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Distractions - or is that real life?

Wonderful weekend away from news sources.

I had the pleasure of helping to provide a background scene for an upcoming BBC show on Beowulf. Managed neither to recognise nor be obsequious to the celebs present, but I'm rotten at that sort of thing. I did manage to discuss the joys of Old English and show off my little woodworking projects.

And I arrived home in time to receive a phone call informing me that one of my sheep bone pipes will be appearing in the upcoming Robin Hood film. So could I make another one as identical as possible for them.
containing much that was in my blog and a great deal more....

AIG weekly recap - history, bonuses, Congress and outrage

March 20, 2009 by Steve McGough
Filed under Featured
& available here: http://radioviceonline.com/aig-weekly-recap-history-bonuses-congress-and-outrage/

I certainly hope that this will not turn into a weekly feature, but the amount of news, sound bites, and heated rhetoric pouring in from every direction resulted in Jim and myself electing to take a knee for the past 48 hours when it comes to posting AIG articles.
That said, we’re slowly putting our toes back into the water and I’ve put together a recap for you to absorb this weekend. That way, you can get all fired up about it again on Monday morning.
AIG Financial Products (AIGFP) is a small division of AIG born in the late 1980s. The idea was to use AIGs strong credit rating and get involved with derivative trading - usually the purview of financial institutions - and make profits that would be split between AIG-proper and AIGFP. Even though derivative trades normally took years to pay out, AIGFP received profits up-front, with AIG holding most of the risk.
In the late 1990s, AIGFP got involved with credit default swaps (CDSs) by insuring the corporate debt of financial institutions like JP Morgan. AIGFP was hedging, treating the CDS business as they do other insurance lines of business. They bet that very few customers - like JP Morgan - would default on their corporate debt.
After AIGFP got rolling, the Republican Congress enacted, and President Clinton signed, the Commodity Futures Modernization Act into law in 2000, attached t0 - get this - another one of those huge omnibus budget bills that nobody seems to read. Not designed to weaken regulation, the act made the system more complex and opened doors to other ways of trading derivatives like credit default swaps.1
Many of the credit default swaps AIGFP made deals on included collateralized debt obligations (CDOs) with a high percentage of sub-prime mortgages. Yes, those sub-prime mortgages.
In March of 2005, AIGFP employee count had grown to about 400, and the New York attorney general was investigating AIG-proper’s accounting practices. Hank Greenberg, who ran AIG since the late 1960s was out, and the credit rating of the corporate giant was downgraded.
With their credit rating lower, and lots of the CDOs tied up in sub-prime mortgages, AIGFP was about to get squeezed - really hard - from both sides.
In late 2005, AIGFP pretty much got out of the CDS business due to the risk, but they could not undo the billions of CDOs already on the books.
With their credit rating lowered and the mortgage crisis hitting hard in late 2007, AIGFP was getting phone calls from investment firms like Goldman Sachs demanding billions to cover losses from mortgage-backed securities the AIG CDSs had insured.
The dominoes started to fall, AIGs credit rating declined, more phone calls came. Even when the writing was on the wall, AIGFP CEO Joseph Cassano and AIG CEO Martin Sullivan put on a consolidated front - the investments were solid.
AIG continued to loose billions. Cassano was gone by April 2008 and Sullivan by late June. A new CEO - Robert Willumstad formerly CEO at Allstate - was hired in June, but was gone by September and replaced by Edward Liddy when the government injected $85 billion in cash - with billions more to follow - to help save AIG while taking 80 percent ownership of the company.
It’s important to note that Liddy was called out of retirement by the new owners - the federal government - to guide AIG out of the mess it was in. His salary is one dollar per year.
In October, Gerry Pasciucco was brought in to lead AIGFP and try to figure out the tangled mess of derivatives with the remaining employees. I include his photo (right) just so readers can wonder about the Che T-shirt.
Retention bonuses
In early December, members of Congress knew about AIGs retention bonus program that seems to have been effective on Sept. 22, just after Liddy came in as CEO. The SEC knew about the retention bonus program by late September, within days - if not just before - the first $85 billion bailout.
The following is from a letter (PDF, 2KB) written on Dec. 1 from Rep. Elijah Cummings (D-Md.), the full PDF is courtesy Salon.com and an article by Glenn Greenwald on March 19. It indicates that the day after Liddy came to AIG, the retention bonus program was put into place.
There is no way Liddy put this program into place in eight business hours, it was planned by former CEO Sullivan or Willumstad.
Why pay retention bonuses and who are the employees getting them? There is much confusion about who is getting the retention bonus cash, but my speculation is employees who were managing AIGFP into the crisis are gone, and employees who were brought in to extract AIG from almost $2.7 trillion in exposure were asked to stay and offered retention bonuses.
From Hinderaker at Power Line, with my emphasis…
