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« Federal Reserve to Buy Treasuries fires Gold Prices! | Main | Gold Prices Awaiting Technical Signal »
Tuesday
Mar172009

President Obama and those AIG Bonuses!

New York Times logo 17mar09


President Obama is determined to try and stop the ailing insurance giant American International Group from paying out hundreds of millions of dollars in bonuses to executives, as the administration scrambled to avert a populist backlash against banks and Wall Street that could complicate Mr. Obama’s economic recovery agenda, according to The New York Times

Of course it makes good print for the news hounds but as we see it they have missed the point. Firstly the government owns approximately 70% of AIG so they must have known that this payment was coming up, so why all the fuss. If they didn't know then the governmental representation on the AIG's board must be asleep! Either way it does not instill confidence, does it.

Similar things are going on in the UK where the government pumps tax payers cash in to a bank and then makes a statement to the effect that it will stimulate economic activity in the UK. The bank then invests in Russia or some far flung place that looks like a good bet. Thats the banks job to make the best possible investment but you would have thought that the UK government would have established just what the banks intentions were before parting with the cash.

The more the governments take action the bigger the mess appears to become. If you scan Youtube.com you can see people like Peter Schiff tearing his hair out at the governments actions, Jim Rogers has pulled the pin and relocated to Singapore and Max Keiser just takes the P on his TV programme the Oracle.

If it wasn't so serious it would be funny!







Got a comment – then let us have it!

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Reader Comments (9)

“Heidi is the proprietor of a bar in Berlin. In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later.

She keeps track of the drinks consumed on a ledger (thereby granting the customers loans). Word gets around and as a result increasing numbers of customers flood into Heidi's bar. Taking advantage of her customers' freedom from immediate payment constraints, Heidi increases her prices for wine and beer, the most-consumed beverages.

Her sales volume increases massively. A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and increases Heidi's borrowing limit. He sees no reason for undue concern since he has the debts of the alcoholics as collateral. At the bank's corporate headquarters, expert bankers transform these customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. These securities are then traded on markets worldwide. No one really understands what these abbreviations mean and how the securities are guaranteed. Nevertheless, as their prices continuously climb, the securities become top- selling items.

One day, although the prices are still climbing, a risk manager of the bank, (subsequently of course fired due to his negativity), decides that slowly the time has come to demand payment of the debts incurred by the drinkers at Heidi's bar. However they cannot pay back the debts. Heidi cannot fulfill her loan obligations and claims bankruptcy.

DRINKBOND and ALKBOND drop in price by 95 %. PUKEBOND performs better, stabilizing in price after dropping by 80 %. The suppliers of Heidi's bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation. Her wine supplier claims bankruptcy; her beer supplier is taken over by a competitor. The bank is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties.

The funds required for this purpose are obtained by a tax levied on the non- drinkers.”

March 17, 2009 | Unregistered CommenterAnon

>Firstly the government owns approximately 70% of AIG so they must have known that this payment was coming up

In May 2008 AIG disclosed the payments in SEC postings.

In Nov 2008 an AIG committee that included member of the US federal reserve reviewed the bonuses.

In Jan 2009 the bonuses were noted in the press.

The only reason it is a problem now for congress is because voters are mad and have made it know to congress. Congress did not care to do their job when they approved the bail outs to AIG, but now they want to look like they are competent and AIG is doing a back room deal. The truth is that our congress is not competent or honest and their only care is the next election. Had they wanted to stop the payments they could have required in advance (as a condition of the bail out) that AIG renegotiate the bonuses, in much the same way that they required GM to renegotiate union contracts in order to receive bailout money.

March 18, 2009 | Unregistered CommenterBC

I fully agree with both comments by Anon & BC. It is obvious to any thinking person that our politicians & bankers are stealing the citizens blind & the media is complicit in the scheme. What a mess !!!

March 18, 2009 | Unregistered CommenterRich M

Well, at least our politician's saber-raddleing LOOKS good though, eh?
The schmucks...

March 18, 2009 | Unregistered CommenterSnakeman

Nationalization

"We are spending more money than we have ever spent before, and it does not work. After eight years we have just as much unemployment as when we started, and an enormous debt to boot". - U.S. Treasury Secretary Henry Morgenthau...May 1939

Here are which should seem familiar.

March 18, 2009 | Unregistered CommenterChuck

Senate Minority Leader Mitch McConnell (R-Ky.) has come up with a vivid new way to express his contention that the nation is spending way too much money it doesn’t have.

McConnell includes the tweaks in his opening remarks on the Senate floor on the 51st day that President Obama has been in office.

“In just 50 days, Congress has voted to spend about $1.2 trillion between the Stimulus and the Omnibus,” McConnell says. “To put that in perspective, that’s about $24 billion a day, or about $1 billion an hour—most of it borrowed. There’s simply no question: government spending has spun out of control.”

The math: 50 days times 24 hours equals 1,200 hours. 1,200 times 1 billion equals 1.2 trillion (a thousand billions is a trillion).

http://www.politico.com/news/stories/0309/19884.html

March 18, 2009 | Unregistered CommenterBC

Excellent article---Congress needs to be shit canned!!!!

March 18, 2009 | Unregistered CommenterJim Duffy

GORDON Brown last night dismissed calls to surrender his £123,000 a year pension when he is forced to stop being prime minister next June.

Mr Brown was defiant in the face of City outrage despite the UK government's annual operating loss of £100bn, rising to £1.5 trillion when the write-down of its banking assets is taken into account.

The prime minister said: "I've been building up this pension since I became an MP, it's all completely legal and now you want to take it away because I've been catastrophically bad at my job and you're looking for a scapegoat. What gives?"

He added: "Yes I've been in charge of financial regulation for 12 years, yes I encouraged the housing bubble, and yes I p*ssed billions up the wall giving pointless jobs to Lab our voters, but I fail to see what any of this has to do with me being incredibly well off."

Brown's £3m pension pot is expected to cast the spotlight on the extravagant retirement packages of other failed politicians including Alistair Darling's inexplicable £1.7m and the £1.5m awarded to John Prescott for being a national scandal for 10 years.

Meanwhile Margaret Beckett has a fund worth £1.7m, something called 'Hilary Armstrong' has £1.2m and Tessa Jowell has £1m even though no-one has the faintest idea what any of them actually did.

Critics insist Mr Brown has a moral duty to hand back his pension fund as he will inevitably receive a multi-million pound advance for two volumes of eye-gougingly tedious memoirs which will end up in the bargain bucket at WH Smith within a fortnight.

March 18, 2009 | Unregistered CommenterM

If the government had divided up all that stimulus among
the citizens instead of the Bankers, the money would be
circulating and probably have been used to pay off debt .
Instead it is tied up in the very institutions that greedily caused this mess .
You don't get much stimulus from $600 but $60,000 would have gotten alot of people out of debt and may be stopped many of the forclosures .
Free Trade is Great but nothing is free somebody has to pay. When the main thing we export is jobs somthing has to give.

March 19, 2009 | Unregistered Commenterjoe c

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