The best laid plans... Banking, Insurance and Government Collusion

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Timing is Everything

Think on it, in mid-June the president appointed the pay-czar. Feinberg. The biggest objections came from AIG. A few weeks later, Insphere Insurance Solutions owned by Goldman Sachs, Credit Suisse, ING and Blackstone Group (how international -bicontinental) is set up and then they pay out huge bonuses a week later. By December, the biggest TARP recipients cut themselves out of the pay czar's field of influence. Citibank gets big tax breaks and announces the payback of TARP monies in order to avoid oversight. Goldman Sachs has changed the nature of their bonuses; Chrysler avoids the midlevel exec pay cuts d/t that fact they don't pay them half a million to start with and Bank of America also cuts deal to pay off TARP and GM is likely top avoid this as they fall into a singular category of needing to attract a new CEO. Remember in the linked article in the OP that AIG will get no share or business in this new insurance co. that will be open for business in January 2010.

"One insurer whose products Insphere won’t initially market is American International Group Inc., Hildebrand said. The New York-based insurer has taken a federal bailout valued at $182.5 billion and reported about $100 billion in net losses last year after bad bets tied to housing markets."
“They’re going through some really tough times right now, and our agents have to deliver products from companies that are very solid and rated well that don’t have a lot of scrutiny around them,” he said."

Which brings me to my conjecture on why the hell is it so important to pass this health care bill by Christmas 2009? So I wonder, what is the deal with AIG-- are they targeted for takedown in the next year or is the proposed health insurance mandates expected to lift their boats while investment/insurance lines (such as American General Life) are court ordered to separate or be sold off? If their straight insurance wing is sold off-- to whom may be a likely candidate to acquire them? I have some guesses. Considering AIG's insurance lines are already licensed to be sold in Texas.

And, speaking of derivatives, cdo's etc.-- those financial side bets that nearly broke down the economy. FireDogLake posted a white paper written by Goldman Sachs-- is bearish on healthcare reform based on their analysis. Seems to me their outlook would make going forward with Insphere a poor investment. (http://fdlaction.firedoglake.com/2009/11/13/goldman-sac... /) Now why would G-S release analysis that may drive down the share values of insurance companies like AIG?

"Goldman Sachs: Insurance Stocks Would Drop 36% By 2019 With House Public Option
By: Jane Hamsher Friday November 13, 2009 7:36 am
Pretty interesting. Goldman Sachs evaluates the impact of the Finance Committee health care bill, the House bill and no bill on the value of insurance stocks over the next 10 years. They focused on the impact of Wall Street’s biggest insurance stocks: Aetna, UnitedHealth, WellPoint, CIGNA and Humana."

(ed--and perhaps American General Life?).

Originally published Wednesday, July 15, 2009 at 12:00 AM
Goldman Sachs bonus bonanza
By The New York Times
Back to big profits for Wall Street powerhouse
NEW YORK — Even on Wall Street, the land of six- and seven-figure incomes, jaws dropped at the news Tuesday: After all that federal aid, a resurgent Goldman Sachs is on course to distribute bonuses that could rival the record paydays of the heady bull-market years.

Goldman posted the richest quarterly profit in its 140-year history and, to the envy of its rivals, announced it had earmarked $11.4 billion so far this year to compensate its workers.

At that rate, Goldman workers could, on average, earn roughly $770,000 each this year — or nearly what they did at the height of the boom.

Senior Goldman executives and bankers would be paid considerably more. Only three years ago, Goldman paid more than 50 employees above $20 million each. In 2007, CEO Lloyd Blankfein collected one of the biggest bonuses in corporate history.

The latest headline results — $3.44 billion in profit during its second quarter — were powered by earnings from the bank's secretive trading operations and exceeded even the most optimistic predictions.

