March 17, 2009

3/17: The AIG Backlash Continues

AIG's decision to hand out $165M in executive bonuses continues to provoke outrage in the liberal blogosphere. Lefty bloggers strongly dispute the company's claim that it was contractually obligated to pay these bonuses. A common argument in the liberal blogosphere is that the Detroit automakers had to renegotiate their employee contracts as a precondition for receiving government bailout funds, so why shouldn't AIG do the same? The netroots are also criticizing the Obama admin.'s handling of this episode, calling it "disappointing and frustrating." Chris Bowers has launched a petition urging Obama to replace Treasury Sec. Timothy Geithner and WH economics adviser Lawrence Summers on the grounds that they're either (a.) too close to Wall Street, or (b.) incompetent.

Meanwhile, conservative bloggers are echoing House Min. Leader John Boehner's argument that the real outrage is not the executive bonuses, but the bailouts themselves. John Hinderaker warns that "the flap over AIG bonuses is just one of many that we can expect to arise if we continue down the path of endless bailouts" and argues that bankruptcy is the only solution for insolvent firms like AIG.

What else is happening in the blogosphere?

• Conservative bloggers (Lopez, Liebau, Allahpundit) are criticizing WH Press Sec. Robert Gibbs for taking a swipe at ex-VP Dick Cheney in response to a reporter's question about Cheney's criticism of Obama. Liberal bloggers (Lewison, Kleefeld), on the other hand, think Gibbs' quip was quite justified.
• Markos Moulitsas thinks House Dems need to stop blocking an ethics investigation into Rep. Jack Murtha's (D-PA) ties to a defense research center. Naturally, conservative bloggers (Reynolds, Allahpundit) agree.

AIG: Some Contracts Are Made To Be Broken

AIG CEO Edward Liddy and various Obama officials have argued that AIG was contractually obligated to pay $165M in bonuses to executives in its Financial Products division. However, liberal bloggers don't find this explanation the least bit persuasive. First of all, they see an enormous double standard, since Congress required the Detroit automakers to renegotiate their employee contracts before providing them with bailout funds, whereas it didn't impose such a requirement on financial firms:

• Salon's Glenn Greenwald: "Apparently, the supreme sanctity of employment contracts applies only to some types of employees but not others."
• Firedoglake's Jane Hamsher: "Unlike the auto workers, nobody insisted that the AIG bankers who wrote half a trillion in credit default swaps take a pay cut as a condition of receiving TARP funds. But this was the deal with the auto makers."
• Sadly, No!'s Brad: "If Team Obamee is smart, they'll come out today and announce that they're forcing AIG to renegotiate its contracts with its employees, just as the autoworkers have had to renegotiate their contracts with GM, Ford and Chrysler. Because if they don't, they'll be giving the GOP the opening that they've been so desperately seeking."

Liberal bloggers also do not buy the argument that AIG had no legal means of breaking its employee contracts:

• Greenwald: "[T]he Obama administration's claim that nothing could be done about the AIG bonuses because AIG has solid, sacred contractual commitments to pay them is, for so many reasons, absurd on its face. As any lawyer knows, there are few things more common -- or easier -- than finding legal arguments that call into question the meaning and validity of contracts. Every day, commercial courts are filled with litigations between parties to seemingly clear-cut agreements. Particularly in circumstances as extreme as these, there are a litany of arguments and legal strategies that any lawyer would immediately recognize to bestow AIG with leverage either to be able to avoid these sleazy payments or force substantial concessions."
• TalkLeft's Big Tent Democrat: "I am not in agreement that [violating contracts] is quite as easy as Glenn [Greenwald] makes it out to be, but there is no doubt that building legal arguments, oftentimes borderline (and not so borderline) frivolous arguments, is often part of the process of negotiating an 'efficient breach' and the payment to be made by the party seeking to breach a contract."
• Firedoglake's Chris in Paris: "I've had it with the 'well, it's legal' crap with the AIG bonus payouts. Let's quit being cute about this and lower the boom. We all know AIG needs more money and that won't end any time soon. If they want to play the legal game, let's let the bastards go bankrupt [...M]aybe it's time we push AIG (and their friends) to the brink and see who wants to scream chicken."

