Andrew Ross Sorkin’s Case for Paying the A.I.G. Bonuses

Posted on March 17, 2009 by Dan

Andrew Ross Sorkin wrote the following in today’s NY Times with regard to why the A.I.G. bonuses should be paid:

via Dealbook – The Case for Paying the A.I.G. Bonuses – NYTimes.com.

â??This isnâ??t just a matter of dollars and cents,â? he said. â??Itâ??s about our fundamental values.â?

On that last issue, lawyers, Wall Street types and compensation consultants agree with the president. But from their point of view, the â??fundamental valueâ? in question here is the sanctity of contracts.

That may strike many people as a bit of convenient legalese, but maybe there is something to it. If you think this economy is a mess now, imagine what it would look like if the business community started to worry that the government would start abrogating contracts left and right.

As much as we might want to void those A.I.G. pay contracts, Pearl Meyer, a compensation consultant at Steven Hall & Partners, says it would put American business on a worse slippery slope than it already is. Business agreements of other companies that have taken taxpayer money might fall into question. Even companies that have not turned to Washington might seize the opportunity to break inconvenient contracts.

If government officials were to break the contracts, they would be â??breaking a bond,â? Ms. Meyer says. â??They are raising a whole new question about the trust and commitment organizations have to their employees.â? The auto industry unions are facing a similar issue â?? but the big difference is that there is a negotiation; no one is unilaterally tearing up contracts.”

One word comes to mind: FRAUD.

A.I.G. committed fraud in the worst way and the bonuses are based on fraud. Accounting fraud, insurance fraud, whatever you name it, fraud took down A.I.G. As an insurance company, A.I.G. is obligated to retain a certain level of capital reserves from which to pay its obligations. Instead, it appears A.I.G. kept little to no capital reserves for insurance contracts it wrote for securities. The money it received from those insurance contracts was looted by its executives through excessive compensation and bonuses. As a result, A.I.G. lacked necessary funds to pay the beneficiaries of those insurance contracts when the insurance notes came due.

A basic tenet of contract law says that contracts based on fraud are not enforceable. Those bonus contracts should be presumed unenforceable until it is clear the recipients were not party to the fraud and actually earned the bonuses received.

I would like to see a real investigation led by William K. Black to determine what exactly went on at A.I.G. and when the executives and other employees knew or should have known they were committing fraud. I find it shocking the Feds have not already begun a thorough investigation into A.I.G. and other financial institutions to get to the bottom of the economic fiasco they caused. Until an investigation is completed, we should all presume fraud is involved.

Then again, I’m surprised A.I.G. wasn’t immediately placed into receivership, executive ranks fired, its counter-party contracts renegotiated through the receiver, and its assets sold off to the highest bidder to pay its obligations.

Digital Converter Box is here

Posted on May 29, 2008 by Dan

I used the analog to digital converter box coupon card this past weekend. So now we can still get TV after the super bowl when the transition to digital television is complete. It is an RCA brand converter box.

I don’t generally shop in Wal*Mart (ruthless and toothless); however the converter box cost $10 after the coupon ($50 retail price). That beat the $65 charged by Radio Shack for a no brand item.

The nice thing I found out about this box is that it includes a V-Chip intended to let parents filter out inappropriate content from their youngsters. It is likely that most people who rely on the government coupons to purchase a converter box will not have televisions built since 2000 when the V-Chip was mandated. The program is still a boondoggle, just not as big as I had previously made it out to be.

In case you still are not aware of the television transition, these are the dates you need to be aware of:

January 2, 2008 – Digital to analog converter coupon program becomes available. * Coupons are now available.
February 17, 2009 – Last day for analog broadcasts.
February 18, 2009 – Analog broadcasts will be turned off. Televisions will need a digital tuner, digital-to-analog converter box, or cable/satellite subscription.

You CAN have a sense of humor in the gov’t

Posted on May 18, 2008 by Dan

There is a widespread belief that government bureaucrats lack senses of humor and that individuality is discouraged when in the ranks of government. The folks at the Social Security Administration (SSA) disproved that last week in a press release.

