Wednesday, March 18, 2009

AIG Retention Bonuses Issue: A Smoke-Screen for the Theft of Billions.

For the last few weeks I've been watching mainstream media so-called pundits foment righteous anger over the "nerve" of AIG execs demanding, and those in charge of overseeing how taxpayer money is spent giving them, millions in retention bonuses. The experience has been quite amazing, to say the least, because the mainstream media has never, ever, in my memory been so openly hostile toward Wall Street. Usually, they act as the Wall Street Propaganda Dissemination Department. For examples, the Exile broke a story about how craven the mainstream media is toward Wall Street about a week ago, and Jon Stewart picked up on it and took it further:

So, yeah, it's strange to watch the mainstream media start trashing Wall Street all of a sudden, but now it's clear why: The manufactured outrage is a smokescreen for something much, much worse. It is a magic trick, which, like most magic tricks, works through deception: The magician distracts you with his left hand slips a card in the deck with his right--and the card you picked "magically" appears on top of the deck.

In the same way, the media is getting you to focus your attention on AIG execs receiving retention bonuses of about $200 million, while AIG is giving about $175 BILLION to banks and financial institutions that it has already given the same amount to. The institutions in question are the usual suspects: Goldman Sachs, Bank of America, Merrill Lynch, UBS, JPMorgan Chase, Morgan Stanley, Deutsche Bank, Barclays, and so on.

The source of this claim, that the bonuses are serving as a smoke-screen for something much more egregious to take place is, to the best of my knowledge, Elitot Spitzer, in his March 17, 2009, article in Slate, "The real scandal at AIG."

But this story, already a Chilean earthquake, gets even more interesting. Dare I say, Eliot Spitzer was forced to resign as Governor of New York last year because he had been trying to prosecute AIG and scam-companies like it since 2002, for exactly the kinds of crimes--crimes--that have led to this crisis. He was silenced. And the silencing was a Wall Street conspiracy.

But, to go back to the beginning, Eliot Spitzer was writing about--strike that, prosecuting--Wall Street's dangerous and highly questionable players since, not a month before, not a year before, not two years before the collapse of Wall Street in September 2008, but since way back in 2002. Then, in 2004, he accused AIG of bid-rigging. Now, I don't have the slightest clue what bid-rigging is, but the fact that AIG and another company lost $38 billion in market capitalization in response to the accusation means that he knew what he was talking about: Wall Street cretens obviously took his accusation as a credible alarm.

Then, in February 14, 2008, he wrote an article in The Washington Post making explicit just how the Bush administration had stepped in to stop states from being able to stop the predatory lending practices that have brought us to this crisis. To quote a Nation article summarizing Spitzer's accusations against thte Bush administration:

[T]he [predatory lending] situation loomed so egregious that the attorneys general of all fifty states, both Democrats and Republicans, lodged suits against the worst predatory subprime lenders [...] The response was shocking, and not nearly wellpublicized enough: the Bush administration employed a little-used 1863 law to annul all state antipredatory-lending laws and, if that wasn't enough, to block states from enforcing their own consumer protection laws in suits against national banks. Thus, when Spitzer tried to open an investigation into discriminatory mortgage lending in New York, the administration actually filed a federal lawsuit to block it. These interventions were so extreme and so unprecedented that the attorneys general and the banking superintendents of all fifty states came together to oppose the rulings unanimously. But to no avail.

Three weeks later, Spitzer was forced to resign his post as the Governor of New York because of a sex-scandal.

Coincidence? I don't think so. Here is a podcast of an interview with Spitzer done by Greg Palast, probably the only real investigative journalist left in the US aside from Seymor Hersh. Here is Palast's article about Spitzer's resignation with other audio links, and here is a Nation article about it.

So, yeah, the same guy that Wall Street successfully conspired to have resign because of his willingness to prosecute its crimes is now saying that this hullabaloo over the retention bonuses, as justified as it is, is only serving as smokescreen for a theft that is 1000% as bad.


Anonymous said...

I don't know about the AIG and stuff but the clearer lesson here is that you gotta keep your Richard in your pants if you want to avoid problems in the future.

Armen Filadelfiatsi said...

The lesson is that AIG is paying the usual suspects--twice, that people are focusing on the theft of $200 million while $175 billion is being stolen.

Keeping "Richard" in your pants, or "Kaj Vartan" aka "Dro" as he's known in these parts, can help you avoid a variety of problems, as well as pleasures, but, in Spitzer's case, he could have been Mother Teresa and Wall Street would have still taken him down, one way or the other. The only way morality played a role in his fall was in the self-righteous condemnations of the public.

parisan said...

//Three weeks later, Spitzer was forced to resign his post as the Governor of New York because of a sex-scandal.//

That explains why, in the stories of the old days, only the knight with a pure heart could proceed into the land of evil and accomplish the most difficult quest.

Today a politician has no chance to climb the ladder of success unless the secret services of their government know just enough about him or her, to discredit them, if the need arises.

I recommend this essay, by Matt Taibbi.

Garen said...

Interesting article. The podcast no longer seems to work, and Hulu doesn't display videos outside of USA. BZW, you forgot to mention RBS in the list of usual suspects (unless RBS somehow escaped that list).

Every 30-50 years Capitalism reconfugures itself. That's when huge chunks of global capital change hands at a faster pace than an average Joe can afford to comprehend. Nearly $10 trillion in value have simply "vanished" out of the US economy alone. I get the feeling that it will take a good 30 years or so before the public will start getting first glimpses of what really happened with the so-called "credit crunch". For instance they keep selling that story with sub-prime mortgates, while it's only a fracion of the full picture. Like you said: the left hand distracts, while the right hand does it's tricks.

Wallace said...

"..only the knight with a pure heart could proceed into the land of evil and accomplish the most difficult quest.." anon.

It's more like an 'Impossible Dream'.

KM, thanks for a great article. Jesse James ( an American Bank Robber from the 19th Century ) said, "If you want to rob a bank on one end of town, light a fire on the other end of town..."

Wallace is checking his pockets