Meanwhile, ex-MA Gov. Mitt Romney writes a blog post at National Review in which he agrees with liberal bloggers: "[T]he Obama administration was wrong to initially defend the bonuses as contractually obligated. In 1990, I was asked to assume the CEO position at the management consulting firm Bain & Co., then in acute financial distress. The need to restructure was paramount or else the company would fail, leaving 1,000 employees without a job. We renegotiated debt with bankers. We rewrote leases with landlords. We designed a whole new governing system. We also had to convince the founding partners to turn back profits they had already taken out of the company. Of course, we had no legal basis for making such a request, but without a shared sacrifice we couldn't keep the company alive. Generously, the founders returned the money, putting us on a path to stabilizing the firm and turning it over to new leadership. It's difficult to understand why the same lesson about shared sacrifice is lost on AIG's executive team and their government overseers."

AIG II: This Is Just A Symptom Of A Larger Illness

Most conservative bloggers are echoing Rep. Boehner's response to the AIG bonus debacle -- namely, that the real problem is not the bonuses, but the bailouts themselves:

• Right Wing News' John Hawkins: "It's easy to forget in this big back and forth over these bonuses that the taxpayers have pumped $173 billion dollars of our money into that company. We're worried about 160 million dollars? Okay, well what about the other 172 billion, 840 million dollars? [...] How about we take the money back and let AIG worry about AIG instead of us worrying about AIG? If we're not going to do that, how about we at least a set a date for an exit strategy? If Barack Obama can set a timeline to get us out of Iraq, why can't he set a timeline to get us out of AIG and these other corporations that have been bailed out with taxpayer money?"
• Power Line's Hinderaker: "A bailout is an ill-defined procedure in which no one's rights are clear, and political calculation counts for more than fairness or transparency. The flap over AIG bonuses is just one of many that we can expect to arise if we continue down the path of endless bailouts, rather than allowing insolvent companies and their creditors and investors to pay the price of that insolvency."
• Michelle Malkin: "Okay. We get it. Every politician in Washington wants to show They Care by bashing AIG. Which almost all of them agreed to bail out. Repeatedly. But never mind all that."
• Hot Air's Ed Morrissey: "The nasty little secret at the center of all the outrage is that the Obama administration could have stopped the bonuses by simply stopping the bailout. They could have forced AIG into bankruptcy, which would have voided the company's contractual compensation obligations. Instead, the Obama administration chose to inject liquidity into AIG, following the lead of the Bush administration, which had done the same thing. That kept AIG's doors open, and therefore kept its contractual obligations to its employees intact. Now Obama is outrageously outraged, as Allahpundit put it yesterday, but over what? A company complying with its contractual obligations?"

OBAMA: Too Little, Too Late?

Some liberal bloggers praised Obama after he declared that he had instructed Geithner to "pursue every single legal avenue to block these [AIG] bonuses and make the American taxpayers whole":

• AMERICAblog's John Aravosis: "Obama's pissed. He's going after AIG. Good."
• Firedoglake's emptywheel: "I'm glad that Obama did this (after seeing the outrage in Congress no doubt). I'm still astounded that Geithner needed to be told."

