Geithner Won't Endorse Bonus Tax Bill

[bajamary]

From Arianna Huffington

On February 10th, the New York Times reported that there had been a "spirited" battle within the Obama administration over restrictions on executive pay and bonuses, and over attaching stringent conditions to any bailout money given to banks.

The clash pitted Tim Geithner, who opposed the restrictions and conditions, against David Axelrod, who favored them. According to the Times, Geithner had "largely prevailed."

In light of what has happened since then, that outcome must now be viewed as a tragic surrender to Geithner, Summers, and the political/Wall Street class -- a "victory" that could lead to the unraveling of the president's entire economic policy.

http://www.huffingtonpost.com/arianna-huffington/geithner-unable-to-escape_b_178006.html

Also in HuffPo

Geithner Won't Endorse Bonus Tax Bill

Treasury Secretary Timothy Geithner refused to endorse a congressional effort to heavily tax bonuses issued by TARP recipients, saying that the government needs to balance rightful outrage over executive compensation with the need to ensure a quick financial recovery.

http://www.huffingtonpost.com/2009/03/23/geithner-wont-endorse-bon_n_177983.html

[rollingrock]

1. Even Dubya is thinking

'wow, that's fucked up.'

[EmilyAnne]

2. Because he wants to send a message to the investors that he needs to work with on the "toxic assets"

plan. He needs them to trust that they can safely invest in these things without the rules changing midstream.

It sucks, but I get it.

We need to get these assets moving so our credit system can thaw.
Geithner wants to match investor funds so there is a shared risk in taking the assets of the banks' hands.
If investors, even the most greedy ones, think that terms can be renegotiated on a whim after the agreements have been made, they will be less likely to participate.

[rollingrock]

3. Are you a lawyer by any chance?

only a lawyer could dream up such crap.

[EmilyAnne]

7. Far from it. I teach english to refugees! Lol. I am not saying that I agree with any of this

stuff.
Quite honestly, I don't agree with anyone...or rather I agree with everyone.
Every editorial written by an economist makes sense as I am reading it.
I always read Krugman's articles and agree.
Then, I listen to Geithner's explanations and read his recent editorial and agree.
I have no independent thoughts about the economy. I have taken university level Macro and Micro which I means I have more "education" about economics than the average American.
And I know nothing.
So many theories, so many new ways of investing, so many factors that I haven't even considered.
I wish American high school students were required to know much more about these things than a half a year of economics (that was the requirement when I was in H.S) because, as so many are now painfully aware of, these high level, specialized fields are affecting all of us.
We need to know more about this stuff so we don't have to blindly trust a politician or even an economist.


I didn't come up with that stuff that sounds so lawyerly.
It is from Geithner and Obama and, well, it makes sense to me.
But, like I said, I can easily read something that completely tears it apart and it'll also make sense to me.

The only thing that I do not agree with is the tax-cuts/ deregulations song that the Republicans have been singing for decades.

[dysfunctional press]

21. they were saying the exact same stuff on the george snuffleophegus show on sunday morning.

investors could be scared off by the prospect that their profits could be taken away retroactively thru tax policy changes if somebody thought they were too large.

and it's a VERY valid point.

[rollingrock]

30. How do you equate private profits to using taxpayer dollars to pay bonuses?

the notion is absurd on its face.

[dysfunctional press]

31. look at it from the point of view of the potential private investors in the toxic asset plan-

the people receiving bonuses at aig were and ARE contractually entitled to their bonuses, but because of misguided public anger, congress has decided to try and get the bonus money back thru personally targeted ex-post facto changes in the tax law...

so- what's to stop the government from doing the same thing, if the private parties are able to make A LOT of money on their investment, and there gets to be similar mindless gnashing of teeth by the hoi polloi- what would there be to stop congress from laying down the same kind of irs slapdown on the investor's contractually entitled profits? :shrug:

btw- the idea that they're "using taxpayer dollars to pay bonuses" is the notion that i find absurd. the money is/was a loan. my policy with loaning money to people has always been that once they get it, it's theirs, and i don't care what they do with it, as long as they pay me back in the timeframe we have agreed upon.

[bajamary]

6. But Axelrod wanted a bonus tax

David Axelrod, Obama's top political advisor and one smart fellow who understands "getting the credit system to thaw" was (and is for) totally for a bonus tax.

