For Rangel, a Complicated Relationship With A.I.G.
New York Times
By DAVID KOCIENIEWSKI
March 20, 2009
As Congress moved this week to levy a 90 percent tax on the $165 million in bonuses paid to executives of the American International Group, one of the more conspicuous expressions of outrage came from Representative Charles B. Rangel.
Charles B. Rangel once tried to woo A.I.G. to donate $10 million to a school to be named in his honor.
As public anger over the bonuses surged, Mr. Rangel on Wednesday introduced a bill that would seize most of the bonuses paid to A.I.G., which received billions in taxpayer bailout funds.
“Dreams have been shattered and homes have been lost because a small group of executives were motivated by greed rather than preserving a system that America and the world depend upon,” said Mr. Rangel, a Harlem Democrat and chairman of the powerful House Ways and Means Committee.
After the measure passed the House overwhelmingly the next day, Mr. Rangel congratulated his colleagues on their bold action, saying that A.I.G. executives “have gotten away with murder in what they’ve done to our communities.”
But Mr. Rangel’s indignation was a reversal of his position earlier in the week, when he opposed heavily taxing the bonuses and warned his colleagues to restrain themselves from allowing the public outcry to warp their judgment.
What is more, the congressman’s relationship with A.I.G. is a complicated one; as recently as last year, he was trying to woo the company to donate $10 million to a school to be named in his honor. And while A.I.G. officials mulled the request, Mr. Rangel supported a provision in a tax bill that saved the company millions of dollars.
For decades, Mr. Rangel has been a close friend of Maurice R. Greenberg, the chief executive of A.I.G. until 2005, and until recently one of the company’s biggest shareholders. Mr. Greenberg has sponsored fund-raisers on Mr. Rangel’s behalf, and in 2007, a foundation controlled by Mr. Greenberg gave $5 million to the school, the Charles B. Rangel Center for Public Service at the City College of New York.
City College records show that the effort by Mr. Rangel and college officials to persuade A.I.G. to donate to the school went on for two years. In a 2007 e-mail message obtained by The New York Times, City College’s director of development, Rachelle Butler, wrote that Mr. Rangel suggested in early 2006 that fund-raisers concentrate on A.I.G. for a contribution. Two years later — on April 21, 2008 — Mr. Rangel attended a meeting at A.I.G. to ask the company to support the school, without specifically discussing a donation.
A month later, as A.I.G. was still considering a financial contribution, the top executive who had attended the fund-raising meeting wrote a letter to Mr. Rangel, urging him to support a provision of a tax bill that would save A.I.G. millions of dollars a year.
Mr. Rangel dropped his opposition to the tax measure, which eventually became law. But he has said that City College’s request for the $10 million, and the letter from A.I.G., played no part in his decision. A colleague in the New York delegation, Representative Joseph Crowley, said that he was responsible for persuading Mr. Rangel to support the tax change. A.I.G. has never donated to the Rangel Center.
But with Mr. Rangel’s personal finances and fund-raising for City College now the subject of an ethics investigation, some Republicans questioned whether Mr. Rangel’s public protestations about the bonuses were designed to eclipse his connections to the company over the years.
Representative John Carter, a Republican of Texas, described Mr. Rangel, who had received $110,000 in campaign donations from A.I.G, as one of several Democrats who had “exchanged legislative favors” with the company...
Saturday, March 21, 2009
Friday, March 20, 2009
New York state official Indicted in Alleged $30 Million 'Pay-to-Play' Scheme
New York Democrats Indicted in Alleged $30 Million 'Pay-to-Play' Scheme
A Democratic consultant and state official were indicted Thursday for allegedly receiving $30 million in kickbacks, as New York's attorney general accused them of using the state's pension fund investments as a "piggy bank."
FOXNews.com
Friday, March 20, 2009
Democratic political consultant Hank Morris and a top lieutenant to disgraced former New York Comptroller Alan Hevesi were indicted Thursday in a scheme to trade lucrative investments in the state pension fund for more than $30 million in kickbacks, gifts and campaign contributions, the New York Post reported.
The 123-count indictment against Morris and former state pension-fund manager David Loglisci stems from a two-year pay-to-play probe by state Attorney General Andrew Cuomo.