All of these payments, as to AIG’s troubled financial products division, are retention bonuses, not performance bonuses.
The money is not going to anyone responsible for the implosion of AIG–those people, who were in the credit default swap area, are gone.
These retention bonuses were promised to AIG employees who are responsible for winding down the company’s financial products division. At the beginning, this division had a potential exposure of $2.7 trillion. Winding down AIG’s book of business in this area was a dead-end job, and there was a great likelihood that the people responsible for the work, who knew the most about the products involved, would take jobs elsewhere.
In late 2007 or early 2008, AIG made a deal with these employees: if they would stay at AIG until specified conditions were met, i.e., either certain business was wound down or a given period of time had elapsed, they would receive a specified retention bonus.
As to all of the employees involved, they satisfied the terms of the bonus by wrapping up a portfolio for which they were responsible and/or staying on the job until now. As a result of the efforts of this group, AIG’s financial products exposure is down from $2.7 trillion to $1.6 trillion.
If you were one of the 400 employees in a dead-end job trying to untangle a $2.7 trillion dollar problem would you stick around? Those employees - with knowledge - could possibly take off without the retention bonus program. My interpretation was if they stayed for specified periods of time they would get a certain retention bonus. The longer they stayed, the greater the bonus. Yes, some may have stay only for a certain period of time, but they stayed long enough - per contract - to get a retention bonus that was paid last week.
Now, if you were still at AIG and trying to work out the remaining $1.6 trillion problem, would you stick around as AIG corporate security advises you how to protect yourself? Maybe you’d feel OK about a United States senator suggesting you commit suicide? Screw the $1.6 trillion, I might walk.
But Edward Liddy isn’t walking. During the theatrical presentation on the Hill the past couple of days, Liddy was crucified by some members of Congress who refuse to acknowledge that Liddy was brought in to clean up the mess after the fact. Liddy is a man who knew what was coming, walked in and took it like a professional. I’m not sure if he will succeed in leading AIG out of this mess, but for darn sure he knows that Congress doesn’t care one whit about him.
What happens to that $1.6 trillion if - let’s say - half of the employees quit? Just wondering…
The theatrics of outrage
Outrage this week comes from every American and politician froma coast to coast, but Senator Chris Dodd (D-Conn. & Iowa) is getting the brunt of it. I actually feel bad for the guy since he’s so disliked everywhere. But I want Connecticut to have a glimmering shade of red in the future so I want him gone from office too.
Wyndeward recently commented…
Chris Dodd would appear to be being cast in the Lou Costello role — the hapless peanut-vendor who just doesn’t seem to “get” it, while Barack Obama, among others, takes the Bud Abbot role — the slick, smooth-talking manager who leads his hapless counter-part around the infield legislation, manipulating the senior senator from Connecticut to their own ends.
First Dodd said he knew nothing about the clause that protected the retention bonus program - big mistake - then he said he knew about it but it was not his idea and did not know why it was there. Then he said it was the Executive Branch and we finally learn that it was Treasury Secretary Timothy Geitner who demanded the change.
Now Dodd has suggested - and Congress is already working on - a bill to selectively tax the AIG employees who received retention bonuses.
The big picture
Goodness, we’re talking about $165 million in bonuses paid out to employees and AIG has gotten $170 billion from the federal government since September. We’re talking about less than one-tenth of one percent here for the retention bonuses. This group of employees seem to have successfully negotiated AIG out of $1.1 trillion in exposure in the past seven or eight months.
Is this a Congressional diversion to take the eye of the people - and the media - off the real problem?
When we started bailout-palooza we went in for a few billion, and we’re now in for a few trillion.
Washington Post article from Dec. 2009 - part 1, 2 and 3
Did AIG explicity lie about its bonuses? (Glenn Greenwald at Salon.com)
Allah at Hot Air providing an update on the AIG bonus tax bill in the Senate.
Ed at Hot Air with video - Geitner knew about AIG retention bonuses March 3
Malkin’s syndicated column looks beyond the bonus smokescreen
Michelle also has the breakdown of Republicans who voted for the targeted AIG bonus tax
Allah’s got video of the theatrical outrage designed to keep the heat off Congress - where it really belongs
1700-plus words… I don’t think I spelled anything wrong…
1 The act would again permit single stock futures contracts, allowing investors to treat stocks like commodities and resolving the disputes between the Commodities Futures Trading Commission (CFTC) and the Securities Exchange Commission (SEC) as to which regulating body would regulate the market.
As a side note, the act included language excluding energy commodity trading from regulation by the CFTC or the SEC. This allowed Enron to launch EnronOnline, their Web based commodity trading application that was the companies downfall. Sen. Phil Gramm (R-Texas) worked with Enron lobbyists to include the language in the omnibus bill.


Whence Intelligent Discourse?

