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Taxpayers Fund AIG Lawsuit Against US
Posted by
ScuttleMonkey
on Fri Mar 20, 2009 01:24 PM
from the should-have-let-them-die-when-we-had-the-chance dept.
from the should-have-let-them-die-when-we-had-the-chance dept.
AIG, now infamous for their executive bonuses, has decided that the $200 billion they received from the government is not nearly enough and is suing the government for the return of $306 million in tax payments. "AIG is effectively suing its majority owner, the government, which has an 80 percent stake and has poured nearly $200 billion into the insurer in a bid to avert its collapse and avoid troubling the global financial markets. The company is in effect asking for even more money, in the form of tax refunds. The suit also suggests that AIG. is spending taxpayer money to pursue its case, something it is legally entitled to do. Its initial claim was denied by the Internal Revenue Service last year."
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Is anyone surprised? (Score:5, Insightful)
Obama says "blame me", which is political-speak for "screw you, it's done, get over it". He won't be saying "blame me" when the honeymoon is over and this escalates to a full scale popular revolt.
We KNEW AIG were crooks long before we gave them this money. Why did they do it? Where the fuck was the outrage when these bailouts were first suggested? I've been outraged since the beginning, because the whole game plan has been obvious to me since they robbed us of that first $700B. And yet polls suggest that Americans STILL think this is going to work somehow.
These people: the Congress, the President, AIG, are all just a bunch of god damned frat boys, scratching each other's backs and doling out our tax money to each other in such staggering volumes that it WILL be the end of this country if we don't stop right now.
Did you all catch Chris Dodd saying he had nothing to do with the change in the bailout legislation to allow these bonuses, then the next day saying oops, that was me. "Somebody should have caught it sooner" - yeah, right, if the bill had any chance of being reviewed by the legislators themselves, let alone the public, before if slipped past Obama's desk quicker than a greased turd. What happened to those 5 days, huh?
Seriously people, at what point do we get off the couch and take back this country? Obama can stimulate my ass.
Re:Is anyone surprised? (Score:5, Insightful)
I think the problem is that all big numbers pretty much look alike to most people & it is easy to create mass outrage at something people understand (bonuses to AIG execs) than something that people don't get (payments to AIG's counterparties).
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Re:Is anyone surprised? (Score:5, Insightful)
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Re:Is anyone surprised? (Score:5, Insightful)
Bailout: $170,000 million
Bonuses: $165 million
There: even more context and even more comparison. Surely this is even more insightful!
The fact of the matter is that:
1) $165 million is still a lot of money
2) At least the bailout was ostensibly aimed at preventing a financial meltdown that would have wrecked the economy even more. Giving bonuses to the people who caused this mess in the first place is just a big, open "fuck you" to the American taxpayers.
3) xkcd isn't a such a good comic. Yes, I get the references, but merely referencing things your audience is familiar with is a cheap excuse for humor.
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Re:Is anyone surprised? (Score:5, Insightful)
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Re:Is anyone surprised? (Score:5, Interesting)
In any case, this lawsuit seems very strange. If AIG "wins" the lawsuit, then the IRS pays AIG - but since AIG is 80% owned by the government, then 80% of that money would essentially go to support the government's investment in AIG (and could conceivably be used to pay dividends back to the entity from which the money was taken!).
I suspect that the lawsuit is really about specific business practices that AIG would like to continue using in the future (assuming AIG continues to operate in the future) and would like to establish the tax-free status of those practices.
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Re:Is anyone surprised? (Score:5, Interesting)
Or about 20 bridges to nowhere
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Re:Is anyone surprised? (Score:5, Insightful)
AIG's counterparties were hardly gambling. They were buying CDS contracts from AIG effectively as insurance, believing AIG was big enough and creditworthy enough that this rendered their default risk close to zero.
AIG was certainly gambling, although the "risk" was the risk of a systemic collapse in housing prices. (Check.)
The counterparties believed they had insurance on their CDOs from a very reputable institution (AIG).
My, how different the world looks with hindsight.