"Morris used the fund as his own piggy bank," Cuomo said in announcing the bombshell indictment. "The indictment charges crimes that go beyond the grossest manifestations of pay-to-play."
The indictment charges that Morris used his access to the Comptroller's Office to direct more than $4 billion from the pension fund to private equity firms, venture-capital funds and businesses in exchange for bogus "placement fees" and other payoffs.
In exchange for signing off on the dirty deals, the indictment charges Loglisci received hundreds of thousands of dollars in payoffs, including some $290,000 to help his brother film and distribute a poorly received comedy, "Chooch," about two Italian-Americans.
"You couldn't make this up," Cuomo said.
A Democratic consultant and state official were indicted Thursday for allegedly receiving $30 million in kickbacks, as New York's attorney general accused them of using the state's pension fund investments as a "piggy bank."
FOXNews.com
Friday, March 20, 2009
Democratic political consultant Hank Morris and a top lieutenant to disgraced former New York Comptroller Alan Hevesi were indicted Thursday in a scheme to trade lucrative investments in the state pension fund for more than $30 million in kickbacks, gifts and campaign contributions, the New York Post reported.
The 123-count indictment against Morris and former state pension-fund manager David Loglisci stems from a two-year pay-to-play probe by state Attorney General Andrew Cuomo.
"Morris used the fund as his own piggy bank," Cuomo said in announcing the bombshell indictment. "The indictment charges crimes that go beyond the grossest manifestations of pay-to-play."
The indictment charges that Morris used his access to the Comptroller's Office to direct more than $4 billion from the pension fund to private equity firms, venture-capital funds and businesses in exchange for bogus "placement fees" and other payoffs.
In exchange for signing off on the dirty deals, the indictment charges Loglisci received hundreds of thousands of dollars in payoffs, including some $290,000 to help his brother film and distribute a poorly received comedy, "Chooch," about two Italian-Americans.
"You couldn't make this up," Cuomo said.
Thursday, March 19, 2009
Election fraud in Kentucky
Ky. officials accused of election-rigging scheme
By JOE BIESK
AP
March 19, 2009
FRANKFORT, Ky. (AP) — A judge, school superintendent and county clerk in southeastern Kentucky have been indicted on charges they extorted money from political candidates so they could bribe voters in a scheme to rig several elections, authorities said Thursday.
The U.S. Attorney's office said charges include racketeering, bribery, extortion and voter fraud against Clay County Circuit Court Judge Russell Cletus Maricle, school superintendent Douglas C. Adams, Clay County Clerk Freddy Thompson and others.
The investigation began after voting irregularities were reported during the 2006 elections. A statement from the federal prosecutor's office claims the officials tried to rig federal, state and local elections in 2002, 2004 and 2006 in Clay County, about 170 miles southeast of Louisville.
Prosecutors claim a group led by Maricle and Adams, who were essentially "political bosses," recruited a slate of candidates to run for certain offices and then tried to rig elections in their favor. They also tried to recruit members of the local elections board so they might avoid an investigation.
It was unclear how much money was involved in the alleged scheme, and exactly how long it may have been going on.
According to the indictment, Democratic election commissioner Charles Wayne Jones and election officer William E. Stivers helped extort money from candidates. In some cases, candidates were apparently asked to pool money so votes could be bought.
Thompson, the county clerk, allegedly provided money for election officers to buy votes. Thompson also told election officers how to change votes at the machines, according to the indictment...
By JOE BIESK
AP
March 19, 2009
FRANKFORT, Ky. (AP) — A judge, school superintendent and county clerk in southeastern Kentucky have been indicted on charges they extorted money from political candidates so they could bribe voters in a scheme to rig several elections, authorities said Thursday.
The U.S. Attorney's office said charges include racketeering, bribery, extortion and voter fraud against Clay County Circuit Court Judge Russell Cletus Maricle, school superintendent Douglas C. Adams, Clay County Clerk Freddy Thompson and others.
The investigation began after voting irregularities were reported during the 2006 elections. A statement from the federal prosecutor's office claims the officials tried to rig federal, state and local elections in 2002, 2004 and 2006 in Clay County, about 170 miles southeast of Louisville.