Five Lessons from the AIG Bonus Blowup
By Jay Newton-Small / Washington
Wednesday, Mar. 25, 2009

Find this article at:

Last week, outlets reported that "the clock was ticking" for "embattled" Treasury Secretary Tim Geithner, with a few members of Congress openly calling for his ousting. His boss, President Barack Obama, was criticized for not engaging in the congressional furor over the $165 million in bonuses paid out to top executives at AIG — the insurance giant that has received more than $180 billion in federal money. This week Obama remains relatively untouched in the polls, and Geithner is basking in his best week of media coverage yet. How did their fortunes shift so suddenly? To some degree, they were helped by the fact that New York State Attorney General Andrew Cuomo announced Monday night that he has already managed to get AIG employees to give back $50 million of the bonuses. But much of the credit still has to go to the Obama Administration for its handling of the AIG fracas. With that in mind, here are five lessons of the latest Beltway blowup. (Read "The AIG Bonuses: Getting Mad and Getting Even.")

1. Stay one step ahead of the news
Geithner caused himself so much grief by not being on top of the bonuses, even though many on his staff and on Capitol Hill knew for months they were coming. Clearly, Geithner is a busy guy, what with managing a collapsing economy, trying to restart the credit system and dealing with China, Europe and other representatives of the global marketplace as the recession spreads. And he hasn't exactly had an easy time hiring staff, with three top appointees withdrawing their names from consideration in the past month. "I knew that we had a big mess on the compensation side to deal with, but I did not have — I should have had, but I did not have — detailed knowledge of these particular legally contracted retention bonuses for [AIG] until I was briefed by my staff on March 10," Geithner told a House Financial Services Committee hearing on the AIG bonuses Tuesday. "That's my responsibility." (See the top 10 unfortunate political one-liners.)

2. Once Congress has worked itself into a snit, there's no reasoning with them
The best recourse, which the Obama Administration successfully employed, is to treat the House and Senate like a 2-year-old having a temper tantrum. Utter a few reassuring words: "Today's vote rightly reflects the outrage that so many feel over the lavish bonuses AIG provided its employees at the expense of taxpayers," Obama said in a statement Thursday after the House passed a bill to tax back 90% of the bonuses — a bill he later effectively came out against. It may also be necessary to make sure they don't hurt themselves, as Obama did by slowing any momentum on the Senate bonus bill when he expressed doubts about the approach on 60 Minutes Sunday night. "You certainly don't want to use the tax code to punish people," Obama said.

3. When they've exhausted themselves, speak slowly and calmly about the bigger picture
It's key to remind folks, as New York Times columnist David Brooks put it, to focus their attention on the ravenous "tiger ... lunging at your neck" — i.e., the tanking world economy — instead of the "dust bunnies under the bed," the AIG bonuses. Geithner employed this tactic Tuesday: "AIG highlights very broad failures of our financial system," Geithner told the House panel Tuesday. "Our regulatory system was not equipped to prevent the buildup of dangerous levels of risks. Compensation practice rewarded short-term profits over long-term financial stability, overwhelming the checks and balances in the system." (See the best business deals of 2008.)

4. Distract them with a big, shiny new toy
If Geithner had testified before the same committee last week — as AIG CEO Edward Liddy did — he likely would've been eviscerated. Many of the "questions" for Liddy from both sides of the aisle turned into frustrated rants about how Geithner was botching his job and why the Treasury only just found out about the bonus payments. This week, though, Geithner was saved, in part, by the introduction Monday of the long-awaited details of his plan to get credit flowing again. Unlike his first stab at a rollout, this scheme was well received by the stock market, sending the Dow Jones industrial average up nearly 500 points, the fourth best day of trading since 1933 (though many economists still had doubts about it). At least half the questions Tuesday were forward-looking, centered on the particulars of the public/private partnership plan to get toxic assets off the books of banks.

5. Turn the negative into a positive
Overall approval ratings show that Obama has not personally suffered in the AIG uproar, though Geithner, Congress and Wall Street most certainly have. On Tuesday Geithner tried to parlay his boss's position of strength into a larger mandate to prevent another AIG Bonusgate from happening again. Suddenly, members found themselves contemplating giving more power to the guy whom many wanted fired last week. "It is clear that we're going to need to ask, and we will ask, for broader authority to deal with future AIGs," Geithner warned the committee. "Our responsibility is to recommend to Congress what's necessary to help get the economy back on track. And if that requires more resources, it will be our obligation to come to you and make the case for that."

These lessons will be particularly important as Obama this week tries to persuade skeptics in Congress to pass his $3.6 trillion budget and, as Geithner warned, the Administration is forced to go back to ask Congress for upwards of $750 billion to fund the bank-bailout plan. "We recognize it's going to be extraordinarily difficult, particularly in the wake of not just the events of the last two weeks, but the last nine months, frankly," Geithner conceded in the hearing.
Shine a bright light to see things clearly, and the recent public illumination has revealed a few things to me.

I don't live my life to impress others.

Things don't matter much to me, people do.

I am surrounded by beautiful amazing loving friends.

Thank you for making me laugh, giving me a place to run away to, keeping me too busy to worry, showing me the amazing things I didn't know I could do, letting me fall apart a bit, coming and playing at my parties... so much more.

Thank you all.

Fun in public

Wow, what a weekend!  So picked up on Friday by Carney: 

Who couldn't even be bothered to get my nick right.  But he seems to have achieved what he wanted - access to my better half.