“For reasons likely to puzzle baby name experts around the world, American parents have become infatuated by names, particularly for their sons, that rhyme with the word â??maiden.â?Â …Â Social Security spokesman Mark Lassiter indicated that the agency would resist any legislative efforts to standardize the spelling of these names.”

SSA Press Release: Pop Culture Makes Mark on Social Security’s Most Popular Baby Names List

SSA tracks the most popular names born in the U.S. through registrations for Social Security numbers. It publishes its list annually. You can see the most popular names for the past 130 years on its web site.

McCain: Cutting taxes more important than balanced budget

Posted on April 21, 2008 by Dan

I don’t think John McCain subscribes to the belief that: “A deficit today means a tax tomorrow.”

McCain: Cutting taxes more important than balanced budget – Yahoo! News

WASHINGTON – Republican John McCain said Sunday that cutting taxes and stimulating the economy are more important than balancing the budget, and accused both Hillary Rodham Clinton and Barack Obama of supporting tax hikes that would worsen the impact of a recession.

“The goal right now is to get the economy going again,” the GOP presidential nominee-in-waiting said on ABC’s “This Week,” adding that he would put the country “on a path to a balanced budget” by attacking wasteful spending.

What John McCain asks for is not a tax cut, it is a deferred tax. As far as he’s concerned, he won’t need to pay the tax man today (but his kids/grandkids surely will).

The thing I don’t think John McCain or our Congress quite understands is that they are pushing 96% taxes someday in the future to pay for the war they refuse to pay for today. In the end, someone needs to pay for war spending, in addition to all the regular stuff the government spends on domestically. I’d rather we all pay our fair share today through taxes (yes, even increased taxes) than it be forced on my generation later on. If that’s the case, I’d rather the U.S. Government default on its debt obligations today rather than force the younger generations to do so later.

Note: I’m not against trimming or cutting programs, I just think a balanced budget is required before tax cuts can be implemented. The first place I’d cut is Congressional pay. The second is the war in Iraq. What a boondoggle!

Digital Television Converter Coupons Are Here

Posted on March 28, 2008 by Dan

I wrote about the need to sign up to receive coupons for the analog to digital television converter coupons back in January (See: Digital Television Transition: Start Preparing Now). Our two coupons arrived this week.

The envelope:

A coupon:

They came with a list of qualified converter boxes and a list of local retailers (all big box stores) that sell them.

This whole television transition is one big bloated boondoggle. These stores and the converter box makers scored with this one. For one, the coupons are good only with stand-alone devices that will convert the signals and not for multi-purpose devices like VCRs, televisions, etc. that build in a converter. Two, television broadcasters don’t need to pay a penny for their broadcast licenses. Three, the converters are expected to cost $75 or more. Four, the converter boxes don’t even include a V-chip (this was a missed opportunity to get a V-chip in every home). There is more to complain about, but I’ll spare myself the time and effort. 😉

Why I love the Internet

Posted on March 22, 2008 by Dan

Because geeky professors can feel empowered to make videos in which they sound alarms and spread their message virally, while they enjoy their morning coffee.

Very cool, however the message given in the video isn’t. The professor, Brad DeLong, rings the alarm, saying evasive action taken by the Fed may not work and that government needs to start talking about solutions before we get another depression with deflation or the inverse, inflation.

The right to be let alone

Posted on March 8, 2008 by Dan

I’m working on a paper and presentation about the zones of privacy and keep running across this quote from Justice Brandeis’s dissent in Olmstead v. United States. I like it a lot so I am sharing it:

“The makers of our Constitution undertook to secure conditions favorable to the pursuit of happiness. They recognized the significance of man’s spiritual nature, of his feelings and of his intellect. They knew that only a part of the pain, pleasure and satisfactions of life are to be found in material things. They sought to protect Americans in their beliefs, their thoughts, their emotions and their sensations. They conferred, as against the government, the right to be let alone – the most comprehensive of rights and the right most valued by civilized men. To protect, that right, every unjustifiable intrusion by the government upon the privacy of the individual, whatever the means employed, must be deemed a violation of the Fourth Amendment. And the use, as evidence in a criminal proceeding, of facts ascertained by such intrusion must be deemed a violation of the Fifth.”