Prosecutors claim a group led by Maricle and Adams, who were essentially "political bosses," recruited a slate of candidates to run for certain offices and then tried to rig elections in their favor. They also tried to recruit members of the local elections board so they might avoid an investigation.
It was unclear how much money was involved in the alleged scheme, and exactly how long it may have been going on.
According to the indictment, Democratic election commissioner Charles Wayne Jones and election officer William E. Stivers helped extort money from candidates. In some cases, candidates were apparently asked to pool money so votes could be bought.
Thompson, the county clerk, allegedly provided money for election officers to buy votes. Thompson also told election officers how to change votes at the machines, according to the indictment...
Monday, March 16, 2009
AIG Discloses $75 Billion in Bailout Payments
Insurer Reveals List of Taxpayer Funds Doled Out to Settle Debts With Companies, Municipalities
By Brady Dennis
Washington Post
March 16, 2009
In the six months since the government's bailout of insurance giant American International Group, a rescue that has become increasingly costly and contentious, one question has loomed above all others: Where did the money go?
The answer became a little clearer yesterday when AIG unexpectedly released the names of dozens of trading partners it has paid using billions in taxpayer dollars. The disclosure, which the company said was made after consulting the Federal Reserve, revealed that AIG paid more than $75 billion in the final months of 2008 to numerous domestic and foreign banks, as well as to various U.S. municipalities.
The funds were paid from the government's initial $85 billion emergency loan in September and included major firms such as Goldman Sachs, Societe Generale, Deutsche Bank, Merrill Lynch, Morgan Stanley, Bank of America and Barclays.
ad_icon
The payments were made between Sept. 16 -- the date that government assistance began -- and Dec. 31.
More than $34 billion of the money went to trading partners of AIG Financial Products, the small subsidiary whose exotic derivatives brought AIG to the edge of collapse. In recent years, the firm had written massive numbers of credit-default swaps, insurance-like contracts that other companies bought as protection against the default of mortgage-backed securities. When the housing boom began to go bust, banks that had purchased the swaps demanded collateral from AIG, burying the company under a tidal wave of debt. Federal officials, wanting to keep the company from failing because they feared it was too intertwined with the global economy, stepped in to help.
In the last months of 2008, AIG Financial Products paid more than $22 billion in taxpayer money to satisfy debts caused by its swap contracts. Another $12 billion went to pay off municipalities in dozens of states for whom the firm had created complex investment agreements.
Nearly $44 billion went to pay debts that AIG incurred under its "securities lending" program, according to the company. In those instances, various companies borrowed securities from AIG in exchange for cash. In turn, AIG invested much of the money in mortgage-backed assets that plummeted in value, leaving the insurer on the hook for billions.
Yesterday's disclosure was an about-face for AIG and the Fed. In recent weeks, public outrage and pressure from lawmakers demanding to know who benefited from the AIG bailout has reached a crescendo. But until yesterday, AIG executives and federal officials had repeatedly refused to release such details, arguing that trading partners had a right to privacy and that any disclosure could harm their businesses.
"These are extraordinary times," AIG spokeswoman Christina Pretto said yesterday in explaining the company's decision. "And we and our partners at the Fed thought this was right thing to do."
Fed spokeswoman Michelle Smith agreed, saying, "We commend the company for finding a balance between its concerns with confidentiality and the concerns of the public interest."
AIG's disclosure came on the same day that President Obama's top economic adviser berated the firm for its plans to dole out hundreds of millions of dollars in employee bonuses and retention pay, despite posting a record $62 billion loss in the fourth quarter of 2008.
"There are a lot of terrible things that have happened in the last 18 months, but what's happened at AIG is the most outrageous," Lawrence H. Summers, chairman of the White House National Economic Council, said yesterday during an appearance on ABC's "This Week." "What that company did, the way it was not regulated, the way no one was watching, what's proved necessary, it is outrageous."
Summers was but one in a chorus of administration officials and lawmakers who took to the airwaves yesterday to excoriate AIG, whose rescue package from the federal government stands at an estimated $170 billion.
"This is an example of people at the commanding heights of the economy misbehaving, abusing the system," said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee.