Never mind that he did what Cuomo only threatened to do - publish our names.

Subsequently I've been called all sorts of interesting names by people with enough time on their hands to submit comments.

I really like the botox babe and welfare queen, shop-aholic descriptions of me - it's been keeping my friends catatonic with laughter.

Best bit is that it's really not that hard to find pics of me (even after we took down our website). But that would take thought and a couple of clicks.  Much easier to assume that I'm the bottle blonde executive trophy wife they expect.

Which brings me to the guy in the grey t-shirt and dark sweat pants who came to the door on Saturday claiming to be from the New York Post.

The person who opened the door and told you I wasn't home....

Yeah that's right.  Do a bit more research next time.

On Saturday I had just arrived home from a climbing session.  I never really got on very well with the executive wives because I do things. And I'd rather build instruments than have perfect fingernails.  I also made most of the dresses I needed for the black tie executive functions I've been required to attend.  It's ok, I usually talked to the 'help' and drank a lot to pass the time.  My favourite was the one in the Tudor building because they hired an "early music" group to add to the ambiance.  Turns out we'd done a gig in Leeds together.  Awesome.

Now I really must get back to work.  There's a film company that need some bone pipes for set decoration.


Thank you

very much.

AIG collapse: Focusing our anger

By Steve Petty/Look Again

I was working on my computer when I got the news flash from the New York Times. AIG would be paying out millions of dollars in bonuses to the upper echelons of the Financial Products unit, the very group that brought the house down last summer. I was stunned! I was angry!

The nasty thing about anger is that by its very nature it is irrational. We move from one anger to the next with little question about the facts, as if righteous indignation were its own justification. At the same time, we ignore things of even greater importance, choosing to abide with them because they are known.

Indulge me in a fable. Imagine a frontier town; it has a bank and a church, school house and teacher, barber/surgeon, hotel and restaurant, a couple bars, a blacksmith, cobbler, miller, tailor, undertaker, and butcher. Everyone gets along peacefully. They have no need of a sheriff. Everyone lives a happy, content life with no outside interferences.

One day, into this idyllic hypothetical scene, there comes a smart thief, he only steals enough to get by, a couple chickens at first. He hits the bank for a hundred dollars. Because he is a really good shot, no one challenges him. People know it is wrong, but he isn’t taking too much, so they learn to live with it. Besides, he is kind of a colorful character, he spends well in the shops, and the town is prospering, so they ignore him and good times abound.

Then one summer the rains don’t come, the crops are poor, the cattle are skinny, money gets tight. Now when he steals the town people are really upset so they send for a nearby gunslinger to come in and rescue the town. When he arrives, they pin a badge on him give him $100 and say, “You are the sheriff. Please restore peace to our town.” The Sheriff goes out into the town and meets the thief, who says: “How much are they paying you?” The Sheriff says $100, so the thief says, “Here’s $200, now go away.” The Sheriff pockets his $300, takes off the badge, hands it to the thief and rides out of town.

The town people are horrified, the thief is amused, and nothing changes. Then a terrible winter comes upon the town, cattle are dying, silos are empty, people are going hungry and cold, while the thief is holed up in the hotel eating like a king.

Finally, the bank runs out of money, and there is nothing left for the thief to steal. The town’s people decide to hire another gunslinger. They offer him $1,000, but they promise to pay only after the thief is dead. This time the thief has no money to pay him off, so the gunslinger shoots the thief in the middle of the street. The town’s people then rush the gunslinger, overpower him, hang him and refuse to pay his widow.

Which part of the story makes you angry?

This is the story of American International Group, AIG. Everything about it makes us angry. But these three things especially:

1. There is little doubt that Credit Default Swaps (CDS) were legal, and also highly unethical. The town’s people should have stopped it right away. Hank Greenberg, former head of AIG, should never have allowed the creation of the Financial Products Division, but his greed, ambition, and lust for power, knew no bounds. He did the legal and unethical eagerly. We can be angry at Hank.

2. Former FDIC Chairman Alan Greenspan felt that “no one would be that greedy” (his words) so there was little reason for Congress to regulate this new derivatives market. Congress, ever vigilant to find an opportunity to do nothing, accepted the campaign contributions of the well healed, and did their very best nothing. They put down the badge and left town. We can be angry at Greenspan and at Congress.

3. Joe Cassano continued to run AIG-FP, even when it was obvious that the whole enterprise was a house of cards. Under Cassano, bonuses amounted to about 20 percent of the total profit earned by the FP unit, as much as $616 million a year. We can be angry with Cassano and his group.

But, all of those individuals are out of the picture. Greenberg was forced out. Greenspan retired. Cassano was forced out, too. The villains are dead.

After AIG collapsed in humiliation, no one wanted to work for AIG-FP. Yet the government in taking over the company last summer, needed knowledgeable people to come in and unravel the toxic CDSs, sell off some parts of AIG, and try to recoup some of the taxpayers’ money. The FDIC and Treasury went out and hired the best people they could get, often paying salaries of $1 a year, and promising bonus money down the line for their service.

