Contempo Magazine Blog

The scandal some are calling “Bonusgate” is now extending beyond AIG and Bank of America into Fannie Mae and Freddie Mac bringing to light the relationship between Wall Street contributions and their connection to Democratic negligence in the handling of Wall Street excesses.  Two key figures top the list in campaign contributions from the entities involved as they did for AIG, Senator Chris Dodd (D-RI) and President Barack Obama. Many Americans are now learning that for some time the Democratic leadership in return to for heavy campaign contributions has show undo favoritism to Wall Street resulting in the wasting of billions of taxpayer dollars.

As I reported yesterday, the testimony of AIG CEO Edward Liddy before Congress demonstrated that the Obama administration should have been reasonably aware of the bonus dilemma early enough to act to prevent the retention bonuses being paid to the Financial Products division employees of AIG who also contributed to the current world wide financial crisis. Senator Dodd has made contradictory statements within the past two days to several reporters including Greta Van Susteren from Fox and now admits he was involved in altering the legislation to curtail executive bonuses to corporation receiving federal monies when the House-Senate subcommittee meet to finalize the bill. He points the finger at unnamed officials at the Treasury department who told him that limiting executive bonuses would result in a torrent of lawsuits. Strangely, Senator Dodd said he never saw the final revision of the bill. Republican Senators Chuck Grassley of Iowa and Richard Shelby of Alabama have indicated that the official House Senate conference committee process shut the minority party out of any real participations. A small number of so far unnamed Democrats which likely included House Speaker Nancy Pelosi (D-CA) and Senate Majority Leader Harry Reid (R-NV) crafted the final bill version privately.

Attention is now being focused on other bailouts. The Housing and Economic Recovery Act of 2008 contained provisions giving the Treasury Department authority to spend tax payer money for the financial security of the troubled government sponsored mortgage lenders Fannie Mae and Freddie Mac. At the time the bill was passed Republicans had concerns over the effect of the enormous lobbying power that these organizations possessed. Even though they were now becoming quasi government agencies receiving potentially $100 billion as was estimated by Peter Orszag, then Congressional Budget Director, but now White House Budget Chief with the Obama administration.

Senator Jim Demint (R-SC) at the time sent out a press release saying ““Currently, the Department of Treasury cannot retain high-powered lobbyists or make political contributions to candidates, and the same rules should apply to Fannie and Freddie. If we plan to use taxpayer dollars to buy shares of these troubled companies, they should be treated like other federal entities. Any legislation exposing taxpayers to this risk should include a serious debate on long-term reforms, and a ban on lobbying must be included.”

In July of 2008 the Center for Responsive Politics reviewed the lobbying history of Fannie Mae and Freddie Mac. For almost twenty years they have concentrated their contributions to members of the House and Senate from one of the four committees that regulates their industry. The top recipient on the list was the same Senator who tops the list in political donations from AIG, Chris Dodd (D-RI). Then Senator Barack Obama received the most money in the shortest amount of time any political figure had ever received from Fannie Mae and Freddie Mac. Neither the President of the United States nor the Democratic leadership in Congress has ever taken any action to limit this lobbying power despite Obama’s pledge to reduce the influence of lobbyists in Washington.

Today the Wall Street Journal is reporting that just Fannie Mae and Freddie Mac despite losing billions of dollars in the mortgage industry requiring government bailout are planning to pay substantial retention bonuses to executives. So far they report details are only known for Fannie Mae which will pay between “$470,000 and $611,000 to some executives” despite that the Treasury has capitalized each organization about $200 billion to stabilize their status following losses of $108 billion in defaulting home loans.

The Wall Street Journal quoted James Lockhart , Federal Housing Finance Agency Director, who seemed to echo sentiments similar to AIG CEO Liddy when he said that bonuses were necessary to keep a specialized workforce to work on mortgages and prevention of foreclosure. Although the CEO Herbert Allison is going without a salary or bonus other top executives at least three top executives will receive bonuses equal to their base salary.

Then Senator Barack Obama made a speech in 2007 against Wall Street. He called for “an immediate investigation of the relationship and business practices of rating agencies and their clients” which has not happened nor did he ever formally ask for one. He offered to Wall Street “I know some may say it’s anathema to come to Wall Street and call for shared sacrifice so that all Americans can benefit from this new economy of ours,” his remarks said. “But I believe that all of you are as open and willing to listen as anyone else in America. I believe you care about this country and the future we are leaving to the next generation. I believe your work to be a part of building a stronger, more vibrant, and more just America. I think the problem is that no one has asked you to play a part in the project of American renewal.” Politico.com and MSNBC among others touted how Obama was going to get tough on Wall Street excesses. Obama’s promises never have been acted upon since he was inaugurated, paradoxically, now he and his administration are coming under intense scrutiny from the American people.

