Class Warfare 101 With Andrew Ross Sorkin

The guy who brought us this piece of fiction about an autoworker at GM making $70 an hour told us here in the New York Times today that we should let those criminals at AIG receive bonuses from TARP funds (some of whom have left) with impunity, because…

If government officials were to break the contracts, they would be “breaking a bond,” (compensation consultant Pearl) Meyer says. “They are raising a whole new question about the trust and commitment organizations have to their employees.” (The auto industry unions are facing a similar issue — but the big difference is that there is a negotiation; no one is unilaterally tearing up contracts.)

But what about the commitment to taxpayers? Here is the second, perhaps more sobering thought: A.I.G. built this bomb, and it may be the only outfit that really knows how to defuse it.

A.I.G. employees concocted complex derivatives that then wormed their way through the global financial system. If they leave — the buzz on Wall Street is that some have, and more are ready to — they might simply turn around and trade against A.I.G.’s book. Why not? They know how bad it is. They built it.

So as unpalatable as it seems, taxpayers need to keep some of these brainiacs in their seats, if only to prevent them from turning against the company. In the end, we may actually be better off if they can figure out how to unwind these tricky investments.

I’m sorry, but given the degree of disaster wrought by these supposed financial geniuses, I’m really not disposed to entertain language that basically is a blackmail threat to us.

More than anything else, I read stuff like this and I wonder what the #@!$ happened to the original TARP (the “beta” version, I guess) that was committed to removing the toxic assets first and THEN determining how the funds should be doled out to the affected companies, either in their original form or in their “nationalized” version (oooh, sorry I know that’s a baaad “N” word, if you will).

But as you consider what Sorkin says, I would ask that you also read this, in which Sorkin communicates a very different perspective towards a GM assembler named Kandy O’Neill…

When you read a line like that (about how difficult it is to be an auto assembly line worker) you might sympathize with her, but then you realize that nothing can be accomplished without bankruptcy. Ms. O’Neill: your company is asking the taxpayers — many of whom don’t have health care coverage — to pay your salary and health insurance.

And that’s a problem for Sorkin (providing some temporary funding for someone like O’Neill, who has done nothing wrong), but apparently he has no issue with “asking the taxpayers” to foot the bill for a bunch of white-collar criminals, “as unpalatable as it seems” (and in his story today, Sorkin tells us that “if A.I.G. had spiraled into bankruptcy, its employees would have had to get in line with other unsecured creditors,” though he apparently has no issue if autoworkers had to endure the same fate).

At this moment, I have two words for Andrew Ross Sorkin, and they’re not “happy birthday” (I’ll give you a hint: Jon Stewart uttered them at the end of his eight-and-a-half-minute takedown of CNBC last week).

And thanks go out to Sorkin also, again, for the $70-an-hour automaker myth (wonder what the hourly rates are for the AIGers who took their bonuses after receiving TARP funds including salary and bennies?) because he didn’t bother to point out that the wages for labor costs “make up only about 10 percent of the cost of a vehicle,” as Sorkin’s Times’ colleague David Leonhardt points out here (and as far as Sorkin preaching bankruptcy as a solution to the automakers goes, Leonhardt makes the following good point)…

Actually, it's rather interesting that Toyota and Honda aren't screaming bloody murder about the U.S. government's attempts to force the Detroit Three's to reduce their costs to levels more comparable to the transplants since that would take away the transplants' comparative advantage.

Could it be that it's so important to the Japanese and German car makers with factories in the U.S. that the Detroit Three remain viable, since they all get their parts from many of the same suppliers, that the Japanese companies are willing to risk more competition in the future than have to contend with Detroit Three bankruptcies today?

Also, as far as recovering AIG’s bonuses is concerned, I thought this Daily Kos post about an idea by a freshman Dem House rep named Gary Peters was the best I’ve heard so far…

“It is beyond outrageous that the very people who brought AIG to its knees and helped create the current financial crisis are scheduled to receive hundreds of millions of dollars in bonuses while tax dollars keep their company afloat,” said Rep. Peters, a Member of the House Financial Services Committee. “These bonuses are in effect a raid on taxpayer dollars. The legislation I’m proposing will get taxpayers their money back. Congress must act swiftly on this matter to show AIG, other companies receiving federal support and taxpayers that we mean business when we say that tax dollars are not to be used to enrich company executives.”

Congressman Peters’ bill would create a 60 percent surtax on bonuses over $10,000 to any company in which the U.S. government has a 79 percent or greater equity stake in the company. Currently, AIG is the only company that meets this threshold. The 60 percent surtax would be added to the normal income tax rate, meaning that bonuses received this year by AIG executives paying the top 35 percent tax rate would be taxed at 95 percent. The remaining 5 percent would likely be paid in state and local taxes, so taxpayers would fully recover any AIG bonuses paid in 2009.

Another thing...I’ve never traded in financial securities, but I worked with people who did, and I know there are codes of compliance and standards of conduct that must be observed in order for someone to maintain their license or licenses. In addition, companies have their own internal codes of compliance in these matters; while I don’t know that anyone at AIG violated such codes (did they even exist?), at the every least, those codes should be strengthened to accommodate the malfeasance of those employed at the company that has brought us to this present sorry state.

And I got sort of a chuckle through clenched teeth, if you will, over this in Sorkin’s story from today…

(New York Attorney General Andrew) Cuomo wants to know who A.I.G.’s lucky employees are, and how they have been doing at their jobs. So here is a suggestion for him. Get the list, and give those big earners at A.I.G. a not-so-subtle nudge: Perhaps they will “volunteer” to give some of their bonuses back or watch their names hit the newspapers. But in the meantime, despite how offensive and painful it might be, let’s honor the contracts.

Here’s my idea instead; get the list and tell them to give back their bonuses or they’ll be prosecuted (“volunteer” my ass; I’d love to go after them now, but I think it’s unclear whether or not they’ve actually broken the law…yet).

And then name who they are anyway (and a hat tip goes out to Atrios for this – he’s right; this congress doesn’t have much of a record of success with “sternly worded letters”).

Update: I would say that, when Dana Perino is pleading your case for you, you're in trouble (and doesn't she have an interesting definition of "middle class"?).