Edward Liddy, AIG’s new CEO, was castigated by the press and Congress last week. But Liddy was hired in September 2008 and had nothing to do with the problems he is trying to fix. Gerry Pasciucco, who was hired by Liddy in November 2008 to wrap up FP, turn out the lights and lock the doors, also is part of the solution. It was in the township’s (taxpayers’) best interest that the final gunslinger was fast enough to kill the thief.

But it makes no sense at all to be angry at the people we (the taxpayers) hired to fix the problems. We may not like the bill the plumber hands us when we are standing knee deep in sewage, but telling him he will have to finish the job for free, when the job is only half finished seems terribly unfair not to mention unwise.

What seems fair to you? What makes you the most angry?

The Rev. Steve Petty is pastor of First United Methodist Church. He welcomes your e-mail at spetty.record@verizon.net.

March 27, 2009


The Cost of Conceding

Need a Real Sponsor here
MARCH 26, 2009

Give Back That Bonus!

Oh, and by the way, you still owe taxes on it.

So, you still work for AIG, having decided not to desert a sinking ship. For this you received a retention bonus, but the politicians have decided to make a scapegoat out of you. Last week the House passed a bill that would tax your bonus at 90%--which, since you live in high-tax New York City, means you'd end up paying more than 100% when you add up all the taxes. In McCarthyite fashion, your state attorney general, Andrew Cuomo, says he has a list of names, as the Washington Post reports:

New York Attorney General Andrew M. Cuomo had subpoenaed AIG for a list of Financial Products employees and how much money each had received.
Now, the firm's chief operating officer, Gerry Pasciucco, had set a 5 p.m. Monday deadline for staffers to indicate whether they planned to return their retention payments, and if so, what percentage. His e-mail included what appeared to be a tacit ultimatum from Cuomo.
"We have received assurances from Attorney General Cuomo that no names will be released by his office before he completes a security review which is expected to take at least a week," Pasciucco wrote."To the extent that we meet certain participation targets, it is not expected that the names would be released at all."

In light of all this, you do the right thing and give the bonus back.


That's the upshot of blogger Richard Belzer's analysis of the tax implications of giving back a bonus.

The good news is that the House bonus-confiscation bill specifically excludes "any amount if the employee irrevocably waives the employee's entitlement to such payment, or the employee returns such payment to the employer, before the close of the taxable year in which such payment is due," provided that the employee does not receive "any benefit from the employer in connection with the waiver or return of such payment."

That means you won't be taxed at 90% on the money you held only briefly. But you will be taxed. As Belzer explains:

All compensation, including the retention bonuses, received by employees for services is included in the recipient's gross income, and in determining his adjusted gross income (AGI). If a bonus recipient gives it back, does the bonus vanish from the employee's income?
No. Because the recipient was entitled to receive the amount of the bonus, and actually received it, it cannot be excluded from gross income or AGI.

This is true under existing law, irrespective of whether the House-passed bill is ever enacted. Belzer notes a couple of ways in which you may be able to reduce the tax on your relinquished bonus:

A recipient could donate all or a portion of the bonus to charity. The amount donated would be deductible on the employee's 2009 return to the extent it does not exceed 50% of his AGI (as increased by the amount of the bonus). Any excess may be carried over and deducted in the succeeding 5 years, always subject to the 50% limit.

This may work if the law doesn't change, but the House bonus-confiscation bill makes no provision for deductions, so if it becomes law, a bonus donated to charity would still be taxable at 90%. Giving the money to charity instead of returning it to AIG would also seem to constitute a refusal of Cuomo's offer you can't refuse.

Belzer continues:

Another option may be to deduct the amount of the bonus returned to the employer as an unreimbursed business expense, incurred to avoid litigation or public disparagement that could harm the employee's current or future employability. Understandably, the instructions for IRS Form 2106 do not address a situation like this, and it is entirely possible that it has never previously occurred.
Assuming that the IRS were to agree, then the employee would be able to deduct the portion of the bonus exceeding 2% of AGI (again, as increased by the amount of the bonus). The proportion of the bonus that would be deductible depends on the relative size of the bonus to total AGI. No matter the ratio, the employee's tax bill would go up in proportion to the size of the bonus even though he did not keep it.

But wait. Because you're "rich," you don't get to deduct all your deductible income:

Regardless of whether a bonus recipient donates the money to charity, or claims a deduction for the return of the bonus, if his AGI in 2009 exceeds $166,800 (if single, or married and filing a joint return), his itemized deductions (other than for medical expenses, investment interest, and certain losses) are reduced by the lesser of (1) 3% of the difference between his AGI and $166,800, or (2) 80% of his otherwise allowable itemized deductions. For many bonus recipients, this will mean that a significant portion of the bonus is not deductible.

And it's even worse than that. Belzer does not note that unreimbursed business expenses, while deductible from the ordinary income tax, are subject to the alternative minimum tax. Thus you will pay at least 26%, and probably 28%, of the bonus you no longer have in AMT.