July 22, 2009-- from Goldman Sach's own website

Goldman Sachs Pays $1.1 Billion to Redeem TARP Warrants
July 22, 2009
US Taxpayers Make 23 Percent Return

New York, NY July 22, 2009 - The Goldman Sachs Group, Inc. (NYSE: GS) announced today that it has redeemed the warrants the U.S. government received in connection with its investment in the firm through the TARP’s Capital Purchase Program at $1.1 billion, the full value the U.S. Treasury Department has determined.

While there are a number of ways to value the warrants, including through a public auction, we believe that in the context of the extraordinary actions taken by the government to help stabilize the financial system, this valuation of the warrants represents full and fair value.

In June, Goldman Sachs repaid the U.S. Treasury’s investment of $10 billion, and during the eight months of the investment, the firm paid $318 million in preferred dividends. We are pleased that the payment of the dividends and the redemption of the warrants, which total $1.418 billion, represent an annualized return of 23 percent for US taxpayers.

“This return is reflective of the government’s assistance, which benefitted the financial system, our firm and our shareholders,” said Lloyd C. Blankfein, Chairman and CEO. “We are grateful for the government efforts and are pleased that this additional money can be used by the government to revitalize the economy, a priority in which we all have a common stake.”

from Bloomberg: Dec. 11, 2009:
Hoping to avert heat from pending “say on pay” legislation in Washington, the top 30 executives at Goldman Sachs (GS: 163.19 +2.26 +1.40%) will receive their bonuses this year in a special form of company stock. Execs receiving the shares would not be able to sell them for five years, the banking giant said yesterday (Thursday). Still, the announcements cover a miniscule number of Goldman’s almost 32,000 employees, and it doesn’t cover the company’s top revenue generators. Additionally, the Goldman’s board of directors approved a “say on pay” policy, which will give shareholders an advisory vote on executive compensation. “We believe our compensation policies are the strongest in our industry and ensure that compensation accurately reflects the firm’s performance and incentivizes behavior that is in the public’s and our shareholders’ best interests,” said Chairman and Chief Executive Officer Lloyd Blankfein.

Remember the same day article posted on Politico: (My comment-- would this be company stock or interest in the insurance company based in Houston? )

'Pay czar' Kenneth Feinberg caps pay of midlevel executives
By EAMON JAVERS | 12/11/09 12:10 PM EST

Kenneth Feinberg, the nation's 'pay czar,' is at it again -- and this time, midlevel executives at bailed-out firms are getting a pay cut.

The nation’s “pay czar” is at it again Friday, and this time, midlevel executives at bailed-out firms are getting a pay cut.

Fewer than 10 of 450 employees will be allowed to earn more than $500,000 per year, according to a source familiar with the plan, which covers six firms that received federal bailout funds.

Kenneth Feinberg, the special master for TARP executive compensation, will release the next phase of his determinations about pay for those executives Friday, and he’s expected to take a tough stance.

Here is Reuters on the same date: http://www.reuters.com/article/idUSTRE5BA2RT20091211
WASHINGTON/NEW YORK (Reuters) - The U.S. pay czar on Friday expanded a crackdown on pay packages at four companies rescued with taxpayer money, limiting most cash salaries at $500,000 for a second tier of top earners.

The Treasury Department's Kenneth Feinberg issued the new limits amid outcries from some companies on a government lifeline that they cannot retain or attract key employees, sending the firms racing for a bailout exit.

He set the compensation structures for the 26th through 100th highest-paid employees at four firms: Citigroup Inc, American International Group, General Motors Co, and GMAC.

Chrysler and Chrysler Financial were exempted during this round of rulings because total pay for their second-tier executives is already under $500,000.
...
Feinberg's pay cap applies only to the final weeks of 2009 and he will not claw back money already paid. The limits will affect the large bonuses typically paid at the end of the year. Also, the rulings will be the baseline for 2010 compensation.

The new plan also mandated that a majority of total compensation will not be released to an executive for three years. In most cases, at least 50 percent of compensation must be long-term stock awards, according to Feinberg.

Further, overall cash is limited in most cases to 45 percent of the total and all other pay must be in company stock.