The Wall Street and investment bankers are still in control.

Now, alas, they are in control of Obama.

What a sad, sad day.


(edit spelling)

[EmilyAnne]

10. Why does he support it? n/t

[acmavm]

8. What the hell drugs are you on????

[acmavm]

9. This shit goes on much longer and you can damn well bet that

Obama will be a one-termer.

Fuck, we can elect republicans and get the same shit. In fact, we have.

[EmilyAnne]

12. I don't know about that. They seem to still think that tax-cuts will be the answer to everything.

This particular tax on these particular bonuses is to be retroactive.
I don't think they should have received bonuses, but I have a bias that puts me at odds with pretty much any CEO/ Wallstreeter/ Corporate Executive.
I do see that these bonuses were agreed upon in the past, before the bailout money was given to AIG.
I have also read that the bailout money has been very effective within AIG so far. Not that the bonus receivers have anything to do with it.
I have no idea.

I do agree that Obama can really blow this because people are getting angrier and angrier.

[EmilyAnne]

11. The drug of not knowing who or what to believe because I am not even close to being an expert on the

economy.
I read so many editorials and spend so much time going to wikipedia to get the definitions of yet another specialized term that I am unfamiliar with.

Aside from the tax cuts/ deregulation stuff that is clearly BS, I find myself agreeing with almost everyone.
I agree with Geithner and Obama and Krugman. It all makes sense to me because I don't have enough of a knowledge base to stand on my own and form an independent opinion.

I was summarizing Geithner's explanation, by the way.
Anyway, I am fully aware that on this issue I am an ignoramus.

[sendero]

20. Ah yes.

... the bankers' "I'll take my marbles and go home" argument.

WHAT HORSECRAP.

If the bankers want OUR MONEY they can play by OUR RULES or they can pack sand.

Geithner is "uneasy" because he is operating on behalf of THEIR INTERESTS, not ours.

[EmilyAnne]

25. But I don't think this is the bankers that will be involved here, am I wrong?

As far as taking ownership of the "toxic assets," the banks already own them.
I think investors within the private sector are the one's who will be taking part ownership of the assets along with the govt.
Of course, if the banks need to be lending money to the investors so they, in turn, can start buying up the assets, then that is another story.

I think the crux of the whole thing is that the interests of the banks/ investors may also be our interests.
So, Geithner operating on behalf of their interests is, theoretically (if his plan works as he thinks it will), also operating on behalf of our interests.
I am not saying that I believe this will work.
I am just trying to see why someone who has his entire career and reputation on the line is continuing down such an unpopular path.

[sendero]

27. He's about the money..

... not the popularity.

This "private/public" partnership is a joke. It's more socializing risk and privatizing profits. All this fancy footwork is meant to disguise a simple fact, the bankers are being bailed out with taxpayer money.

We the taxpayers are going to buy at premium prices "assets" that nobody wants. The reason nobody wants them is simple, they are worthless.

The only thing that would make some of these assets not worthless is a big turnaround in housing prices. That's not going to happen soon.

[EmilyAnne]

28. Where has Geithner stated that the prices of the assets won't be negotiated down?

That is one part of Krugman's opinion that I don't follow.
It seems that the values of the assets that are on the banks' books will be much higher than the values placed on them when they are purchased.
I need to look for this information, though if you know more about this, please let me know.

Won't any profits be shared between public and private?
The private will get more incentives, but that makes sense IF we need them to get interested in these assets.
Of course, if they are truly worthless, no one will get profits.
I don't see how investors will be into taking part ownership of something that is worthless.
Like I said, it seems that Krugman believes that Geithner holds the assets to be of much higher value than they really are and now I'm off to find out about that.

BTW- I have such a hard time believing that Geithner is just about money. It doesn't make sense to me.
I don't usually believe that people act like characters in comic books, being singularly motivated by a love of money, being fixated on serving one agenda at all costs, being consumed with nothing but greed, etc. I am looking for an ideology or some real basis of belief that Geithner has in regards to this latest plan.

Of course, I think Dick Cheney is basically a comic book character with a singular agenda. Anything is possible. Geithner could very well be a crook out for one thing and one thing only. It just seems extreme to believe that before trying to understand the possible explanation for his proposal.