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Re:Is anyone surprised? (Score:5, Insightful)
When you make an investment with an uncertain outcome, it is gambling - which is to say, all investment is gambling. I have nothing against companies who bought/sold CDSs, CDOs, MBSs, etc - it was their money and they had the right to do whatever they wanted with it.
The problem I have is that when their bets went wrong - one of the bets being that AIG was a good counterparty - they should eat the losses. They sure as hell were not going to give you a share of the profits - why should you protect them from their losses?
Gambling is ok - as long as you can take the losses.
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Re:Is anyone surprised? (Score:5, Insightful)
Yes, you are. You are betting on it burning down, while the insurance company is betting against that outcome.
Like any betting operation, the odds are supposed to be stacked slightly in favour of the house, and the operation must be big enough not to allow any individual gamblers to break the bank (or, if you'll pardon the pun, burn the house).
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Re:Is anyone surprised? (Score:5, Insightful)
Thank God the Obama administration is trying to do something about our economic mess. I understand that very few people have any real grasp of economics and they also don't have any grasp of just what can happen when an economy deflates. We were on the edge of a real doomsday in this situation. It seems that the cash infusion has already caused a bit of an upturn.
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Re:Is anyone surprised? (Score:5, Insightful)
I think you're misunderstanding the outrage.
It's due to the fact that the very people in charge of messing up so badly they needed government help - are getting bonuses as though they had done exceptionally well.
It's an expression of the injustice that all of us grunts feel when the executives get all the credit when things go well, and the grunts get laid off when things go poorly.
Only in this case the overpaid executives are being rewarded as though they had done extremely well when in fact they've done so poorly they should be fired if not hanged.
Personally, I'd like to know how I could score a contract that will reward me with multi million dollar bonuses when things go horribly even after I'm no longer even employed by them. That sounds like about the sweetest gig imaginable.
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Re:Is anyone surprised? (Score:5, Insightful)
It was a distraction, while the Fed pumps another $1 trillion into circulation:
http://www.iht.com/articles/2009/03/18/business/fed.php [iht.com]
Which will either head off deflation (never in history been successful) or cause hyperinflation, while we are worried about 0.1% of AIG's bailout funds.
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Re:Is anyone surprised? (Score:5, Interesting)
>>>Which will either head off deflation (never in history been successful) or cause hyperinflation
I wish economists would call this phenomenon with a better description. If a government starts printing tons of paper money, it doesn't cause inflation of prices. It causes *devaluation* of the paper until soon people are walking around with wheelbarrows to buy a loaf of bread.
To use the word "inflation" is akin to a doctor claiming illness is caused by a runny nose. No, the nose and the price inflation is the symptom. The cause is the bacteria and the devaluation of the paper, respectively.
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Re:Is anyone surprised? (Score:5, Insightful)
The thing that pisses me off sooooo much is that if we had just LET THEM FAIL, AIG would have filed for bankruptcy and these contracts would have been nullified.
I've been against bailouts from the beginning. They've always appeared to me to be meant to keep the rich and powerful people (including the gov't) who SCREWED EVERYTHING UP in power and well off, while destroying everything and everyone else.
We have to endure this pain now. We have to let these giant corporations fail. We have to build everything back from the ground up. Trying as hard as the government is trying to prop up the failing companies and failed ideas that led to this mess is going to only make things much much worse.
Its hard and its not fun, but its time for the US to take its medicine. The bailouts and stimulus must stop. Hard as it is to say, I think we need to let everything fall down and then move in and start picking up the pieces and build something new.... I'm referring to the economy here, not necessarily the government. But I fear that it may need to end up getting scrapped and rebuilt too....
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Re:Is anyone surprised? (Score:5, Insightful)
Yes, of course that would work. Of course it would cost a little less money. The situation is not so different from the Great Depression. As all the idiots on Fox "News" were talking about this week: "the New Deal lengthened and deepened the Great Depression".
And they're right.
