Legislative Lashings?

Congress Bares its Teeth at AIG, Misses the Point

The Congress OK'd a Punitive Excise Tax on bonuses paid to AIG executives worth over $250,000 today to attempt to regain the $165 Million paid out beginning at the end of last week. I've covered this over the last two days and wish that this issue would go away just a little bit.

Democrats, led by Representative Charles Rangel of New York, pushed the bill through the House with astounding numbers on both sides of the aisle, the greatest act of bi-partisanship in this session. Yet there were six Democrats that were political strong enough to stand up to this ridiculous piece of legislation that is purported to retrieve taxpayer money, but is, in fact a, politically speaking, cowardly move to make some kind of movement on the AIG situation without actually solving anything. Way to go, Congress. Way to respond to a symptom and not the illness.

But Congress isn't alone on this one. President Obama echoed an eagerness to sign such a bill once it reaches his desk in cooperation with Congress' and the People's Outrage. Meanwhile House Republicans are seeming to take the stand that I am in this mess: Stop trying to CYA and fix the problems! And the Democratic-controlled House is saying that this measure is the only solution to the problem, apparently unaware of any kind of discussions that are currently going on in committee regarding the return of the bonus millions to the people.

But the real issue here is that while these executives have done really terrible things and they don't deserve the money that they are receiving, it is not okay for Congress to rip those bonuses out of executives' hands through an excise tax. This is where the Executives of AIG should throw a Tea Party, not those fools angry about the government's marginal increase in spending. These bonuses were offered to keep AIG afloat, before the U.S. Government stepped in and as pointed out by some, including Rush Limbaugh, it's not right for Congress to start a pitchfork raid of these people who were promised these bonuses.

It is a complicated issue, the AIG disaster, and there are many people to blame for this situation. But it's my opinion, as I've said for the past couple of days, to move past punishment and focus on fixing the problem. But I guess if we want to focus on getting our elected officials to punish AIG, they are doing a fine job of that. Let's punish them into oblivion and hopefully we can crash the whole system - isn't that why we bailed them out in the first place?

**UPDATE: From Rep Campbell, an interesting viewpoint about Californian's and the Bonus Excise Tax

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Today's Political Thought
We currently have a fracturing Democratic Senate Caucus that will leave three voting factions - instead of having a third party, we'll just have two Democratic Parties and one Republican?!?!

Hold on to your Teabags

Teabag protests are breaking out all over the country as Obama's support dips. And everything else that actually happened today.

First, let's look at news that slipped under the radar with the AIG debacle:

Secretary Gates has signaled an end to Stop-loss policy in the Military - this means that the military is actually going to start upholding its contract with military personnel regarding the length of their duty and will pay those it must hold an additional stipend for extended duty.

The GIVE act passes - Almost perfectly along partisan lines, but this legislation has moved out of the House to reauthorize and reform national service laws.

The RNC has seen a dip in Fundraising - But not in a really significant way suggesting that Michael Steele has had no real effect, or rather no overwhelming effect on RNC fundraising.

Attorney General Eric Holder makes a couple big announcements - including a shift in position on marijuana prosecution and a consideration of lessening regulation of anti-trust laws for newspapers.

The Pope says no to condoms while en route to Africa

Gay Rights Ban Signed by U.S. - So while we are debating the legality of it here in the United States, we are proud to say it's not okay to discriminate gays if you're not the U.S.

But most of these stories were overshadowed by the stories surrounding AIG and CEO Liddy's testimony regarding the bonuses that have now been paid out. Of course there are great stories that are riding along with the AIG mess including the new chic teabagging that is happening around the country which will culminate on April 15th. The Nationwide Tax Day Tea Party organized by New American Tea Party promises to be a very interesting event as we have already seen instances of people teabagging their local water sources in protest. These teabaggers are getting quite the media coverage for their antics. Bob Cesca, has published a fantastic little explanation of why that is a little funny.

It is always interesting to me when groups of people get together to throw little protests like throwing tea into the river because they don't agree with the administration. Just a quick question: Do you think throwing tea into a body of water is going to get your Representative or Senator to change their minds? As though they are sitting in their office on Capitol Hill going, "My goodness, my constituents sure have dumped a lot of tea into Lake __. I better ask Liddy questions harder before they get really angry."

