The AIG Bonus Shell Game & The Ghost of Section 8: Paulson at Point, Geitner and Congress in the Dark:...and Something This Way Comes

We shouldn't be surprised by the AIG bonus issue oozing forth these days. Last September (Feb 6, 19 -this blog), Section 8 of Secretary Paulson's first TARP draft gave us a big tip off that something strange was afoot about the financial relief planned by the former administration: messiness of some kind was rumbling down the tube, a huge power-money grab was taking shape right before our eyes, and more than any of these frightful vibrations there was a pervading sense that a naked, blatant gaming was about to be perpetrated on everyone outside of the previous administration. All we had to do was buy into Section 8's outrageous set up. And there will more AIG-like shenanigans to come - secretive, outrageous money giveaways, and feigned innocence the perps didn't realize what they were about to do, or did, was wrong, distasteful or unconstitutional.

Section 8 of Secretary Paulsons ONE PAGE draft of TARP 1 was adventuresome to put it mildly because it proposed to give Mr. Paulson complete, unquestionned, personal power over all relief funds, with exclusive confidentiality. All this power was to be unchecked and unmonitored. This would be unprecedented and truly dangerous for the future of our constitutional principles of checks and balances.

Section 8 should have set off alarms that there was a panicked need TO HIDE SOMETHING BIG. Plus, Section 8 was a statement of the methods and intentions of those who wanted to do the hiding.

Big Question: how possibly could Mr. Paulson and his masters imagine the Section 8 scheme would work? Answer: imho, though Section 8 violated the most rudimentary principles of constitutional checks and balances, Section 8 is routine corporate CEO-ese - total, unquestionned power held and exercised by one person - and Paulson lost it he was so panicked about something; so, as a former CEO of Goldman Sachs, he gambled for a miracle - the possible miracle that the Congress, press, public and Obama team would swallow the Section 8 chocker.

Note: TARP 1 was A ONE PAGE draft! To disburse a trillion dollars, maybe more???!!

Although Section 8 did not survive, not many reacted with the outrage that should have been heard. Despite that Section 8 hinted at things to come.

Exactly who and what was behind Section 8's attempted cover up? That answer might come out...or it might not. Instead it might be swept somewhere to be ignored as the short attention span of media and public drift elsewhere.

Now there is messy confusion about AIG bonuses, timing of same, why the taxpayer should be expected to pay the bonuses; but even more...why don't the banks, CEOs, traders and whoever else understand something is not right about receiving bonuses in a year when their companies went broke. Hmmmmm. So I have some questions,
(first, the broad context is the common sense view that a broke business enterprise should be helpless and in a position, by definition, of being totally vulnerable to renegotiate with creditors and contractual obligations):

1 Did Secretary Paulson know details about AIG's financial trouble last June 2008, uncluding bonus contracts, recipients, amoiunts?
2 At the very least, as a former investment house CEO (Goldman Sachs), wasn't Secretary Paulson knowledgable in principle about bonuses before Sept 8, TARP 1 (and Section 8); and wasn't he therefore able to conceptualize the detailed nature of collateral obligations carried by the relief targets?
3 Was Section 8, of TARP 1, designed to prevent Congressional due diligence inquiry and prevent Congressional examination of all future bailout funds?
4. What was particularly at threat by revealing details to be hidden by Section 8, and subsequently de facto hidden in Tarp 1?
5. Didn't Mr. Geitner, a former Wall Streeter, foresee in detail the landscape of all this - what institutions, their in-house contractual obligations, etc? His prior WStreet experience and expertise was the reason he was appointed Treasury Secretary.
6. By virtue of his WStreet experience, couldn't Mr. Geitner have anticipated problem issues that he then could have springboarded into prepared positions, drafts etc to be used by the Obama team as they cam into power?
7. Did Mr. Geitner discuss Section 8 with anyone? Why did Section 8 disappear after Tarp 1?
8. Did Mr. Geitner discuss with Mr. Paulson the transmittal by verbal or written means, Paulson-Bush administration agreements, understandings and obligations with Wall Street and the Federal Reserve?
9. Did Mr. Paulson consider, or have, informal discussions with Congressional committees regarding the information or insights he had about the crisis?
10. Finally, was/is Congress savvy enough to have anticipate the gist of Section 8? If so, why was there not an issue made right then?

The implications seem dire re the Paulson legacy: Section 8, the ghost of Section 8, the AIG bonus mess, the continuation of shields erected between the TARP targets and Congress and the Obama team..... Whatever is to come, you bet it will look like the AIG bonus mess.