Their anger stemmed in large part from AIG's decision to move forward with retention bonuses for executives at the troubled Financial Products unit. In early 2008, before the government rescue, the firm's employees had been promised more than $400 million in retention pay this year and next. Lawyers for the government and AIG have agreed that most of those payments, however unsavory, are legally binding.
"We are a country of laws. There are contracts," Summers said yesterday. "The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system."
In addition, AIG is in the process of paying $121 million in previously scheduled corporate bonuses and hundreds of millions more in retention payments to more than 6,000 employees throughout the company's global insurance units.
The bonuses and other payments have infuriated the public and government officials. After a contentious call on Wednesday between Treasury Secretary Timothy F. Geithner and AIG chairman Edward M. Liddy, first reported by The Washington Post, Liddy agreed to alter the terms of some executive bonuses and make future payments contingent on the company's progress with its restructuring and paying back taxpayers.
But in a letter that followed, Liddy said he had "grave concerns" about the impact on the firm's ability to retain talented staff "if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury."
Speaking on CBS's "60 Minutes" last night, Fed Chairman Ben S. Bernanke once again expressed frustration with the bad will that AIG has wrought.
"I understand why the American people are angry," he said. "It's absolutely unfair that taxpayer dollars are going to prop up a company that made these terrible bets, that was operating out of the sight of regulators, but which we have no choice but to stabilize, or else risk enormous impact, not just in the financial system, but on the whole U.S. economy."
Staff writer Neil Irwin contributed to this report.
AIG's Counterparties (PDF)
Special Report: AIG
By Brady Dennis
Washington Post
March 16, 2009
In the six months since the government's bailout of insurance giant American International Group, a rescue that has become increasingly costly and contentious, one question has loomed above all others: Where did the money go?
The answer became a little clearer yesterday when AIG unexpectedly released the names of dozens of trading partners it has paid using billions in taxpayer dollars. The disclosure, which the company said was made after consulting the Federal Reserve, revealed that AIG paid more than $75 billion in the final months of 2008 to numerous domestic and foreign banks, as well as to various U.S. municipalities.
The funds were paid from the government's initial $85 billion emergency loan in September and included major firms such as Goldman Sachs, Societe Generale, Deutsche Bank, Merrill Lynch, Morgan Stanley, Bank of America and Barclays.
ad_icon
The payments were made between Sept. 16 -- the date that government assistance began -- and Dec. 31.
More than $34 billion of the money went to trading partners of AIG Financial Products, the small subsidiary whose exotic derivatives brought AIG to the edge of collapse. In recent years, the firm had written massive numbers of credit-default swaps, insurance-like contracts that other companies bought as protection against the default of mortgage-backed securities. When the housing boom began to go bust, banks that had purchased the swaps demanded collateral from AIG, burying the company under a tidal wave of debt. Federal officials, wanting to keep the company from failing because they feared it was too intertwined with the global economy, stepped in to help.
In the last months of 2008, AIG Financial Products paid more than $22 billion in taxpayer money to satisfy debts caused by its swap contracts. Another $12 billion went to pay off municipalities in dozens of states for whom the firm had created complex investment agreements.
Nearly $44 billion went to pay debts that AIG incurred under its "securities lending" program, according to the company. In those instances, various companies borrowed securities from AIG in exchange for cash. In turn, AIG invested much of the money in mortgage-backed assets that plummeted in value, leaving the insurer on the hook for billions.
Yesterday's disclosure was an about-face for AIG and the Fed. In recent weeks, public outrage and pressure from lawmakers demanding to know who benefited from the AIG bailout has reached a crescendo. But until yesterday, AIG executives and federal officials had repeatedly refused to release such details, arguing that trading partners had a right to privacy and that any disclosure could harm their businesses.
"These are extraordinary times," AIG spokeswoman Christina Pretto said yesterday in explaining the company's decision. "And we and our partners at the Fed thought this was right thing to do."
Fed spokeswoman Michelle Smith agreed, saying, "We commend the company for finding a balance between its concerns with confidentiality and the concerns of the public interest."
AIG's disclosure came on the same day that President Obama's top economic adviser berated the firm for its plans to dole out hundreds of millions of dollars in employee bonuses and retention pay, despite posting a record $62 billion loss in the fourth quarter of 2008.