Either way, the whole thing makes me sick.

Thanks for trying to clear some of this up for me, by the way.
I am really not trying to be argumentative because I really don't have a strong opinion. I'm just trying to understand the different plans.

[sendero]

29. There are not going to be any profits..

... the markets would price them in if they were there.

Geithner isn't just "greedy", he's helping his pals, the people he's associated with forever.

If Geithner was useful, how come this whole thing happened right under his nose while he was the NY fed?

This whole this reeks, and Obama has this grand agenda, most of which I totally agree with, that is going to be scuttled by his ham-handed approach to this problem.

[spanone]

26. yep

[leftofthedial]

4. Geithner is an inside man.

His JOB depends on doing whatever makes the elite Wall Streeters wealthier.

He guards their interests like a pit bull guards a pork chop.

[EmilyAnne]

13. Do you think this is the reason he wants to involve them in the toxic asset burden?

Do you think these investments will be unfairly rewarding?

Just curious about your opinions here. I am open to every idea.

[leftofthedial]

15. he wants to involve them *partially* (while protecting and rewarding them personally)

in a shitpile that is wholly of their creation.

[EmilyAnne]

17. I know that he wants them to shoulder some of the ownership of the assets. And to get them to do so

would, of course, mean that there have to be rewards and protections. Otherwise, they simply won't buy any part of these assets.

What I really want to know, and maybe you know this and can help me out here, what would happen to the assets without part of the ownership being in the private sector.
So, its seems that there are three options.
1. We would own 100% of them (ie. nationalization)
2. No one buys them.
3. A whole lot of time passes until someone buys them.
Are these the only other options, in your opinion?
Also, what would happen if no one bought the assets?
Would they just disappear as the banks that own them go under?

Thanks for taking any time to answer these questions because, really, I'm clueless but trying to at least get to the heart of the different arguments.

[xiamiam]

5. i have a sinking feeling about geithner...wont go away...very very sad...nt

[108]

14. he needs them right now

if you can't see it, you are blind...

if you allow this taxation bill to pass, they have no chance of the new plan succeeding...

[Donnachaidh]

16. his plan is flawed -- it wouldn't work anyway

He *needs* them to take their profits. He's basically handing out bonuses to companies that take toxic assets, paid for by our tax dollars, and IF any of them turn out to have some sort of value down the road -- the bankers get to KEEP it.

All of this is one big gangrape of the american taxpayer by Geithner and his cronies. And Obama is allowing it.

[BzaDem]

18. This is not about bonuses, this is about contracts.

Everyone agrees that if we have the power to stop bonuses in the future, we should and will. But in this case the bonuses were promised under contract before we bailed them out. Essentially they were "paid" before we bailed them out and just haven't vested yet. The real question is should (and can) Congress pass laws essentially nullifying contracts between a small set of specific parties.

For all those who just say "screw the contracts," you are simply legally mistaken. If a company is not legally bankrupt, its contracts are valid in court. The reason contracts had to be renegotiated in the case of GM was to avoid failure of GM. In a normal case where a company can actually fail, there is high incentive for both parties to renegotiate contracts. But since no one of much significance thinks that we can seriously let AIG fail, there is no incentive for the traders to give up one penny of their bonuses if they don't care about publicity.

The solution to this mess is to create some sort of intermediate legal state between bankruptcy and fully solvent for too-big-to-fail-institutions that would otherwise have failed were it not for government money.

[Winterblues]

19. It isn't up to him one way or another....

There are a lot of people in the Obama Administration that love to overstep their bounds. Congress makes Law not the Treasury Secretary and then they are signed into Law by the President and not some Secretary...

[fascisthunter]

22. why Do I Get the Suspicion that Geithner and Wall Street will Get Their Way

and this disagreement between Geithner and Obama is just political theatre?

[Lorien]

23. Oh, I don't know...because it always ends up that way?

The ruling elite would never allow someone who didn't have their back into office. You'll never see someone like Kucinich even considered as a viable candidate by the media that they own.

[fascisthunter]

24. Ain't That the Truth....

we really don't have a democracy... corporate interests and a wealthy elite decide who runs and who makes it. We have to end that.