Way back when I was reporting on New York City’s “fiscal crisis” for the Times in the 1970s, I got the impression that bankers could be a slippery lot, far less reasonable to deal with than politicians. Now everyone is, as you note, “outraged” — appropriately — at what AIG is doing with the public’s money. To suggest that this sort of stuff will make it harder for the Obama administration to manage a bank bail-out is an understatement. Let’s hope (a) that the administration can improvise some way to make AIG behave better, and (b) that this isn’t just the tip of the iceberg. If we start finding out that there’s much more of this kind of stuff, the public, followed by Congress, is bound to rebel and we can say bye-bye-bailout.

http://www.politico.com/arena/

First, I’m betting that it will turn out that AIG entered into these contractual obligations just before the initial Federal Reserve $85 billion bailout last September.

Second, you bet I’d break those contracts to “appease the masses.” But short of breaking them in any company under any circumstances are a host of ways to persuade people to renegotiate their contracts, not least of which is the threat of firing. Ultimately, you can say to the involved employees, we don’t have the money; sue us. You have to buy into the notion that these are people who are the “best and brightest” and somehow indispensable to AIG to appease them.

Third, why didn’t Geithner and Obama get all “outraged” before Sunday and tell Liddy, who was installed by the government, to figure out a way to hold back these bonuses or prepare to be replaced by someone who will.

Allowing this to go forward was a huge mistake. Obama can pretend to being outraged along with everyone else but this was an irreversible tripwire: the financial system may genuinely need a lot more in bailouts for the benefit of the whole economy and all of us, but now, Congress — Democrats and Republicans alike — will no longer be able to coutenance any more bailouts. It won’t be possible politically. Anyone who votes, yea, on more dough to Wall Street had better have a safe seat. People are now furious. AIG was the weak link in this whole affair all along. These bonuses are a bridge too far.

If the contracts are broken… does anybody really think some fatcat is going to sue the U.S. government, in public court, claiming that the government “owes” them millions of dollars in bonuses, under the TARP?

Gimme a frackin’ break.

No millionaire in their right mind would pursue such a case.

Break the contracts… call the bluff.

Agnostick
agnostick@excite.com

Because no one seemed to have to foresight to put many strings on the bailout money, I think there will be an increased cry for bankruptcy for these companies since a bankruptcy judge can void these contracts (though often doesn’t).