One way to solve these sorts of situations is just to let them fall down. Sure it hurts for a bit, but it's better to take the pain for a short time than suffer for a long time, right? Sure, times will be rough, but you just need to brace yourself and use a little common sense: don't buy a new car this year, hold off on renovating your beach house, and be a little more conservative in how you invest your disposable income.
Wait. What do you mean you don't have a beach house? You're only investment is your 401k? And your only car is already 12 years old? Well, that's gonna make it harder to stop that imminent foreclosure, but at least you can be kept warm at night knowing that your hunger is helping the country save a little bit of money.
It must feel good to be able to sit there, saying that the best solution is to let a section of the economy totally fail. I mean, its not like you're the one taking the hit, right? You're not losing your job or your house. You're not the one who actually has to endure hardship. And neither am I. I just bought a house. I'm going on vacation. I'm doing fine, but I'm not so much of an ass that I don't realize that many lower and middle-class people out there would lose many years of happiness in the name of helping the wealthy "suffer" through the economic troubles we're in.
Yes, the New Deal made the Great Depression a little worse, but it also kept people from dying of hunger or maybe only losing every bit of wealth and happiness they had been building up in their life.
Does AIG suck hardcore: Yes. Do the deserve help? Absolutely not, but the lower middle class does and they are the ones who would pay for your "let them fail" plan. I have zero sympathy for anyone in the upper-middle and upper classes who whines about how this is affecting their lives and how they feel their money is being wasted.
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Re:Is anyone surprised? (Score:5, Informative)
This is probably the most disturbing thing about the whole AIG mess.
The house just passed what is in all likelihood a Bill of Attainder: http://www.techlawjournal.com/glossary/legal/attainder.htm [techlawjournal.com]
We all know that the average Congressman is an idiot. However, they almost all lawyers too, so they should know better. In fact there was more than one speech on the House floor mentioning this fact. But still the House leadership went ahead.
It goes without saying that they did this for political expediency. The news says they voted to tax the bonuses, and that all anybody will remember. When it fails in the Senate or fails the final vote or is ultimately found unconstitutional, it probably won't be front page news.
On the other hand, if they are serious, what does that say about the current leadership? The Constitution is very clear and unequivocal about this. That they would even attempt it suggests a contempt for the Constitution that at the very least meets the same level of which Bush is often accused, if not exceeds it.
And if they are ultimately successful, then look out.
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Re:Is anyone surprised? (Score:5, Insightful)
Keynesianism has never worked in practice.
... except between 1930 and 1945.
And for those who think that WW II spending wasn't Keynesianism, you misunderstand Keynesianism. Keynes never argued that the government shouldn't buy guns instead of butter, he just argued that the government had to buy something, anything, in order to get the economy moving. WW II spending was much more massive than New Deal spending, with greater government oversight (wages controlled by government regulators, that sort of thing).
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Re:Is anyone surprised? (Score:5, Funny)
Seriously people, at what point do we get off the couch and take back this country? Obama can stimulate my ass.
That might make your prostate happy but what about the rest of us?
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Re:Is anyone surprised? (Score:5, Insightful)
"blame me", which is political-speak for "screw you, it's done, get over it".
No, it's political speak for "the buck stops with me." In other words, something may be the fault of his staff, but the ultimate responsibility is with him. He's saying he won't simply throw someone else under the bus like previous presidents.
We KNEW AIG were crooks long before we gave them this money. Why did they do it?
My personal, uneducated opinion is that Obama felt it necessary to continue the plan that started under the last administration. During an emergency it would be very unnerving for the plan to drastically change. My guess is the hope to restore general confidence overcame the desire to fix this bungle. Also at play is the "Wall Street insiders" who laid out the last plan and continue to work for the Treasury and Fed.
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Re:Is anyone surprised? (Score:5, Insightful)
Oh, brave new world! Where "change" means "keep doing the same fucking thing"!
-Peter
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Re:Is anyone surprised? (Score:5, Informative)
In other words the Banks are using tax payer money to pay off their debts. Lovely.
Banks are required, by law, to maintain a minimum ratio of capital vs risk-weighted assets.