"There are a lot of terrible things that have happened in the last 18 months, but what's happened at AIG is the most outrageous," Lawrence H. Summers, chairman of the White House National Economic Council, said yesterday during an appearance on ABC's "This Week." "What that company did, the way it was not regulated, the way no one was watching, what's proved necessary, it is outrageous."
Summers was but one in a chorus of administration officials and lawmakers who took to the airwaves yesterday to excoriate AIG, whose rescue package from the federal government stands at an estimated $170 billion.
"This is an example of people at the commanding heights of the economy misbehaving, abusing the system," said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee.
Their anger stemmed in large part from AIG's decision to move forward with retention bonuses for executives at the troubled Financial Products unit. In early 2008, before the government rescue, the firm's employees had been promised more than $400 million in retention pay this year and next. Lawyers for the government and AIG have agreed that most of those payments, however unsavory, are legally binding.
"We are a country of laws. There are contracts," Summers said yesterday. "The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system."
In addition, AIG is in the process of paying $121 million in previously scheduled corporate bonuses and hundreds of millions more in retention payments to more than 6,000 employees throughout the company's global insurance units.
The bonuses and other payments have infuriated the public and government officials. After a contentious call on Wednesday between Treasury Secretary Timothy F. Geithner and AIG chairman Edward M. Liddy, first reported by The Washington Post, Liddy agreed to alter the terms of some executive bonuses and make future payments contingent on the company's progress with its restructuring and paying back taxpayers.
But in a letter that followed, Liddy said he had "grave concerns" about the impact on the firm's ability to retain talented staff "if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury."
Speaking on CBS's "60 Minutes" last night, Fed Chairman Ben S. Bernanke once again expressed frustration with the bad will that AIG has wrought.
"I understand why the American people are angry," he said. "It's absolutely unfair that taxpayer dollars are going to prop up a company that made these terrible bets, that was operating out of the sight of regulators, but which we have no choice but to stabilize, or else risk enormous impact, not just in the financial system, but on the whole U.S. economy."
Staff writer Neil Irwin contributed to this report.
AIG's Counterparties (PDF)
Special Report: AIG
AIG gets $173 billion, sends $93 to Wall St. and Europe; $165 billion in bonuses
AIG massive payments to banks stoke bailout rage
Mon Mar 16, 2009
By John O'Callaghan and Lilla Zuill
Reuters
Goldman Sachs Group Inc and a parade of European banks were the major beneficiaries of $93 billion in payments from AIG -- more than half of the U.S. taxpayer money spent to rescue the massive insurer.
The revelation on Sunday by American International Group Inc was another potential public relations nightmare, coming on the same weekend that the Obama administration expressed outrage over AIG's plan to pay massive bonuses to the people in the very division that destroyed the company by issuing billions of dollars in derivatives insuring risky assets.
The size of the payments also illustrates how seriously a potential collapse of AIG was viewed by the regulatory authorities. U.S. Federal Reserve Chairman Ben Bernanke said in an interview with CBS news magazine "60 Minutes" that the failure of AIG would have brought down the financial system.
AIG, an embattled insurance giant that has received federal bailouts totaling $173 billion and is now paying $165 million in employee bonuses, is at the heart of a global financial crisis that President Barack Obama is trying to address with plans for trillions of dollars in spending.
As part of those efforts, Obama will announce steps on Monday to make it easier for small business owners to borrow money, officials said.
But the revelations that billions of U.S. taxpayer dollars were funneled through AIG to Goldman Sachs -- one of Wall Street's most politically connected firms -- and to European banks including Deutsche Bank, France's Societe Generale and the UK's Barclays could stoke further outrage at the entire U.S. bank bailout.
FINANCIAL SYSTEM AT STAKE?
The fact that billions of dollars given to prop up giant insurer AIG were then transferred to European banks and Wall Street investment houses could raise new doubts about whether the rescue was really economically necessary...
Mon Mar 16, 2009
By John O'Callaghan and Lilla Zuill
Reuters
Goldman Sachs Group Inc and a parade of European banks were the major beneficiaries of $93 billion in payments from AIG -- more than half of the U.S. taxpayer money spent to rescue the massive insurer.
