Frank: We Own AIG, Now Let's Act Like It
House Financial Services Committee Chairman Barney Frank (D-MA) just finished a press conference on AIG, where he divulged a new wrinkle in the ongoing push to recoup the company's lavish bonuses.
The U.S. government apparently added "covenants" to its deal with AIG to cede some of its rights as the majority owner of the company, Frank said, adding in plain English: "It's time to act as the owner."
Frank declined to elaborate further on the nature of the limits that were set "restraining [the government's] influence" over AIG, but he said he'd be taking the issue up further with the Obama administration later today.
And he reminded reporters that Congress had no control over the AIG bailout, which was conducted via the Federal Reserve rather than the legislation that set up the TARP program late last year. "Remember, the legislative authority for this is essentially the 1932 statute" that set the Fed's lending rules, Frank said.
Asked about the idea picking up steam in the Senate as well as the Joint Economic Committee to tax AIG's bonuses as 100%, Frank demurred to Rep. Charles Rangel's (D-NY) Ways and Means Committee, which has broad jurisdiction over taxation.
Late Update: Here's the video of Frank's comments today.
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What "covenants"? Why haven't we heard about these before? It does explain why the government keeps acting like it can't give orders.
March 17, 2009 2:52 PM | Reply | Permalink
Barney Frank is absolutely right - if the government can force GM to renegotiate contracts with their employees - and the government doesn't own GM - there is no reason whatsoever that it can't do the same with AIG. The real problem is that the liars and con artists at AIG have convinced Geitner they are indispensable. This is just their latest scam and theft, and it's time that Obama wakes up and cleans house at a company that we now own and that he is supposed to be in charge of.
March 17, 2009 2:55 PM | Reply | Permalink
We don't own AIG.
Why do people keep saying we do?
We own a lot of paper on AIG's paper.
March 17, 2009 2:57 PM | Reply | Permalink
Taxpayers own 77.9% of the equity of AIG and hold warrants to purchase an additional 2% equity interest.
March 17, 2009 3:09 PM | Reply | Permalink
Yeah but what's the point in owning a company that you have no control over?
March 17, 2009 3:31 PM | Reply | Permalink
The government has control because the government can demand its money back and send the company into receivership tomorrow. At that point the company is nationalized. If that's what it takes to weed out the crooks and con men in the company, that's what should be done. Period.
March 17, 2009 10:49 PM | Reply | Permalink
But we don't have a voting interest. We're essentially a silent partner.
From my vantage point, it appears AIG may be beyond saving. Put it into receivership, sell off (or spin off) the parts of the company that are viable and shut down the division that's caused all the trouble. It's going to be nearly impossible to get the bonus money back, but it should be the last check they receive.
March 17, 2009 3:38 PM | Reply | Permalink
Agreed. But to do that, the government has to actually assert its authority. As stated above, we have a majority ownership and no place on the board. That has to change. It's time to dictate the rules, find out where we stand (or 'how bad it really is'), and start slicing and dicing.
March 17, 2009 4:16 PM | Reply | Permalink
Technically we have preferred stock which can be converted into common stock under some conditions. Until converted I wouldn't say we own any significant fraction of AIG. We are playing to their needs, for now. And they aren't even paying us interest if I understand the TARP N details!!
March 17, 2009 5:16 PM | Reply | Permalink
I am beginning to think Obama is not being well served by Geitner.
March 17, 2009 2:58 PM | Reply | Permalink
That's the understatement of the year.
March 17, 2009 3:58 PM | Reply | Permalink
Gosh, ya think?
I'm still trying to figure out why he hired Geithner in the first place.
March 18, 2009 3:40 AM | Reply | Permalink
It is time to show some balls. This people need to be put in their place.
March 17, 2009 3:01 PM | Reply | Permalink
These people ...
March 17, 2009 3:01 PM | Reply | Permalink
Let's all say it together: "Nationalize". Is that so hard? I think it's time to go into AIG.
March 17, 2009 4:18 PM | Reply | Permalink
Damn straight it's time to nationalize AIG. But why stop there? It's the FEDERAL RESERVE that should be taken out of the banksters' greedy clutches.
Nationalize the Federal Reserve!
March 17, 2009 4:32 PM | Reply | Permalink
I agree that the current administration is not being tough enough (or transparent enough, if there is good reason for not being as tough as I'd like) with AIG, the banks, etc.
Just a reminder, in case anybody forgot, that most of this is a hangover from Bush and Paulson, the guys who initially proposed handing over $700B, no strings attached.
March 17, 2009 4:21 PM | Reply | Permalink
AIG is Bernanke's doing, technically speaking. AIG only came under the TARP later. The Fed "owns" AIG in that sense, both literally and figuratively speaking. The Fed is not the Feds.
Bernanke played a shell game with Bear Stearns, too (Maiden Lane LLC ...). It might be legal but it's definitely questionable (when is exploiting loopholes a good idea).
March 17, 2009 5:12 PM | Reply | Permalink
Ass In Gutter - Who's your daddy?
March 17, 2009 6:12 PM | Reply | Permalink
The administration needs massive public support to be able to take control of these robber barons. There's much more that Obama can't do because the public are too lazy and ignorant to get involved.
It means support in the voting booth, opinion polls, boycotts, and through liberal NGOs. Join up and contribute now before we're all in bread lines.
March 17, 2009 9:27 PM | Reply | Permalink
Obama had better have a strong next few days through the remainder of the week. Monday/Tuesday have disappointing, to say the least.
It's time for Axelrod, Emmanuel and Co. to really get on the ball and get Geitner's game together forthwith.
March 18, 2009 1:46 AM | Reply | Permalink