CNN Senior White House Correspondent
With outrage mounting over AIG's $165 million in bonuses, the President's chief economic adviser offered a new line of defense for the White House in an exclusive interview with CNN.
Larry Summers suggested that if Treasury Secretary Timothy Geithner had pushed the insurance giant too hard on the bonuses, AIG could have collapsed just like Lehman Brothers and sparked an even bigger crisis.
"Secretary Geithner has used all the legal authorities that are open to him to contain and limit the payment of bonuses," said Summer, chairman of the National Economic Council. "What he did not do, and what would have been irresponsible to do, as outrageous as these payments are, would have been to put at risk the stability of the financial system. To have courted the kind of disaster that followed the decision to let Lehman Brothers simply collapse might have felt good briefly but it would have touched the lives of a huge number of Americans who would have unnecessarily become unemployed or seen destruction of their lifetime savings."
CNN Senior White House Correspondent
The President's chief economic adviser is not quite as bullish about a turnaround as Federal Reserve Chairman Ben Bernanke, who's predicting the recession may be over by the end of 2009.
Asked about Bernanke's prediction, Summers said he was upbeat about some aspects of the economy - such as a 22 percent spike in housing starts and recent upticks in the stock market - but said he was cautious about making any grand pronouncements.
Summers told CNN that while he's confident of a turnaround, "just what day the turn will come isn't something that i would dare to forecast" at this point.
Tonight on AC360°, we’re following all the latest on the AIG front as the outrage over billions in bonus payments boils over. Today we learned that AIG gave more than 73 employees in its Financial Products subsidiary (yep, that’s the rogue unit that nearly drove the company into the ground with its risky investments) bonuses of $1 million or more. 11 of those employees no longer work at AIG. New York’s Attorney General Andrew Cuomo said the top 10 bonus recipients combined take was $42 million, with the top recipient getting more than $6.4 million. Now lawmakers are scrambling ot find ways to get the billions back. It’s your money after all – taxpayer bailout funds paid for the bonuses. We want to keep the live blog on this one topic. So, please share your thoughts on AIG below.
And, don't miss Tom Foreman's webcast on the AIG outrage during the commercials. Watch our WEBCAST
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Joe Johns and Justine Redman
Officials in Connecticut reacted swiftly and angrily Tuesday to reports by CNN that American International Group is using a quirk in Connecticut law to defend giving $165 million in bonuses to top managers in its Financial Products division.
Unlike other sectors of AIG based elsewhere, AIG Financial Products is headquartered in Wilton, Connecticut.
CNN reported first Monday night on "AC 360" that AIG would be subject to "double damages" under Connecticut law in the event it is sued for not fulfilling its contract to pay $165 million dollars in retention bonuses to workers in its Financial Products division.
Program Note: For more on Alonso Arellano's green tortillas, tune in to AC360° tonight at 10 p.m. ET.
CNN Senior Producer
Alonso Arellano believes the green tortillas flopping onto a conveyor belt in his small factory are their own economic stimulus in a clear plastic package. The tortillas, called Nopaltillas, are made with powder from the nopal or prickly pear cactus, renowned in Mexico for its healthy properties.
Arellano says right now the demand for these tortillas is greater than supply.
“You know instead of giving all this money to AIG executives, they should just give it to me to invest,” Arellano says. “I could take that money, rebuild tortilla factories that are struggling in this economy. And that would create jobs.”
Arellano is one of those restless entrepreneurs who runs around acting like he’s just glad to be breathing.
And he is. Arellano almost took his last breath at the age of 11 while visiting the United States on vacation from Mexico.
“I always had this pain in my legs, and they started hurting real bad so my mom took me to the doctor,” Arellano explains, “They did some tests and found I had 90 percent blockage in the artery near my heart.”
Arellano underwent heart surgery and never returned to Mexico.
But Arellano still clings to much of his Mexican heritage – including the belief that the prickly pear cactus is a cure-all.
“Growing up all I ever heard was how good the prickly pear is for you,” Arellano explains “They say it helps reduce cholesterol, that it’s high in dietary fiber and it’s only 50 calories for one tortilla,”
Now only four people work for Arellano making tortillas, but he says that number could grow. Arellano is in talks about partnerships with a major health food store chain, a northern California distributor that ships to 150 stores, and a Latino supermarket chain.
“If any one of these hits I will go from shipping boxes of tortillas to palettes,” he says. Most of his sales are from stores.
But he also sells the Nopaltillas on the internet for $1.49 a dozen, and $2.99 for three dozen.
Arellano says he tested and fiddled with the recipe for months.
Seems like he got the formula right. Take a bite out of one of these Nopaltillas without anything extra on it and it tastes great plain.
It's nice to see something as simple as a green tortilla can inspire a little consumer spending.
Greetings from Ireland!
As the locals say, I'm on holiday in Dublin with family. It's been a grand time (more local speak). We are part of the estimated half a million people who lined the streets of Dublin today for the parade down O'Connell Street and beyond.
The crowd is very festive. A lot of green, white and orange can be seen throughout the city. Plus, shamrocks painted on faces and "Kiss me I'm Irish" pins and T-shirts. I'd bet about 60 percent of the crowd is American. The locals aren't complaining. They're making a lot of money. It will come in handy.
For The Financial Times
In the midst of the market turmoil, the pressing priority for US and global policymakers is to repair the financial system and restore the economy. Just as important, however, will be addressing the serious flaws exposed by this crisis. This process of reflection and reform will be critical to restoring confidence and enabling market-based capitalism to rebuild our economies. We must recognise the real possibility that because the crisis is not behind us, there may be lessons to learn and problems to address that are not now obvious. Yet many lessons are obvious and I take confidence from the commitment of world leaders – in the US, Europe, China and elsewhere – to pursue comprehensive regulatory reform and co-ordinate internationally.
First, this will be a big, multi-year undertaking. The crisis has exposed serious flaws in many aspects of our financial system. There will be proposals for more effective regulations in areas ranging from over-the-counter derivatives and short selling, to the practices of financial institutions, investors, mortgage originators and credit rating agencies. We will need to reflect on the long-held premise that sophisticated investors have the wherewithal to look out for themselves and require minimal, if any, supervision. In these areas and others, regulations must be crafted to foster market stability while maintaining the fundamental tenet of capitalism: if investors are to reap the rewards of taking risks they must also bear the negative results of their risk-taking.
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U.S. President Barack Obama is presented with a bowl of shamrock by Irish Taoiseach Brian Cowen during the annual shamrock ceremony at the White House March 17, 2009 in Washington, DC. Cowen was in Washington for St. Patrick’s Day celebrations.
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Carmen Van Kerckhove
President, New Demographic
A good friend of mine is an associate at a white-shoe law firm that just went through a major round of layoffs.
Workplace diversity is very much on her mind now because during the job cuts at her firm, it became glaringly apparent that people of color were massively over-represented in the pink slips department. If there are additional personnel cuts, she now wonders if she - a woman of color herself - will be among the next to go.
The current recession is already dealing a severe blow to the scant progress that has been made regarding racial diversity in the workplace.
According to a recent Pew Research Center study, blacks and Hispanics were twice as likely as whites to have reported being laid off or fired in the previous 12 months, about two-in-ten blacks (21%) and Hispanics (19%) versus one-in-ten (11%) among whites.