Add it all up, and the cost of returning your bonus is somewhere north of 130%. Suddenly that 90% rate doesn't sound so bad.


"Follow the money. Not the noise."

Look who's getting the goodies

Angry about the AIG bonuses? Here's what should really disturb you.

By Allan Sloan, senior editor at large
Last Updated: March 26, 2009: 9:58 AM ET

NEW YORK (Fortune) -- To understand what Washington is actually up to, you have to watch what it does, not what it says. That's especially true when it comes to Washington's role in the ongoing bailout of Wall Street, part of its "let's hope this works" plan to revive the U.S. economy.

While Washington is setting the populist mob on the individual American International Group (AIG, Fortune 500) employees who got a total of $165 million in bonuses this year, far larger amounts of money are being quietly handed to Wall Street through programs that generate barely a peep of protest.

Let me count the ways - or at least some of them.

We'll start with the proposed public-private investment program for toxic assets. It depends heavily on a massive subsidy from the Federal Deposit Insurance Corp., which would insure the borrowings of the program's investors. The borrowings would be up to six-sevenths of the total invested; the Treasury and Wall Street (which I define as the nation's big financial institutions and money managers) would each put up half of the initial seventh.

I'm glad that taxpayers stand to get half the profits and fees because the Treasury's in the game. But the Treasury and the FDIC (whose guarantees for such huge sums are credible only because they're backed by the Treasury) run much more risk than the private investors, whose loss is limited to their investment.

The subsidy, by my back-of-the-envelope math, could be worth $18 billion a year to the Wall Street investors. That assumes that the program raises $75 billion from Wall Street and that the guarantees lower interest costs by 4% on the Street's $450 billion share of the borrowings. That's more than 100 times the AIG bonuses.

We also have the Federal Reserve Board's programs to revive the economy by offering cheap money under a dozen plans invented since the credit crunch began in earnest in the summer of 2007. They total around $1.1 trillion by my count, so a three-point saving - a very conservative number - is more than $30 billion a year.

Meanwhile, the Fed's decision to buy Treasury paper and assorted U.S. mortgage-backed securities isn't helping troubled home-owners. Rather, these purchases, designed to lower mortgage rates, benefit well-off homeowners, who can refinance at new, cheaper rates. It also boosts the market value of the tons of Treasuries and mortgage-backed securities held by Wall Street. Marginal or distressed homeowners don't qualify for cheap mortgages because lenders have toughened their credit standards.

I'm not saying, by the way, that any of these programs are necessarily bad. We have to get out of this horrible financial mess somehow, and the feds are throwing everything they have against the wall to see what sticks. But if you want to yell about taxpayer money subsidizing Wall Street, you should look at those programs, not waste time with AIG bonuses, which are symbolically important but economically meaningless.

Yes, AIG has received vast amounts of bailout money from the government. But that doesn't mean that every bonus-receiving employee is some sort of troll or incompetent who deserves to be threatened with a 90% tax or with having his address made public so that people can picket his house.

I won't even mention that this uproar in the name of preserving taxpayer money has cost taxpayers bigtime. We own 79.9% of AIG's stock and have committed $180 billion in loans and investments to it. This uproar has eviscerated our investment by destroying AIG's reputation and shredding the value of its businesses. Good luck on getting anything like our $180 billion back.

Finally, if you want a real bonus outrage, consider this: The operation getting the biggest taxpayer subsidy of all - the federal government - pays bonuses to its employees too. This year it plans to hand out about $1.6 billion of bonuses, despite running more than $1 trillion in the red.

So there you have it. While the public is focused on AIG small fry, Wall Street's big fish are getting the bulk of Washington's goodies. As always, follow the money. Not the noise.

Allan Sloan invites you to post your questions to him about Wall Street, dealmaking and the state of the financial crisis in a Fortune Talkback forum. He'll choose several questions to answer in a future online installment of his column, The Deal.

First Published: March 26, 2009: 4:03 AM ET


As this is getting wider circulation than originally anticipated...

For the record.

We own no houses, we rent.
Our car is 12 years old as is our TV.
We've not bought a house here because we could not afford to.
What we lost were involuntary investments in the company.
What we have is anything we kept in an ordinary savings account.

I home educate our youngest as he has Aspergers and the schools here could not provide what he needed.
I research and build early instruments and my idea of a hot designer can be found here

If it were only about money and only about me, I wouldn't care. But it was the children's education fund and 15 years of my husband's work. Even then I could say tough luck, it happens, and get over it, just like the folks at Enron & Lehman

But they were not vilified and threatened. That's the only reason I spoke up.

Read it again. I don't ask for sympathy, nor do I use exclamation points.

With gratitude to those who read it carefully the first time and responded thoughtfully.

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Once upon a time my husband, working as a contractor from Digital, helped move the offices of FP from Manhattan to Westport, CT. When he came home to Vermont he was glowing with satisfaction of a difficult job well done and the pleasure of having worked with so many committed and intelligent people. I said "Wow, I wonder what it would take to work for them?"