Other liberal bloggers were less impressed by Obama's rhetoric:

• MyDD's Todd Beeton: "While this tough talk from the President is welcome, the management of this news and the lack of the exertion of any authority over a company that the government essentially owns, has been disappointing and frustrating."
• TPM's Josh Marshall: "I guess [the Obama admin.'s] outrage is a little hard for me to swallow at this stage of the game. They just got schooled by AIG. Their initial outrage should have been about the bonuses, but their outrage now ought to be about AIG's fundamental misapprehension of what the post-bailout relationship between the company and Treasury is all about. AIG doesn't seem to get it -- and I'm not convinced yet that the Administration gets it either."
• Open Left's David Sirota: "Wall Street and Washington insiders like Larry Summers and Tim Geithner have spent the last few weeks telling America there's supposedly nothing that can be done to stop bailed out banks from using our taxpayer money to subsidize executive bonuses. [...] Now, President Obama has publicly contradicted them, signaling a major schism in the new administration. [...] It raises a very serious question: Who is in charge -- the president or the Washington and Wall Street insiders he put around himself?"

OBAMA II: The Netroots Are Done With Geithner And Summers

Liberal bloggers are stepping up their criticism of Summers and Geithner, whom they perceive as ineffectual and/or too closely aligned with Wall Street:

• Daily Kos' Moulitsas: "Obama appears rudderless in dealing with the bailout mess (AIG bonuses just the latest example) precisely because his economic team came from the same group that brought us this mess. A clean break couldn't come soon enough ... you know, change!"
• Atrios: "Timmeh [Geithner] and Larry [Summers] are just shoveling cash to their pals. It's so depressing."
• Open Left's Bowers: "It is becoming hard to avoid the conclusion that Geithner and Summers are working to protect the Wall Street executives at the financial institutions that are receiving TARP money. Its either that, or they are demonstrating a lot of incompetence. No matter which is the case, I have created a petition asking President Obama to replace Geithner and Summers on his economic team. We need people who are serious about changing TARP to be running TARP. Geithner and Summers ain't it."
• Hamsher: "American taxpayers now own 80% of AIG. They'll be paying back the government, and paying off the bonuses, with our money. There is no reason to be tiptoeing around these people. Are Geithner and Summers are just too aligned with Wall Street interests to do what needs to be done? The bottom line is -- nobody trusts them. Congress needs to use its subpoena power to get a hold of these AIG contracts and make their own analysis. "

GIBBS: Crossing The Line?

Conservative bloggers are criticizing Gibbs after he gave the following response to a reporter's question about Cheney's criticism of Obama:

QUESTION: ...How do you respond to those kind of allegations from the former vice president?
GIBBS: Well, I guess Rush Limbaugh was busy so they trotted out the next most popular member of the Republican cabal.

Conservative bloggers complain that Gibbs' response was inappropriate:

• NRO's Kathryn Jean Lopez: "At some point, this administration -- when it takes a break from talking about bipartisanship -- ought to consider that Barack Obama is Rush Limbaugh's and Dick Cheney's -- every American's -- president, too."
• Townhall's Carol Platt Liebau: "For heaven's sake. Bill Clinton and Jimmy Carter both broke the longstanding tradition of ex-presidents remaining silent about the policies of their predecessors. Yet I don't recall the George W. Bush White House attacking either of them. Nor did the Bush White House respond when Al Gore essentially accused President Bush of being a traitor."
• Hot Air's Allahpundit: "What happened here? I thought the new strategy was to put aside childish things like the Rush nonsense and start explaining to Americans why an almost $2 trillion dollar deficit is actually a good thing short-term. Maybe they saw the new CNN poll and figured there's a little magic left in their Limbaugh-bashing bag of tricks?"

GIBBS II: Way To Show Your True Colors, Chip!

