CT Blue

One of the drawbacks of being an evening blogger is that by the time you get a chance to put in your two cents on the morning news, most of what can be said has already been said.

Nonetheless, let me add my mite to the chorus of outrage directed at Andrew Ross Sorkin of the New York Times, who tells us all to chill out and let those AIGers get their bonuses.

Why? Two very good reasons, according to Sorkin.

First there’s the “sanctity of contracts”. Since Sorkin has presumably, like the rest of us mere mortals, not read the contracts, this is an odd argument. But it’s particularly ironic since contracts are de-sanctified amazingly fast if one of the parties happens to be a union. Just ask the workers at GM, who are not at all to blame for the bad decisions that got their companies into their current predicament.

Second, we need the guys who got us into this mess to stick around and get us out:

A.I.G. employees concocted complex derivatives that then wormed their way through the global financial system. If they leave — the buzz on Wall Street is that some have, and more are ready to — they might simply turn around and trade against A.I.G.’s book. Why not? They know how bad it is. They built it.

So as unpalatable as it seems, taxpayers need to keep some of these brainiacs in their seats, if only to prevent them from turning against the company. In the end, we may actually be better off if they can figure out how to unwind these tricky investments.

Even if you take that argument on its face, its absurd, as Barney Frank has pointed out. But the more telling argument against it was made over at firedoglake:

So what Sorkin is saying is that we should just admit, in a very public way, that we have no ability to regulate the system. That if someone commits fraud and theft on such a massive scale, there’s nothing we can do but pay everyone off or they will use their knowledge to steal even more money. He’s saying that there is no authority, no viable regulation, no legal structure that can right this mess. All we can do is keep writing checks, pay off the blackmailers and hope that if we let them continue to get rich they won’t make matters worse.

Meanwhile, the other thieves and crooks, acting while attention is focused elsewhere, are finding newer and creative ways to preserve their right to loot from the public fisc. Again from firedoglake:

Anticipating restrictions on bonuses, officials at Citigroup Inc and Morgan Stanley are exploring ways to sidestep tough new federal caps on compensation, the Wall Street Journal said.

Executives at these banks and other financial institutions that received government aid are discussing increasing base salaries for some executives and other top-producing employees, the paper said, citing people familiar with the situation

And then there’s this from this morning’s Times:

Goldman Sachs got its bailout. Now some of its bankers, those aristocrats of Wall Street, apparently need a bit of a bailout too.

Goldman, which accepted billions of taxpayer dollars last fall and, as learned Sunday, was also a big beneficiary of the rescue of the American International Group, is offering to lend money to more than 1,000 employees who have been squeezed by the financial crisis. The loans, offered via e-mail last week, could range from a few thousand dollars to hundreds of thousands.

…

Some Goldman employees got rich before the markets collapsed, allowing them to invest several million dollars in the funds, often on a leveraged basis. Only three years ago, Goldman paid more than 50 employees more than $20 million apiece. In 2007, its chief executive, Lloyd C. Blankfein, collected one of the biggest bonuses in corporate history — nearly $70 million.

But one former Goldman partner estimated that a quarter of the bank’s roughly 100 partners are now worth $5 million or less because of losses on their company stock and other investments. Last year, the bank’s seven top executives received no bonuses. One of them, Jon A. Winkelried, resigned from his position as co-president a few weeks ago, saying he wanted to spend more time with his family. His estate on Nantucket is on the market.

These poor guys, some of them down to their last $5 million. My heart would be bleeding if it hadn’t practically stopped when I looked at my 401K statement. When they got their huge bonuses they couldn’t just buy stock at face value. They had to buy even more by leveraging their money, basically buying in to the scam they were perpetrating on everyone else. Now they are being bailed out with our money in the form of “loans”. I’m not buying that these are loans, or at least I’m not buying that they will stay loans. When the heat is off, when no one is looking, Goldman will forgive the debts, and presto-chango, you have a back door bonus.

Among other things, it is becoming clear that Obama made a huge mistake in picking Geithner (along with Larry Summers) for Treasury. He is entirely too comfortable with the mindset that got us into this mess and he is totally unaffected and non-infected by the righteous rage that is sweeping the country. Certainly, in retrospect, it would have been better if he had been the one torpedoed by tax problems, rather than Tom Daschle. I’m not one to excuse the leader by blaming the subordinates. That’s a Republican dodge. This is Obama’s mistake too, for shying away from exerting government control over these zombie institutions. We own 79% of this company and exert 0% effective control. That’s idiotic.