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.

The Bailout, the Bankers Who Hustle and Con, ...and the Kid Geitner

Mr. Geitner's reticence in the face of bank bullying is a mystery. Just hope it is worth it for him, as the front man for the new administration, to keep taking it (ok, on the chin) from the bankers. It's like we've gone back to the era of big bucks and Taft.

The bank CEOs are colluding and bullying Mr. Geitner like he is a junior go-fer.

Mr. Geitner increasingly comes off as a fresh-faced kid. Where is Mr. Geitner's backbone, expertise and, supposed, professional insight in all this? One surely hopes he is holding some trump cards.

The banks are essentially kaput yet acting as if entitled to the bailouts. They continue to carve bonuses out of bailout finds as if nothing has happened. They apparently regard Mr. Geitner like a Carnie flattie drools when a curious mark comes to the booth. Sharks and minnows.

PS: The paying out of bonuses earlier than their normal payout date to make it appear the bonuses are acts prior to bailout, is transparent deception and should be treated as crimes. What is going on with Geitner, IRS, SEC, Obama ? Many web sites are questioning this, notably Huffingtonpost in their series,"
Tim Geithner, CNBC, and the Second Coming of Known Unknowns"

Still Undercover - What about, again, Tarp-1 Section 8? Hmmm Where's the Money?

Still haven't heard what happened to the first $350 Billion (otherwise known as a big lot of bucks).

Recession, Bail Outs and Stimulus - "Remember Section 8"?

Section 8 of the TARP plan (the Troubled Asset Relief Program) was a troubling part of Treasury Secretary Paulson's early September 2008, $700+ Billion, Wall Street bailout plan. Section 8 read, “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.” Section 8 exempted the administration (and specifically Paulson) from ANY and ALL oversight regarding his administrative actions in handing out $700 Billion of public money.

As the New York Times put it (NYT Sept 22, 2008, A.R. Sorkin), "with those words, the Treasury secretary...will be vested with perhaps the most incredible powers ever bestowed on one person over the economic and financial life of the nation."

Section 8 did not appear in the final bail, out but it didn't have to since it was de facto enacted on the first $350 billion dole-out about which no details yet have been offered, by whomsoever as to where, when and how those funds were distributed. But maybe worse, no one is effectively asking. It's like a predator picked off cows from the herd while the other cows just went on cud chewing. So, since section 8 continues in left over spirit like a bad odor, here're some thoughts about that from a Perched Eye.

Quick Glance:
Section 8 was unprecedented in American history. But the scam was unprecedented in scope. The Bush administration wanted a HAIL MARY bailout to save the day because the economy was about to tank but with a quick miracle, maybe GOP could save its rear or at least delay the collapse until after the election. Solution?- a midnight-hour, grandstand, outrageous play that relied on cowing the press, Democratic innocence (gullibility, naivete, etc) and a public that was only sporadically tuned in (apathetic). It almost worked.

Rose Glass:
The Bush administration was in truth caught unawares and was simply excercising (resorting to) a grosser version of executive privilege. 'Hey we have the best interests of (fill in good nice things);...just believe in us [and go back to your reality tv]."

The Gut (says):
The administration was passing bricks since early 08 trying to figure a spin on how to explain that Wall Street had done it again...despite the good guy faith the administration had placed in the eight year handshake with the financial sector, 'we trusted you guys....we're one of you...WTF..., and one more thing, don'hat you guys know when to stop, huh? Paulson, get out there; do your thing; we got one chance.... yeah, say anything...Congress are asleep at the wheel...tell em you don't need oversight. Don't worry, Pelosi and Reid haven't a clue where this thing has gone. Jeez, what would RN have done...sure he's not around?'

That basically sets the stage for everything that has happened from October 08 until now, February 6, 08. Think about it. GOP's still touting "wealth" as the only worthwhile passenger to be saved on this sinking ship, while the DEM's are still trying to mouth their position that the people deserve consideration too, and appear stunned that anyone in their right mind can forget this. Well, the GOP core can, could, and will continue quite well to forget the public (er, labor...lay em off... or something).