Capital is not just money in the bank. Capital is also shareholder equity, reserves, general provisions (aka losses), and term debt (and other things). Many banks are currently falling below the required capital ratios because of the housing loses, erosion of asset values, and the slowing of the economy.
Legally, many banks cannot loan money at this time.
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Re:Is anyone surprised? (Score:5, Insightful)
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Re:Is anyone surprised? (Score:5, Interesting)
I don't think you understand the term "systematic danger". Lets do it in computer science speak:
You have a run away critical process somewhere in your critical system. It is eating memory like mad. It will take down the whole system when you run out of memory. Do you
1: Try to expand the memory for it, even at the cost of less critical applications, while you sort out the problem.
2: Do nothing and wait for the whole thing to come crashing down.
3: Begin looking for who ever wrote the crap to take away his bonus for successfully completing the project last year.
Basicly, letting AIG fail would not just crash the American economy. It would crash the world economy. As in NO MONEY IN THE ATM crash. As in NO FUEL FOR YOUR CAR crash. It might cost billions, but the alternative is far worse. Think Zimbawe. They have been allowed to grow too large to fail, and there is no way out of it except to keep them alive until they can be split up and sold.
What you should be asking is why the Republican party is still against nationalization of banks... Because currently, the taxpayers get to enjoy all the risk, while the owners of the banks gets the profits. And that is not a matter of a few million dollars to the executives. That's a matter of many billions. Being too large to fail is very very profitable.
Look at the Swedish bank crash of 1992. Notice that the Swedish taxpayers actually came out of it with a profit, after nationalizing several failing banks. But that is not what the US is doing. While you are busy arguing about a few millions billions are being pulled from under you.
Please stop being a sheep.
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Re:Is anyone surprised? (Score:5, Insightful)
Bu..buh.. but nationalizing banks, why thats... that's socialism! Having everyone but the responsible parties foot the bill for the excesses of the rich and privileged is just the American way - we're keeping the free market going!
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Re:Is anyone surprised? (Score:5, Insightful)
We KNEW AIG were crooks long before we gave them this money. Why did they do it? Where the fuck was the outrage when these bailouts were first suggested? I've been outraged since the beginning, because the whole game plan has been obvious to me since they robbed us of that first $700B. And yet polls suggest that Americans STILL think this is going to work somehow.
Were you high? The outrage was EVERYWHERE, eventually however people decided that the possibility of losing their bank accounts was worth the massive irritation in bailing out these losers. We've had this debate before and others, including myself; collectively decided to grit our teeth and do it because it was necessary. Remember the bailout was actually shot down the first time it was proposed.
These people: the Congress, the President, AIG, are all just a bunch of god damned frat boys, scratching each other's backs and doling out our tax money to each other in such staggering volumes that it WILL be the end of this country if we don't stop right now.
Wow, all of them; congratulations you've opened my eyes to the MASSIVE CONSPIRACY AGAINST YOU. Even the guy who wasn't around till 49 days or so earlier; he's in it too. Me I prefer the far more sane explanation, he and the rest of the cabinet are trying to prop up a bunch of retards determined to decimate themselves by any means possible. Really any sort of conspiracy would basically require the participants to be intelligent and wise; the idea that this bunch of idiots are actually part of anything more complicated than feeding and using the toilets is pretty far-fetched.
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Re:Is anyone surprised? (Score:5, Insightful)
Look on the bright side, with this method, the governments of the world (led by the US) would be paying for the losses anyway (both the businesses mentioned above are too big to fail) so by leaving AIG intact they get to capture the cashflows from the life, P&C and other solid insurance businesses.
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Re:Is anyone surprised? (Score:5, Informative)
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today's xkcd (Score:5, Insightful)
Re:today's xkcd (Score:5, Funny)
How dare you consider using perspective and logic? This is about anger and screaming and smashing stuff!