This situation with AIG and Bank of America and all of the other banks is a real tragedy and those on the Hill and in the White House are working really hard to fix the problem. You dumping tea into the Potomac is not going to fix it. Neither is mailing it to the White House. And your protests are going to lead to panic, which as I explained yesterday, is exactly what we DO NOT NEED in this crisis. So let the boys and girls in D.C. do their work to try to solve this issue and stop protesting. You're not helping the matter any.

Obama came out with a very measured response to this ridiculousness on the Hill and ya'll should take a hint from him. It's time to take a little responsibility and get through this, not point fingers and whine.

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Today's Quote
"Though dissenters seem to question everything in sight, they are actually bundles of dusty answers and never conceived a new question."
- Eric Hoffer, Reflections on the Human Condition (1973)

AIG: Ain't It Grand

Financial Crises lead to Financial Arms Race. But who will have the bigger guns?

AIG is the topic of today with many stories popping up from the news to the blogs for the overwhelming response from pundits and politicians regarding salary bonuses to executives of the company - bonuses that were promised last year, before the company ended up being owned by the U.S. Government. Freshman Representative Peters of Michigan has proposed legislation that would effectively tax those bonuses at 95%, with the remaining 5% to be taxed by state and local government nixing those bonuses in their entirety. Which has caused other financial institutions to consider pay loopholes that will help their executives dodge dealing with this abusive taxation of bonuses.

At the same time, a document is floating around Washington, and now on the web, that ties the potential risks of an AIG collapse to the global financial system (wonderfully recapped by the NYT). In this document, AIG lays out a doomsday scenario for its collapse that could nearly be set off by a sneeze in Asia, and end in the collapse of many Nations' Financial Markets. This is more-or-less simplified by two different scenarios began by the same lack of confidence.
1. Investor Confidence drops - In this case, a government cashes in on AIG's holdings and in the face of being accountable for the insurance written in that state, AIG is forced to cut itself into oblivion.
2. Policy-Holder Confidence drops - In this case, life-insurance policy holders cash in on their policies at a rate too high for AIG to handle at the present moment, leaving AIG in a position where it would have to liquidate subsidiaries to payout to policy holders.

I was in a bank in September where a woman was desperately trying to pull the money out of her bank account because she thought the bank was going to collapse.

Here's what we're talking about: A Financial Arms Race
To discuss Arms Races, you can use some great little tools that have been developed, namely, Game Theory's Prisoner's Dilemma. What we are seeing right now is an iterated non-zero sum game in which one player (in this case there are a very many players that act independently, though often in the same ways essentially being balanced with the U.S. Government / The People on one side and The Financial Institutions on the other) responds to the other in a reciprocated fashion in order to either punish or subvert the other player in the hopes of eventually pushing the loser into a stalemate or checkmate (the case where one player has no potential reciprocation for your opponents' last and final play).

Potential devastations of Arms Races, as demonstrated abundently during the Cold War, include Mutually Assured Destruction MAD which is the basis of the movie Wargames. The basis of MAD is that when a game is played out over and over again the players will continue to arm themselves to the teeth in anticipation of, and because of rumors that there will be, a threatening action by the opponent. So the government is threatening to restrict pay, the companies change pay structure. Eventually, however, one of two things will be reached:
1. the Equilibrium - This would be the point where delicately balanced relationship between the two sides leads to a mutual benefit
2. the Devastating Global Collapse - basically, all of the worst parts of the AIG Paper.

So let's put the two pieces together from above and think about what is coming in the next few weeks / months and consider that maybe it's time we reconsider our stances on things to reach that equilibrium instead of focusing on punishment and working towards a devastating collapse

The Opinion:
1. People: Do not try to cash out your life-insurance policy
2. Countries: Do not attempt to seize AIG's Assets in your country
3. AIG: Renegotiate and stop doing things that are going to piss off your stock holders
read here: the U.S. Government / The People
4. Realize that this game doesn't have a particular end in sight, so stop trying to make the final move and thus escalating the fight more quickly but instead realize that if we do lose, it's going to be a really big loss. So let's compromise a little bit so we can all get through this. Someone's gotta be the bigger man here and step down a little bit.

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Today's List
Here's a List of Games in Game Theory. When you think about the choices you make in your life, it's amazing how most of them can be simplified to one of these.