The revelation on Sunday by American International Group Inc was another potential public relations nightmare, coming on the same weekend that the Obama administration expressed outrage over AIG's plan to pay massive bonuses to the people in the very division that destroyed the company by issuing billions of dollars in derivatives insuring risky assets.
The size of the payments also illustrates how seriously a potential collapse of AIG was viewed by the regulatory authorities. U.S. Federal Reserve Chairman Ben Bernanke said in an interview with CBS news magazine "60 Minutes" that the failure of AIG would have brought down the financial system.
AIG, an embattled insurance giant that has received federal bailouts totaling $173 billion and is now paying $165 million in employee bonuses, is at the heart of a global financial crisis that President Barack Obama is trying to address with plans for trillions of dollars in spending.
As part of those efforts, Obama will announce steps on Monday to make it easier for small business owners to borrow money, officials said.
But the revelations that billions of U.S. taxpayer dollars were funneled through AIG to Goldman Sachs -- one of Wall Street's most politically connected firms -- and to European banks including Deutsche Bank, France's Societe Generale and the UK's Barclays could stoke further outrage at the entire U.S. bank bailout.
FINANCIAL SYSTEM AT STAKE?
The fact that billions of dollars given to prop up giant insurer AIG were then transferred to European banks and Wall Street investment houses could raise new doubts about whether the rescue was really economically necessary...
Sunday, March 15, 2009
Is the CEO cartel the enemy of capitalism?
Uplift, Deep Cheating, and the CEO Cartel
David Brin
Salon.com
MARCH 14, 2009
..."So long as risk is effectively concealed from borrowers and lenders or actually shifted to others, risk-taking will be excessive. The initial phase of excessive risk-taking will manifest itself as an economic boom, but eventually, when actual losses begin to change the perceptions of borrowers and lenders and begin to impinge upon unsuspecting others, the boom will give way to a bust....[A] market system whose credit markets involve risks that are partially concealed from the lender and partially shifted to others will be biased in the direction of excessive risk-taking. And excessive risks are converted in time into excessive losses." --Roger Garrison
“Neither the U.S. government nor anybody else is capable of estimating the ultimate cost of bailing out such corporate giants as Citigroup, AIG, General Motors, Fannie Mae, and Freddie Mac (and the list goes on). There are two reasons for this. First, on a stand-alone basis, these companies are opaque and indecipherable entities. Financial innovation left transparency in the dust. Wall Street devoted much of its intellectual and political capital to concealing the risks it was creating. This concealment was deliberate; products needed to be priced inefficiently to produce profits.” - Michael Lewitt
Ironies abound. Though I consider myself something of an open market libertarian, I have long warned that we've been slipping into a putsch-coup by a conspiratorial oligarchy. There is, of course, no contradiction. The patron deity of capitalism, Adam Smith, declared that the very worst enemies of markets (far worse than socialism), are conniving aristocrats and top lords of finance.
Smith made clear (as I'll reiterate) that capitalism and top capitalists are often NOT the same thing. Indeed, the latter can often be lethal to the former...
David Brin
Salon.com
MARCH 14, 2009
..."So long as risk is effectively concealed from borrowers and lenders or actually shifted to others, risk-taking will be excessive. The initial phase of excessive risk-taking will manifest itself as an economic boom, but eventually, when actual losses begin to change the perceptions of borrowers and lenders and begin to impinge upon unsuspecting others, the boom will give way to a bust....[A] market system whose credit markets involve risks that are partially concealed from the lender and partially shifted to others will be biased in the direction of excessive risk-taking. And excessive risks are converted in time into excessive losses." --Roger Garrison
“Neither the U.S. government nor anybody else is capable of estimating the ultimate cost of bailing out such corporate giants as Citigroup, AIG, General Motors, Fannie Mae, and Freddie Mac (and the list goes on). There are two reasons for this. First, on a stand-alone basis, these companies are opaque and indecipherable entities. Financial innovation left transparency in the dust. Wall Street devoted much of its intellectual and political capital to concealing the risks it was creating. This concealment was deliberate; products needed to be priced inefficiently to produce profits.” - Michael Lewitt
Ironies abound. Though I consider myself something of an open market libertarian, I have long warned that we've been slipping into a putsch-coup by a conspiratorial oligarchy. There is, of course, no contradiction. The patron deity of capitalism, Adam Smith, declared that the very worst enemies of markets (far worse than socialism), are conniving aristocrats and top lords of finance.