I got one answer then.

When the CEO left with most of the IT department, the contractors who had worked on the move were the heroes who came to the rescue. And my husband was hired.

Thus began 15 years of being on call every hour of every day of every week of every year.

Never getting to read the boys a bedtime story without the phone ringing from Hong Kong or Tokyo or London or Paris because the mail server was down or someone couldn't log on to their office machine from home or....

Eating at his desk with a phone to his ear - at dinner - at home.

And that was in Connecticut where we had bought a modest home and were able to save most of the 'bonus'.

Then we were asked to go to London. My only questions were When and How!

Little did I know he was moving over and would use my husband as his chief geek and whipping boy for the next 10 years.

My husband was held accountable by Cassano for other people's performance but never given direct authority over them, screamed at in public (as were most employees who had to encounter Joe) if any fault was found. Systems must never fail or there must be an instant correction and explanation and preventative measures put in place for the future - or else. That someone else beyond his control had made the error was never allowed as an explanation.

Some how my husband managed to get most of the others in the department to work with him.

Fortunately these challenges were a joy. But the lack of authority or promotion or respect were not. Especially when one person was hired to work in London who set out to undermine what trust there was between Cassano and my husband. This cost us most of our year's 'bonus' and lowered the level of rises for the next 3 years.

Joe Cassano is a bully. I wanted very much to like the person who made our amazing London adventure possible but it was not going to happen.

Sent to London on a 2 to 3 year commitment, half a house left in storage in CT, we have been here 'indefinitely' for 11 years pushing 12. We were unable to press for anything more than the ex-pat package we were given at the beginning and lost even housing support after the first 5 years.Our housing costs rose to 5 times what we paid in Connecticut. The salary did not.

Raises were only given in the 'bonus'. So imagine having to pay 5 times your mortgage or rent on your current salary with the promise of the rest of your compensation to come once a year, in December. How do you leave that job?

Do you leave in December and disrupt your children's education? Well, not without a very good reason.
Do you leave at the end of the school year and essentially throw away 6 months of under compensated work? Not likely.

- Oh and, a percentage of your paycheck you will be forced to 're-invest' in the company for 5 years before you will see it.

It is a very pretty velvet lined cage with a tyrant holding the key.

It was ok while the company was ok. I was familiar enough with the way the deals worked and the internal as well as external oversight to be willing to stay in the cage in order to try to save enough to be able to send the boys to university some day. - like the ordinary tax paying citizens we happen to be.

FP had ridden through some heavy weather. While rogue traders took down other banks, I knew of the peer review of the trades and the transparency that would keep that from happening at FP.

When one rogue did get in and began setting up false deals with fake companies it was my husband who pulled together all the evidence that was used to remove him and keep him from ever getting another trading job.

I had many reasons to trust that, though I was having to do most of the utility parenting and keep the world ticking over for the family while he spent all hours working, we would come out of the long hard road with money for the boys education and a retirement fund that would allow my husband to have time to do the things he loves.

Then Cassano betrayed us. The CDO business was his. The other businesses were profitable and still are. When the executive in charge of risk challenged him he was told to shut up. When it blew up Joe walked around the office, looking at people who had worked loyally for him (no choice there if you wanted to stay) and took home $1,000,000 per month, knowing that those around him were going to lose their savings and more. We have.

Ok, it was a huge blow but the government stepped in and my husband still had a job for now. But the description had changed.

Since January 2008 he has been working with Congressional auditors and investigators and the FBI to compile evidence on the deals and dealings of the people responsible, most particularly Joe Cassano.

Then the government and AIG parent lied to us. My husband had been asked to, and signed an agreement to stay for the next 2 years. In October we were told that all the prior compensation we had been forced to 're-invest' in AIG was gone and would never ever be paid to us EVER no matter whether the company ever made any more money ever again.

It was a body blow. It was what we had worked 15 years for. It was our children's education, our retirement, the down payment on a house (we own nothing). Can you feel it? That's the draining away of hope.

But one bone was thrown - we were assured that the 'retention payments' (remember we're still on a 15 year old salary that's never risen so this is actually the bulk of our annual compensation)
would be paid.

Assured by Cuomo, the Federal Government and Liddy, the CEO of AIG. So he went back to work for another 6 months.

They paid us part in December - I suppose I should have smelled a rat, but that's that 20/20 hindsight thing. It was nice, we'd planned on no Christmas as we didn't expect the money until March. So the boys got to pick out something they really wanted and we had a nice Christmas.

The year before they had moved our payment from December to March. Yes, we had budgeted for 12 months and it suddenly turned into 15. Could you do that? Go 3 months without getting paid. Amazingly we managed.

We waited worried that the March payment might not come, despite the assurances. We counted the days until the transfer was to be made, checking the FX rate, wondering what the final number would be that we would live on and try to rebuild the children's education fund with - retirement fund will have to wait.