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Re:today's xkcd (Score:5, Insightful)
There are bigger issues, but letting future company managers know they can:
1. Make their company more money in good times by taking economically unjustified risks.
2. Get the tax payer to bail out the company when the unjustified risks backfire.
and
3. Personally profit either way.
Is a really bad idea. To pick an extreme example, if the same managers knew that their companies will be bailed out, but that they personally would spend the rest of their lives in jail, they would take a lot less risks.
We need to motivate managers to be prudent in the future. Letting them reward themselves does not accomplish that.
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Re:today's xkcd (Score:5, Insightful)
Actually, you and XKCD are missing the point.
This issue is that we are rewarding the people in power for fucking us over. What we need to get the bad guys out and provide proper incentives for a new team to replace them. Instead what we're doing is paying them a handsome sum to keep doing what they're doing. Indeed, the cost to us is much larger than these individuals' compensation!
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Re:today's xkcd (Score:5, Insightful)
So yea, a large amount of money next to an obscenely large amount of money is a small percentage, but it's still a large amount of money.
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Re:today's xkcd (Score:5, Informative)
Actually, these bonuses are required pay and they were not performance based. Why are people calling them bonuses then? I have absolutely no idea.
You see, back in 2007 when the CDO market started to bottom out, several of their top traders were considering leaving AIG because they were paid almost entirely basic on a bonus which was a percentage of their earnings for the company. AIG wanted them to stay to help unwind the problem and cut their losses. If they'd known what was going to happen to the entire industry they might have taken another route, but AIG didn't know and they thought these traders were worth keeping.
So AIG struck a deal, that they would continue to get the bonuses they received in 2005/2006 until 2012, as long as they stayed with the company to help cut their losses.
These "bonuses" are basically their pay, and are the only reason they are working there. I don't see how it could possibly be the government's right to take the agreed upon pay away from these people.
Can we complain about this whole deal? Yes. Can we complain about the state of the economy? Yes. Can we complain about inflated pay? Yes. Can we complain about bonuses and all the incentive based connotations that go with it? No. Yet that is what most people are doing.
Once and for all people, these weren't bonuses the way most people think of bonuses. Management didn't decide to reward then, it was pre-agreed upon payment. And it would be horribly immoral for us to take them away from said recipients.
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Re:today's xkcd (Score:5, Insightful)
These "bonuses" are basically their pay, and are the only reason they are working there. I don't see how it could possibly be the government's right to take the agreed upon pay away from these people.
It's simple. The company that agreed to pay them that can't afford to pay them that. A new entity (the government) came in which is not bound by those contracts. The people who obviously do not deserve any pay should consider themselves very lucky that they aren't stripped of every asset they own and then tossed out in the streets. That would be fair and just, but not many people are even suggesting it.
Once and for all people, these weren't bonuses the way most people think of bonuses. Management didn't decide to reward then, it was pre-agreed upon payment. And it would be horribly immoral for us to take them away from said recipients.
It would be perfectly moral and justified. Their employer does not have the money to pay them with. What they are paying them with is *my* money. That is fucking immoral. If you run a company into the ground, then you do not deserve anything. If you run a company into the ground and then demand that I be robbed to pay you for doing so, then...well the very idea that you're attempting to frame a moral debate with those thieves and failures as the moral entities doesn't speak well to your sanity or ethics.
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Re:today's xkcd (Score:5, Insightful)
These are "bonuses" like the Union pensions and health care automakers are required to cut... you know legally and fairly negotiated years ago, right.
IF it was good enough to demand retired auto workers give up their contracted benefits, (actually worse because the current workers cut off their former union brothers) it's good enough for AIG people making million dollar salaries.. don-cha think?
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This is Completely PROPER!! (Score:5, Funny)
What as stupid article!!
The US government, although the largest shareholder is not the ONLY shareholder. Minority shareholders have rights and a successful lawsuit benefits them too.
I wish people would give their heads a shake!
Re:This is Completely PROPER!! (Score:5, Informative)
Since the only reason these minority shareholders even hold stock right now that isn't simply fancy-looking toilet paper is because of the Government's involvement. I'd say to the minority shareholders "You have 35 seconds to stop this lawsuit or we're going to let you lose your miserable little shirts."
