama and his Cabinet take a black eye when the word gets out that it was Democratic Senator Chris Dodd that wrote-in the loophole that allowed for the bonuses to poke through the bailout package to begin with (everyone knew the bonuses were part of the deal). Obama’s lack of experience, and therefore susceptibility to bad advice under pressure quickly became evident over the past three weeks. The question on my mind is whether he did this under direction of Treasury Secretary Geithner.

Conclusion:

I am defending AIG executives less than I am asking for a stand for best business practices. A call for forethought. A consideration of our Constitution in terms of jurisprudence.

Big businesses keep making the same mistakes. But, so does our government.

Brian Visaggio posted his brilliantly titled: There’s No Crimea-River Tuesday, and I added the following comment (in response to his own earthly father’s historical perspective comment):

So… Ignorant bureaucrats, across multiple administrations, monkey with business.

In my own line of work I help many executives (from start-ups to fortune 50) make better decisions. Sometimes we learn that the best, albeit toughest, decision is to close the business.

From Mr. Visaggio’s dissertation we might surmise that government does not allow for the natural progression of business. Perhaps some times it’s best to let companies fail and others, more strong, and able, to take their place. Certainly might be useful from an S&P standpoint.

There was a pretty good article in the Wall Street Journal a few weeks ago where the writer posited that perhaps we should stop pouring billions of dollars into companies that keep making poor decisions and invest in the many entrepreneurs that come on-line each year with innovative ideas that need less capital to vette themselves. It was something to that effect.

Elements of natural selection?

[…]

This made me suddenly realize (or, perhaps I have actually known all along because it should be in our DNA) that the best answer to the AIG situation, like many similar situations, is that government should have kept it’s hands off, as painful as that might seem, and allow companies to perish along the natural order of things.

Tip of the iceberg, this.

Peace be to my Brothers and Sisters.

Brian Patrick Cork

What’s All This About?

"What am I looking at?", you might wonder.

Lots of stuff.

Meanwhile, here, I discuss events, people and things in our world - and, my (hardly simplistic, albeit inarticulate) views around them.

You'll also learn things about, well, things, like people you need to know about, and information about companies you can't find anywhere else.

So, while I harangue the public in my not so gentle way, you will discover that I am fascinated by all things arcane, curious about those whom appear religious, love music, dabble in politics, loathe the media, value education, still think I am an athlete, and might offer a recipe.

All the while, striving mightily, and daily, to remain a prudent and optimistic gentleman - and, authentic.

brian cork by John Campbell





photos by John Campbell

 

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