Smith made clear (as I'll reiterate) that capitalism and top capitalists are often NOT the same thing. Indeed, the latter can often be lethal to the former...
Saturday, March 7, 2009
Welfare for the Rich: Bank of America interferes with probe of Merrill Lynch CEO bonuses
Merrill Probe Stymied by Bank of America, New York’s Cuomo Says
By David Mildenberg and Karen Freifeld
March 7, 2009
Bloomberg
Bank of America Corp. is still interfering in his investigation into bonuses given to Merrill Lynch & Co. employees, New York Attorney General Andrew Cuomo told a New York Supreme Court judge.
“We respectfully request that the court reject Bank of America’s continued efforts to stymie the attorney general’s investigation,” Cuomo said in his letter yesterday.
Cuomo is probing a decision by Merrill, which lost $15.8 billion in the fourth quarter, to award $3.6 billion in bonuses in late December, days before Bank of America bought the firm on Jan. 1. Former Merrill Chief Executive Officer John Thain and Bank of America CEO Kenneth Lewis have already testified to Cuomo, and Cuomo has subpoenaed seven of the bonus recipients, a person familiar with the matter said.
Bank of America, the largest U.S. bank by assets, said it offered information on individual Merrill bonuses that Cuomo is seeking. Bank of America won’t comply with Cuomo’s request, even under an agreement to keep it confidential at least temporarily, according to Cuomo.
“Bank of America does not believe the attorney general needs the freedom to place private, personal information in the news media in order to conduct his investigation,” Scott Silvestri, a spokesman for the Charlotte, North Carolina-based bank, said in an e-mail.
Trading ‘Irregularity’ Found
The dispute with Cuomo widened as Merrill said it uncovered an “irregularity” during a review of its trading operations in London. The New York Times said risk officers discovered three weeks ago that a London currency trader who had recorded a trading profit of $120 million for the fourth quarter may instead have lost a large amount.
The newspaper identified the trader as Alexis Stenfors, 38, and said he described the matter as a “misunderstanding.” Calls from Bloomberg News to his office in London and a mobile phone weren’t answered.
Stenfors previously worked at Calyon, the investment-banking unit of France’s Credit Agricole SA, according to the U.K. Financial Services Authority’s register. He joined Merrill Lynch in 2005, and is listed as being “inactive” since Feb. 25. A spokeswoman for Calyon couldn’t immediately comment.
In the Cuomo probe, Bank of America is seeking to expand a temporary confidentiality order on Thain’s testimony to include all witnesses in the investigation, including Greg Fleming, Merrill’s former head of investment banking, Cuomo said. Fleming, who left the bank in early January to take a post at Yale University, testified this week, the attorney general said in the letter.
Not ‘Commercial Litigation’
“Bank of America is treating this matter as a commercial litigation between private parties. It is not,” Cuomo said. “Bank of America is seeking to prevent witnesses from testifying and is seeking to require advance notice of the attorney general’s investigative steps, which it is not entitled to do.”
The Wall Street Journal on Wednesday published the names of a number of the top executives and their 2008 earnings, citing documents and people familiar with Merrill’s compensation. Eleven top executives were paid more than $10 million in cash and stock last year, the Journal said. The newspaper identified the seven bonus recipients as Andrea Orcel, David Sobotka, Peter Kraus, Thomas Montag, David Gu, David Goodman and Fares Noujaim.
A person familiar with Cuomo’s investigation said that seven bonus recipients were subpoenaed in connection with the probe. The person identified the people as Orcel, Sobotka, Kraus, Montag, Gu, Goodman and Noujaim.
‘Road Map’
The information Cuomo seeks would provide a “road map” showing which business lines Bank of America considers most valuable and to assist rivals seeking to poach talented staff, the bank said in its court filings.
Cuomo’s letter said House Financial Services Committee Chairman Barney Frank will soon demand Bank of America make individual bonus information public. The bank has received $45 billion from the Treasury’s bank recapitalization program.
