Kedrosky links to what he characterizes (aptly) as "the AIG blackmail note"--nine pages of reasons why we just gotta be their bitch (link). There's a grain of corn in this dunghill, but it beggars all imagination to consider how much of it is almost totally spurious.
They open with a little Mrs.-Thistlebottom lecture "inter-linkages and interdependencies...which could potentially bankrupt or bring down the entire system or market" (Oh, thank you, professor! Now I understand!) They go on to parade a seemingly endless list of horribles that will befall us if they do not get their way. They do make some perfunctory efforts to say that they could peel off some of the viable assets (HEY THAT'S MY WIFE'S PENSION FUND!). But they make it clear that the whole enterprise is fraught with perils that we (or at least, those of us without eight-figure bonuses) cannot possibly expect to comprehend.
There are a few odd and I suspect inadvertent concessions to reality along the way--like when they refer to their "business model" as "a sprawl"--did they clear that one with public relations? and they declare that it has "many inherent risks that are correlated with one another"--as if not noticing that it was they who created such a shambolic juggernaut to begin with ("I've got it, chief! Let's build a business with many inherent risks that are correlated with one another!) And they acknowledge, right there on page two, that it all began with "an over-reliance on US residential-backed mortgage securities" (Bingo!)
They also say that "In the fall of 2008, the Federal Reserve and the Department of Treasury determined that the systemic risk of a failure of AIG was so great that they should provide support by injecting liquidity and equity capital into AIG." You know, I wonder. Okay, I grant that the government did take an equity stake in AIG. But I think a more accurate sentence would have read: "In the fall of 2008, the people in power decided that it had to do everything it could to salvage the wreckage of this ill-conceived folly, but minimal disturbance to the interests of powerful stakeholders whose wrath they did not wish to incur."
The phrase "running dogs of the capitalist system" comes to mind. Boy if we don't have a 100-percent bonus tax by Friday, I'm going to join the guys who are heating up the tar pots.
4 comments:
The problem is, the vast majority of the recipients of the bonuses (which I believe have already been dispersed) are UK nationals working in AIG's London office, where the financial products business was centered. So they are beyond the reach of the IRS. Convenient, ne c'est-pas?
I am convinced that these payments are in no way bonuses for performance, but rather a form of extortion by the AIG derivatives experts against their all-too-acquiescent company and, down the line, against us; which they are able to pull off because, to borrow a Hitchcockism, they know too much. The full range of malfeasance here probably beggars even our worst imaginings so far.
What do you think the relevant facts would be for a garden-variety fraudulent-transfer action brought by the US government? I think the govt is still a creditor, it seems at least possible that AIG was insolvent at some relevant time of contracting, and the issue of reasonably equivalent value seems colorable at least.
I seem to recall that UK courts will not enforce default judgments from US courts where the deft asserts lack of personal jurisdiction. So this suit might have to be brought in the UK.
Assuming UK law would be applied, Sec. 423 of the U.K.'s Insolvency Act appears relevant, and 423(3) seems to require intent to place assets beyond creditors' risk, so it appears that a fraudulent conveyance claim may be tougher to make out in England.
Given the strong interest of the US government you might be able to get a UK court to apply to US law. I guess there are some new EU conflicts principles that might be relevant to this.
On my own blog, I am currently advocating a cure for all this: guillotines at the mall.
Well, also on the streets of downtown Chicago, but that has to do with my ire over a particular bank that seized the CDs of a belly-up bank, insisting on depositors' obligations but reneging on their own to pay a particular interest rate.
Put them all in the damn tumbrils, I say!
Yours very crankily,
The New York Crank
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