David Gewirtz | BIO
Editor-in-Chief, ZATZ Publishing
It's time for the White House to "man up" and put AIG out of our misery. Over the past six months, the U.S. government has given or loaned AIG more than $173 billion taxpayer dollars as compensation for an incredible inability to run a company properly.
And now, due to "contractual obligations", AIG wants to give its oh-so-talented management staff more than $165 million in bonuses. This is after taking billions from the U.S. government and spending it on lavish retreats at California spas and English hunting lodges. Oh, and they also gave more than $30 billion (yes, with a "b") of our money to foreign banks.
In the words of Nancy Reagan, it's time to "Just say no".
[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/US/02/20/economy.history/art.depression.jpg caption="Life-sized statues of a Great Depression breadline greet visitors to FDR memorial in Washington. "]
CNN Financial News Producer
The number of Americans who think another Great Depression will occur within the next year is on the rise, a poll released today shows.
Forty-five percent of people questioned in a CNN/Opinion Research Corp. survey said another depression like the one the U.S. experienced in the 1930s is likely. Last December, 38% said a depression was likely in the next year.
The poll described the Great Depression of the 1930s as a time in which roughly one out of four workers was unemployed, banks failed across the country and millions of ordinary Americans were temporarily homeless or unable to feed their families.
Senate Democrats want to tax the controversial bonuses doled out to AIG employees who work for the division that led to the company's downfall.
Senate Majority Leader Harry Reid announced on the Senate floor Tuesday that the tax-writing Senate Finance Committee will pursue a legislative fix in such a way that the "recipients of those bonuses will not be able to keep all their money - and that's an understatement."
Senate Finance Committee Chairman Max Baucus, D-Montana, will propose a special tax within the next 24 hours, Reid said.
"I don't think those bonuses should be paid," Baucus said Tuesday.
Troubled insurance giant AIG, already under fire for intending to pay out $165 million in bonuses and compensation, succumbed Sunday to congressional pressure, identifying banks that received chunks of the company's billions in federal bailout funds last year.
AIG, a recipient of at least $170 billion in federal bailout money , got an $85 billion loan from the Federal Reserve.
The list released Sunday of "counterparties" that benefited from the bailout is topped by European banks Societe Generale and Deutsche Bank, which received $4.1 billion and $2.6 billion, respectively.
Wall Street firms Goldman Sachs and Merrill Lynch round out the top four, receiving $2.5 billion and $1.8 billion, respectively.
In releasing the list, AIG said it "recognizes the importance of upholding a high degree of transparency with respect to the use of public funds," in a statement.
The bailouts have brought a new list of terms to the conversation about the economy.
The government's economic recovery efforts have brought many new and unfamiliar financial terms into the conversation. Here's a list of some we think are vital to understanding the recession and the government's attempts to fix it:
Alternative Minimum Tax (AMT): The provision was originally intended to prevent high-income taxpayers from using tax breaks to sharply reduce their tax bill. But Congress never adjusted for inflation the amount of income exempt from AMT, putting tens of millions of middle- and upper-middle-income taxpayers at risk of having to pay it. Every year, Congress approves a "patch" that temporarily lifts the income exemption levels.
American Recovery and Reinvestment Act: The $787 billion economic stimulus package contains $212 billion of tax relief, $308 billion of appropriations and $267 billion in direct spending. The Obama administration estimates that the plan will create or save 3.5 million jobs by the end of 2010 and boost consumer spending.
Mike Allen & Eamon Javers
Harnessing public outrage over lavish bonuses for bailed-out executives at insurance giant AIG, President Obama said Monday that he will “pursue every single legal avenue to block these bonuses and make the American taxpayers whole.”
Obama made his forceful remarks at a small-business event at the White House, following a weekend of heavy news coverage of the payments that fueled the populist backlash already building against bailouts for the wealthy.
“This isn’t just a matter of dollars and cents. It’s about our fundamental values,” Obama said.
“All across the country, there are people who work hard and meet their responsibilities every single day, without the benefit of government bailouts or multi-million dollar bonuses,” Obama said. “And all they ask is that everyone, from Main Street to Wall Street to Washington, play by the same rules.”
Wells Fargo Corp. (WFC) and HSBC Holdings PLC (HBC) are the target of separate lawsuits being filed on Friday by the NAACP, which alleges the banks were engaged in "systematic, institutionalized racism" in their subprime mortgage lending businesses.
The lawsuits, which the NAACP said would be filed in U.S. District Court in California, allege that African-American homeowners were frequently steered into mortgages with higher interest rates than other borrowers with similar credit histories.
"These banks are getting billions in bailout money yet think they can get away with business as usual," Austin Tighe, co-lead counsel for the NAACP, said in an interview Thursday evening.
Predatory lending and other practices, he continued, "are legally actionable and more importantly, morally reprehensible."
[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/POLITICS/02/08/congress.economy/art.sen.shelby.gi.jpg caption="'We bury the small banks — we've got to bury some big ones,' said Sen. Richard Shelby on Sunday."]
CNN Financial News Producer
The world economy is on track to post its worst performance since the Great Depression, with developing countries bearing much of the economic pain, the World Bank said.
Those countries face a credit shortfall of up to $700 billion.
"The global economy is likely to shrink this year for the first time since World War II," the bank said, noting that global industrial production, by the middle of 2009, could be as much as 15 percent lower than in 2008.
Based on those projections, world trade is on track to record its largest decline in 80 years, with the sharpest losses expected in East Asia.
Program Note: For more on the economy and the banking crisis watch Ali Velshi tonight on AC360° at 10 p.m. ET.
Chief Business Correspondent
Citi is something like 20 percent of US bank assets. By contrast, back in the Savings & Loan crisis, ALL of the S&L's COMBINED were less than 10 percent of US bank assets.
Here's what happens if a company as large as Citi fails:
– Investors and depositors, fearing failure of smaller banks, would take their money out, triggering further bank failures across the country.
-There would be less money available for loans to support economic recovery
The Los Angeles Times
To understand why federal officials keep pumping astronomical sums of money into companies such as insurance giant American International Group Inc., it might help to take a high-altitude view of the situation.
Say from 30,000 feet, up where jet airliners fly.
AIG is not just the largest insurance company in the world, with about 74 million customers - more than the populations of California, Illinois and Florida combined - but also owner of a company called International Lease Finance Corp.