Cuomo said in a Feb. 10 letter that Merrill “secretly and prematurely” awarded the bonuses with Bank of America’s “apparent complicity.” After the top four recipients received a total of $121 million, the next four received a combined $62 million and the next six a combined $66 million, Cuomo said.
By David Mildenberg and Karen Freifeld
March 7, 2009
Bloomberg
Bank of America Corp. is still interfering in his investigation into bonuses given to Merrill Lynch & Co. employees, New York Attorney General Andrew Cuomo told a New York Supreme Court judge.
“We respectfully request that the court reject Bank of America’s continued efforts to stymie the attorney general’s investigation,” Cuomo said in his letter yesterday.
Cuomo is probing a decision by Merrill, which lost $15.8 billion in the fourth quarter, to award $3.6 billion in bonuses in late December, days before Bank of America bought the firm on Jan. 1. Former Merrill Chief Executive Officer John Thain and Bank of America CEO Kenneth Lewis have already testified to Cuomo, and Cuomo has subpoenaed seven of the bonus recipients, a person familiar with the matter said.
Bank of America, the largest U.S. bank by assets, said it offered information on individual Merrill bonuses that Cuomo is seeking. Bank of America won’t comply with Cuomo’s request, even under an agreement to keep it confidential at least temporarily, according to Cuomo.
“Bank of America does not believe the attorney general needs the freedom to place private, personal information in the news media in order to conduct his investigation,” Scott Silvestri, a spokesman for the Charlotte, North Carolina-based bank, said in an e-mail.
Trading ‘Irregularity’ Found
The dispute with Cuomo widened as Merrill said it uncovered an “irregularity” during a review of its trading operations in London. The New York Times said risk officers discovered three weeks ago that a London currency trader who had recorded a trading profit of $120 million for the fourth quarter may instead have lost a large amount.
The newspaper identified the trader as Alexis Stenfors, 38, and said he described the matter as a “misunderstanding.” Calls from Bloomberg News to his office in London and a mobile phone weren’t answered.
Stenfors previously worked at Calyon, the investment-banking unit of France’s Credit Agricole SA, according to the U.K. Financial Services Authority’s register. He joined Merrill Lynch in 2005, and is listed as being “inactive” since Feb. 25. A spokeswoman for Calyon couldn’t immediately comment.
In the Cuomo probe, Bank of America is seeking to expand a temporary confidentiality order on Thain’s testimony to include all witnesses in the investigation, including Greg Fleming, Merrill’s former head of investment banking, Cuomo said. Fleming, who left the bank in early January to take a post at Yale University, testified this week, the attorney general said in the letter.
Not ‘Commercial Litigation’
“Bank of America is treating this matter as a commercial litigation between private parties. It is not,” Cuomo said. “Bank of America is seeking to prevent witnesses from testifying and is seeking to require advance notice of the attorney general’s investigative steps, which it is not entitled to do.”
The Wall Street Journal on Wednesday published the names of a number of the top executives and their 2008 earnings, citing documents and people familiar with Merrill’s compensation. Eleven top executives were paid more than $10 million in cash and stock last year, the Journal said. The newspaper identified the seven bonus recipients as Andrea Orcel, David Sobotka, Peter Kraus, Thomas Montag, David Gu, David Goodman and Fares Noujaim.
A person familiar with Cuomo’s investigation said that seven bonus recipients were subpoenaed in connection with the probe. The person identified the people as Orcel, Sobotka, Kraus, Montag, Gu, Goodman and Noujaim.
‘Road Map’
The information Cuomo seeks would provide a “road map” showing which business lines Bank of America considers most valuable and to assist rivals seeking to poach talented staff, the bank said in its court filings.
Cuomo’s letter said House Financial Services Committee Chairman Barney Frank will soon demand Bank of America make individual bonus information public. The bank has received $45 billion from the Treasury’s bank recapitalization program.
Cuomo said in a Feb. 10 letter that Merrill “secretly and prematurely” awarded the bonuses with Bank of America’s “apparent complicity.” After the top four recipients received a total of $121 million, the next four received a combined $62 million and the next six a combined $66 million, Cuomo said.
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