As it is, I think the more we understand about AIG's role in the collapse, the more I'm thinking that it should simply be dismembered.
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WTF (Score:5, Interesting)
Are these guys intentionally trying to force Congress to shut them down? Too much more of this, and economy or no economy, lawmakers are just going to say "Fuck you, die die die" and let the international banking system take a nosedive.
I have been (somewhat) onside for giving Wall Street a helping hand, but between the sheer incompetence of the Democrats and the sense of entitlement of these guys, I think it's time to say "Screw it", let them all sink, and then rebuild it properly, with laws requiring all bonuses be voted on by shareholders, all executives and managers be forced to convert their stock to non-voting, requiring complete replacement of any company's board and senior executives the second they take a single penny of taxpayer money, and putting their legal departments under direct Treasury control.
Re:WTF (Score:5, Insightful)
"Get over your Dem hatred, the "bonuses" were part of the deal Bush set up last year when the financial fallout was starting"
Hint: Bush did not give them the money, Congress did.
And Congress is and was controlled by... Democrats.
Most of the people I saw opposing the bailouts were Republicans: the Democrats in Congress were more than eager to hand over any amount of money so they could avoid taking the blame for pushing big financial companies into bankruptcy.
No matter what Bush wanted, the bailout would not have happened with Democrat votes.
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In other news... (Score:5, Funny)
Great Article (Score:5, Informative)
There was a great article in Rolling Stone [rollingstone.com] today that lays out exactly what has happened at AIG in terms most people can understand. It makes my blood boil!
New rule (Score:4, Insightful)
This is just beyond belief.
Not AIG's fault (Score:5, Insightful)
Don't blame AIG for trying to get their tax money back (perhaps the only money here that is rightfully theirs), or for paying their employees what is contractually due to them. Blame our politicians for bailing them out instead of allowing their failure.
Re:Not AIG's fault (Score:5, Insightful)
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Aesop's Tales (Score:5, Insightful)
During the fridge winter months, a farmer happened upon a snake frozen upon his grounds. Taking pity on the creature, he took it into his home to warm it by the fireside. Perhaps he realized they eat the rodents who would dig up his crops, and thus provided a dire function. Perhaps it was just the plain goodness in his heart. As the snake warmed itself and became animate, it leapt to forth and bit the farmer. As the farmer lay in pain (perhaps poisoned) he cried out, "Why have you bitten me, snake?!" I do believe the obvious answer was "Duh, I'm a snake."
It's just like... (Score:5, Funny)
It's just like the story of the grasshopper and the octopus.
All year long, the grasshopper kept burying acorns for winter, while the octopus mooched off his girlfriend and watched TV.
But then the winter came, and the grasshopper died, and the octopus ate all his acorns. Also, he got a race car.
Is any of this getting through to you?
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80% Owned (Score:5, Insightful)
So the gov't calls a shareholder meeting, replaces the board, and the new board quashes the lawsuit. They own 80% of the equity in the company. The government can do whatever it wants with AIG because it owns them.
Why is this lawsuit a big deal? Or rather, why does it still exist?
Solution (Score:5, Insightful)
There's a known solution to this problem. In the 1980s S&L collapse, the Office of Thrift Supervision established the rule that S&Ls taken over by the Government couldn't sue each other or the Government. It just burned up legal fees, since the money came out of the same pocket. Congress needs to enact something like that this time.
Re:I cannot believe the hubris... (Score:5, Funny)
Or, at the very least, a televised kick in the balls.
We could make it a game show, with a national lottery at dollar a ticket for the chance to be the one doing the kicking. Ad pricing could start at Super Bowl levels for the first episode, and double for each subsequent show. The money from the lottery and ad buys could be used to buy up the toxic assets, or buy out the predatory mortgages and relocate the victims into something actually affordable (in Florida).
It'd be a multi-win scenario. The public would get to vent its anger, the CEO's would learn a sharp, public and valuable lesson, and the corporate glass ceiling would be shattered as a host of women get sudden promotions to positions of power.
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