Downer cows in the food supply – ugh!

Posted on February 22, 2008 by Dan

This past week, the massive beef recall from a Southern California slaughterhouse made headlines. It seems most attention was paid to the inhumane treatment of the cows. I find the use of downer cows to be the most heinous and horrid part of this whole mess.

Lawmakers react to massive recall from SoCal slaughterhouse

Federal lawmakers and watchdog groups had harsh words Monday for the U.S. Department of Agriculture after the agency ordered a recall of 143 million pounds of beef from a Southern California slaughterhouse.Beef products dating to Feb. 1, 2006 that came from the Chino-based Westland/Hallmark Meat Co. are subject to the recall, which is the largest such action in U.S. history. The notice came after the Humane Society of the United States filmed undercover video showing crippled and sick animals being shoved with forklifts â?? treatment that has also triggered an animal-abuse investigation.

…

USDA spokesman Keith Williams said the agency did not have a shortage of inspectors. He said his department has evidence that Westland did not routinely contact its veterinarian when cattle became non-ambulatory after passing inspection, violating health regulations.

Williams said the recall was done primarily to revoke the USDA’s seal of inspection for the meat â?? not because of the risk of illness.

“Everybody’s going, ‘Oh, a recall, that means death, that means sickness.’ That’s a different kind of issue,” Williams said. “This is a lower severity, where there would be a remote probability of sickness.

This official response by the USDA is not acceptable and is bullshit, pun intended. The inability to stand is one of the signs of Mad Cow disease. It is the reason these rules were put in place. The fact that downer cows were put into the food supply means the USDA food inspection process does not work and we are all at risk of getting e coli, salmonella, and bovine spongiform encephalopathy (BSE), the human version of Mad Cow disease, among other diseases. The link between BSE and downer cows is clear. The possibility is low, but it is still there. Not only that, but in the logic of the USDA spokesman, there is no need to have rules against downer cows since there is low risk of illness.

Deporting American citizens?

Posted on February 22, 2008 by Dan

This is one example of how inept the U.S. immigration service is and how the immigration system is broken. How idiotic can they be not to run the quick and simple checks?

McClatchy Washington Bureau | 01/24/2008 | Immigration officials detaining, deporting American citizens

FLORENCE, Ariz. â?? Thomas Warziniack was born in Minnesota and grew up in Georgia, but immigration authorities pronounced him an illegal immigrant from Russia.Immigration and Customs Enforcement has held Warziniack for weeks in an Arizona detention facility with the aim of deporting him to a country he’s never seen. His jailers shrugged off Warziniack’s claims that he was an American citizen, even though they could have retrieved his Minnesota birth certificate in minutes and even though a Colorado court had concluded that he was a U.S. citizen a year before it shipped him to Arizona.

Digital Television Transition: 365 days to go

Posted on February 17, 2008 by Dan

A year from tomorrow, February 18, 2009, the traditional, analog broadcast television signals across the U.S.A. will be turned off. (See: Digital Television Transition).

If you’re like me and rely on over-the-air television signals, you will need to invest in a digital-to-analog converter box, or a nifty new television built to receive digital broadcast signals, or subscribe to cable/satellite television.

The estimated price of the digital to analog converter box is $75. The federal government is providing $40 coupons towards your purchase. Request a coupon: https://www.dtv2009.gov/ApplyCoupon.aspx According to the coupon request form, TV converter boxes are not expected to be available in retail stores until late February or early March. You should sign up now before they are gone (limited supply); however you will not receive your coupon until after converter boxes are available in stores. The Coupon will expire 90 days after the date it is issued.

The federal department responsible for the program has a web site that provides more information regarding the coupon program, such as rules and the coupon request form. https://www.dtv2009.gov/

Reports from my Nanocosm

Tag Archives: government