“We Can’t Break Contracts!” = Total Bullshit
Politicians from both sides of the aisle are claiming that they can’t invalidate AIG’s staggering $165 million in bonuses because This is America And We Honor Contracts. On Sunday, Larry Summers, Obama’s director of National Economic Council, said that while the bonuses were outrageous, they represented contracts that could not be broken. Of course, Glenn Greenwald points out that the government had absolutely no qualms with breaking the United Autoworkers’ contracts with the Big Three during their bailout.
And Summers’ claims are false because This is America and We Break Contracts All The Time. In fact, corporations and the government are super talented at wiggling out of contracts that prove too strenuous to honor. That’s why there are so many lawyers trolling around Washington – they’re there precisely for this occasion when lawmakers need to get out of an unsavory contract.
Lawrence Cunningham, a professor at George Washington University Law School, spells out all the easy ways the government and/or AIG could get out of paying those bonuses:
1. If employees did not meet performance goals, AIG doesn’t have to pay them bonuses. Considering AIG was one of the worst offenders when it came to selling bundled subprime mortgages, it should be fairly easy to prove that AIG employees don’t deserve to be paid $165 million in bonuses.
2. If you were fired (or should have been fired,) AIG doesn’t have to pay you. Again, you breached your contract, so you’re shit out of luck.
3. If an employee was not absolutely candid about their shady practices, their bonuses can be withheld. Everyone at AIG knew their subprime mortgage dealings were shady, but that doesn’t excuse individual players from responsibility.
4. It’s impractical for AIG to shell out cash loaned to them by taxpayers. AIG does have the option to say, “Sorry, we can’t afford to do this right now.”
5. Sweetheart deals are illegal. Cronyism hurts not only shareholders, but in this case, taxpayers.
And there are many more ways for AIG and the government to deny these bonuses. It’s a lack of will preventing that from happening. But the excuse that AIG and the government are somehow “obligated” to pay $165 million to AIG employees is complete and utter bullshit.
Update: Kevin, a reader, makes the excellent point that the We Don’t Break Contracts logic would mean California’s gay marriages should be made legal again. After all, This is America. We Honor Contracts, and what contract is more sacred than the vow of marriage?
The Sanctity of AIG Contracts
Glenn Greenwald has written an excellent piece about the AIG bonuses, and the contracts guaranteeing those bonuses that are apparently too sacred and holy to break. Of course, our government stood idly by and let the Big Three shatter all kinds of contracts with the UAW, and nary a word was uttered about the holiness of those contracts. In America, the only contracts that matter are the ones belonging to billionaire CEOs.
An excerpt from Greenwald’s article:
Apparently, the supreme sanctity of employment contracts applies only to some types of employees but not others. Either way, the 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.
Read the rest here.
Kucinich Hands Kashkari His Own Ass
Background on Kashkari, the most irronically named man in Washington and the evilest-looking Treasury employee since, well…Henry Paulson:
The government’s $700 billion bailout plan is in the hands of this man. Neel Kashkari, a relatively green assistant secretary in the Treasury department, will be responsible for the government’s purchasing of billions of dollars of bad assets from banks and other financial agencies. His career has been a short one.
Personal Life
• Kashkari grew up in Stow, Ohio, an Akron suburb. As a high school student, he was a fan of heavy metal bands like AC/DC, whose lyrics dot his high school yearbook. He is 35 years old.
• He comes from a family of scientists. Father Chaman has a doctorate in engineering, and won a Presidential award for his work in getting water to African villages. Kashkari’s mother, Sheila, is a retired pathologist, and his sister Meera, specializes in infectious diseases.
• Accordingly, Kashkari also studied science, getting his masters in engineering from the University of Illinois, Urbana-Champaign
• He and his wife Minal live in Silver Spring, Maryland, with their dog Winslow.
Career
• Neel’s first job was as an aerospace engineer at TRW, where he worked on technology for NASA projects such as the Webb Space Telescope, which is due to replace the Hubble.
• He decided to change careers and go to Wharton Business School at the University of Pennsylvania. After getting his MBA, Kashkari joined Goldman Sachs in San Francisco, specializing in IT security.
• He followed former Goldman Sachs CEO Henry Paulson to the Treasury Department, where he was hired as a senior adviser in 2006. In short order, he was assigned to work on the department’s response to the housing crisis, during which time he grew close to Paulson.
Notable Quotes
“Neel Kashkari is not going to be in Washington much longer if there’s a change in administrations. And that’ll cause some kind of turbulence.”—Madeline Brand, of National Public Radio, on the fact that Kashkari might have to leave after only a few months on the job, Oct. 6, 2008
“When he does anything, if you ask him to make an electric car or ask him to plan an outing to Niagara Falls, he is so meticulous.”—Chaman Kashkari, father, USA Today, October 6, 2008
“I’m a free-market Republican.”—Kashkari, at an American Enterprise Institute conference, Sept. 19, 2008
Oh really? And yet he couldn’t wait for big daddy government to swoop in and stuff his pockets with taxpayer cash when the free market failed. In a rare display of testicles, Congress absolutely tore into Kashkari, but Dennis Kucinich positively MVPed it. Now, if only they would back-up the tough talk with some serious oversight.
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