And then our government betrayed us, painted us as thieves and threw our co-workers in Connecticut to the mob. No one ever approached anyone at FP to re-negotiate those contracts and everyone currently screaming about them knew what they contained in October if not in January.

And now Cuomo says that the security of our families can be purchased by returning the compensation we had been promised with his re-assurance in October. He is no better than a highwayman waiving a gun "Your money or your lives."

Now I know what it would take for my husband to work AIGFP.


Little populist outrage at latest AIG hearing
The Associated Press
Tuesday, March 24, 2009; 5:30 PM

WASHINGTON -- Treasury Secretary Timothy Geithner made a House Republican go "hmmm."

This was news, considering Geithner's audience on Tuesday: the venerable, and lately venomous, House Financial Services Committee, for which no explanation, professed sorrow or death threat report from a witness last week was good enough.

No, Rep. Frank Lucas, R-Okla., actually let Geithner answer a question about how much risk public investors might take on under the Obama administration's public-private partnership to relieve non-banks, like the demonized AIG, of toxic assets.

Very little risk, Geithner said. Potentially, an investor's dollar might earn six times that.

"Hmmm," Lucas replied thoughtfully. "Hmmm."

No scoffing? No populist rejoinder? No call for Geithner's head?

Was this the same committee that six days earlier beat the tar out of Edward Liddy, American International Group Inc. chief executive who came out of retirement for a salary of $1 to steer the failed insurance giant back to solvency, only to be told that AIG stood for "Arrogance. Incompetence. Greed?"

The same panel whose hearing spurred Republican calls for Geithner's resignation, for failing to talk Liddy into canceling the bonuses?

It was. Chaired by Rep. Barney Frank, D-Mass., the committee this week pivoted from calling for people's heads to probing what's in Geithner's, and that of the man wearing an identical tie, Federal Reserve Chairman Ben Bernanke. In many cases, panel members asked about actual economic policy.

One Democrat who had been part of the pitchfork brigade during Liddy's hearing suggested the panel should apologize to Liddy and the employees of AIG.

"Some of us are learning that we've hurt a lot of otherwise innocent and decent people that just fulfilled their contractual obligations in ... this massive company having nothing to do with the real problem that took place in the financial products division" of AIG, said Rep. Gary Ackerman, D-N.Y.

The cooler heads in the committee room reflected the breezier attitude toward AIG generally, from House leaders on down. Obama has signaled opposition to a House-passed bill that would levy a 90 percent tax on the roughly $170 million in bonuses AIG paid to some of its employees out of federal bailout funds.

And that's OK, in light of the news that AIG's senior bonus-receiving executives seem likely to return the money, House Majority Leader Steny Hoyer, D-Md., said.

"Apparently, the House bill had its effect _ they're giving it back," Hoyer told reporters at his weekly press availability.

This newfound tameness and earnest approach seemed fitting, since Frank's committee has a big job ahead that tracks Geithner's and Bernanke's.

It's composed of what are supposed to be the House's 70 leading experts on the housing and financial services sectors. Well before the 2010 elections, when every one of them will be on the ballot, the committee will have considered enough economic rescue legislation to own the results.

So most spent their time Tuesday asking substantive questions, a marked change from a week earlier. And a newly-confident Geithner defended the administration's plans, his new staff and the intentions of many like Liddy who have been demonized in the financial sector.

Rep. Maxine Waters, D-Calif., wanted to know whether the big investment firm, Goldman Sachs, was exerting too much influence over Geithner's plans.

"You hear a lot about the dissatisfaction about the bonuses, et cetera, but underneath all of this is a conversation about the linkages and the connections of the small group of Wall Street types that are making decisions," Waters told Geithner. "That's what's causing a lot of the distrust."

He did not dispute that and acknowledged that Goldman Sachs has connections to Liddy and some of Geithner's new staff. But he stuck up for Liddy and for AIG employees, calling the public treatment of them unfair.

He faced little challenge from other questions.

"What in the Constitution could you point to to give authority to the treasury for the extraordinary actions that have been taken?" asked Michele Bachmann, R-Minn.

The treasury, the Federal Reserve and the FDIC were acting under powers granted "by this body, the Congress," Geithner said, looking puzzled.

"In the Constitution, what could you point to?" Bachmann pressed.

"Under the laws of the land, of course," Geithner replied.

Apparently satisfied, Bachmann moved on.

Rep. Lynn Jenkins, R-Kan., wanted to know how much more public money AIG would need. Bernanke said that depended on how well the economy does.

Rep. Peter King, R-N.Y., asked Geithner how the government should go about preventing companies that receive bailout money from handing out contracted bonuses, without undermining legal contracts generally?

Geithner said there can be limits placed on contracts for bonuses among firms receiving taxpayer rescue money.

There wasn't a pitchfork in sight.

Ackerman was contrite about the committee's treatment of Liddy and AIG employees generally.

"We probably owe them an apology and maybe even more than that," he said. "We owe them some kind of a remedy to the damage that it looks like we've been engaging in."

© 2009 The Associated Press

Yes, yes they do.