Liberal bloggers, on the other hand, think Gibbs' swipe at Cheney was quite warranted, and they're criticizing journalists (such as CBS's Chip Reid and ABC's Rick Klein) who think otherwise:

• TPM's Eric Kleefeld: "Now let's consider the full context here. Dick Cheney did an interview with CNN in which he went out of his way to repeatedly attack the new White House, saying they were putting the country at risk of a new terror attack. But the question here is whether it's appropriate for the Obama Administration to fire back in response -- that it's Obama's people who are accused of showing insufficient respect to the office?"
• Balloon Juice's DougJ: "Cheney said that he'd 'pay to see' a debate between Rush and Obama and has repeatedly said that Obama has left the nation open to attack. Why don't we get a 'wow, he's talking about the sitting president' here? Dick Cheney still has higher status in the Village than Barack Obama. It's that simple."
• Daily Kos' Jew Lewison: "First, lighten up -- most people like Gibbs' sense of humor. You don't have to laugh at it, but don't be the sourpuss ruining it for everybody else! Second, if you're interested in decorum, start with Cheney, who spent an hour berating the President of the United States. After all, IOKIYAR is not a good thing."
• Oliver Willis: "Chip Reid: Rush Limbaugh's 'Butt Boy'? By Rush's own definition of the phrase, Chip Reid is doing the GOP's dirty work, last week by attacking Democrats, this week by speaking up for Dick Cheney."
• Atrios: "Wanker of the Day: Chip Reid."

MURTHA: Kos Has Had Enough

Moulitsas thinks House Dems need to stop blocking an ethics investigation into Rep. Murtha's ties to a defense research center: "House Democrats have been blocking an ethics investigation into this matter. That has to stop now. It was shit like this that helped Democrats lose control of the House in 1994, and Republicans in 2006. I've got no interest in giving Republicans easy ammunition. We have to show we are different than Republicans by refusing to tolerate any corruption in our ranks."

TAPPED's Tim Fernholz agrees: "I don't always agree with Kos, but he's right about this. The Democrats have got to stop hindering ethics investigations into their members if they want to retain the majority, and they definitely shouldn't let John Murtha continue to hold the chairmanship of the Defense Appropriations Subcommittee. The FBI is investigating Murtha, and if they find nothing, he can always have the chair back. But the more it seems that the FBI will bring back an indictment or damning evidence, the better it is for House Democrats to get ahead of the issue."

Conservative bloggers are praising Moulitsas for his stance:

• Glenn Reynolds: "Good for [Kos] -- he's certainly right. But the GOP Congress didn't listen to me; let's see if the Dems listen to him..."
• Allahpundit: "Give Kos credit, I guess, for supporting the GOP probe, although now that the story's reached this level of rancidity, throwing him under the bus is less a matter of conscience than of simple prudence."

THOUGHT OF THE DAY: Which Crises Are The Chrisisiest?

Ezra Klein disagrees with Noam Scheiber's claim that "our political system isn't ideally suited to dealing with financial and economic crises":

"Indeed, I think our political system is actually fairly well-designed for short-term crises. The problem is long-term crises like global warming or health costs. As Peter Orszag wrote back on his CBO blog, 'our political system doesn't deal well with gradual, long-term problems' that require 'trading off up-front costs in exchange for long-term benefits.' Few Congressmen want to raise taxes tomorrow to reduce carbon a decade from now. Lots of Congressmen don't want the economy to collapse if they have to run for reelection next year. For that reason, I'm much more confident in the system's ability to react agilely and seriously to the economic crisis than global warming. The economic crisis, after all, threatens their reelection. Incumbents often don't survive depressions. Conversely, I think conventional wisdom is that it's fixing global warming, rather than global warming itself, that poses the largest political threat to incumbent legislators."

LEST WE FORGET: A Vote Of No Confidence

Balloon Juice's John Cole:

"With all this talk about investor confidence and confidence in the market and confidence in the future, you know who doesn't have much confidence? Me.

I'm listening to the 'market analyst' on CNN, and she assured me the market is going to rally today because, and I'm paraphrasing, 'they were reassured by Ben Bernanke's appearance on 60 Minutes.'

Really. No wonder we are in this mess. That is how my ex-girlfriend picked restaurants -- 'Let's go here. I liked the look of their greeter.' If this is how the market really operates, I would not be surprised if this is just another short-term rally before the next plunge to the bottom."

Posted by Ian Faerstein at March 17, 2009 01:00 PM