The liberal press stressed beyond reasonable measure during the Presidential campaign that Obama had raised money from small time donors through the internet but there is another not often told story. More than half of Obama’s donations ( and the reason he turned down public financing) came from large corporate donors. Although at initial glance of the publicly available Federal Election Commission records the traditional owners of Democratic party funding, the trial lawyers would appear to have been the most prominent at over 24 million dollars in just a few months time. On closer examination its clear, however, that Wall Street dwarfs all other donors. Wall Street corporate executives, employees, their political action committees, and 527 organizations can multiply their donations many times over if when public financing is avoided. For just 2008, for example, Goldman Sachs gave $691, 930; troubled Lehman Brothers managed to give $370,524; Citigroup gave $448,529; and JP Morgan Chase & Co. gave $442,919 just to name a few.

Special types of contributors are called “bundlers”. These are specialists at gathering and concentrating large amounts of cash in ways that are not technically illegal. A record number of “bundlers” where given special skyboxes at the Denver Democratic party convention in 2008. During the convention they arranged that almost every Democratic elected official and all newly elected officials where taken to special parties to meet “important people” such as those promoting online gambling legalization. Some have argued that the reason Joe Biden was selected as Vice-Presidential candidate had less to do with his foreign affairs expertise and more to do with his linking to bundlers like prominent Baltimore attorney, Peter G. Angelos. Many in the Obama campaign feared that they could be in real trouble if they were “cut-off” from the Hillary Clinton’s financial supporters so they planned a brillant strategy of combining new online campaigning and the old fashion behind the scenes money “handling”. In all, 56 bundlers from Wall Street added another quick $10 million dollars to the Obama campaign. Although it is true that bundlers associated with lobbyists have also given to the McCain campaign, it appears that what Obama has done is get rid of the middleman and get the money directly from Wall Street itself. The Center for Responsive Politics has even questioned if Obama can be objective in dealing with a possible government bailout of troubled financial institution after many from Wall Street made such a public statement of support of Obama at the Democratic convention. The former head of Goldman-Sachs, former Senator Jon Corzine, remains one of Obama’s closest advisors.

The American public is now learning the truth of the connections between the money of Wall Street and the actions of the Democratic leadership. Obama is now saying he will form a new regulatory agency to oversee non-banking financial institutions with the help of Congressman Barney Franks (D-MA) similar to what the FDIC is for banks. Is this more rhetoric or will he finally keep the promise he made in 2007.

Thanks for reading Contempo Magazine blog which discusses issues for McAllen, the Rio Grande Valley, and America from a conservative Hispanic point of view. Tony Magaña grew up in McAllen Texas, attended Texas A&M University, served as an officer in Army Reserve, and holds a doctorate from Harvard University. The co-founder of Contempo Magazine has participated in Valley business for over 20 years. He is a member of the National Association of Hispanic Journalists and also writes for the American Daily Revew

The honeymoon for the Obama administration is definitely over. Two hours of testimony of American International Group (AIG) CEO Edward Liddy today before a Congressional committee called to investigate the AIG bonus scandal has accelerated the decline of public approval of the President and the growing disunity within the Democratic Party. President Obama essentially sidestepped talking about the issue today and Treasury Secretary Geithner actually refused to appear before the committee. At best it appears that the Obama administration has been inept at minding the store but now there are also questions asking why the bonus package got through the stimulus legislation prepared by the Democrats and signed by Obama in January.

Both sides of the aisle pummeled Mr. Liddy about how the bonuses came about, how knew about them, why were they needed, and what should be done now? For his part Mr. Liddy at times did seem like the proverbial deer in the headlights in painting a picture of poor or completely absent Federal involvement in the oversight of AIG which is now essentially owned by the American taxpayer. When Mr. Liddy tried to evoke sympathy for AIG employees who may have received threats by requesting that the names of employees be kept confidential for their protection. Almost every Congressman later said that the American people have a right to know where their money is being spent. An offer of returning 50% of the bonuses made by Mr. Liddy at the onset of his testimony did not find favor.

On the subject of contacts and communication with Federal agencies there was an appalling paucity. Usually CEOs have frequent meetings or at least send reports to their boards but when Mr. Liddy was asked about a special “Board of Trustees” involvement he could not even name one member. The Federal Reserve Board of New York named three in January 2009 to oversee the government’s 80% share of AIG. The trustees are Jill Considine, a former New York banking commissioner; Chester B. Feldberg, former chairman of Barclays Americas; and Douglas L. Foshee, president and chief executive officer of El Paso Corp. Asked about communication from the Treasury Department he reported that he had no first hand knowledge. The contact he seemed to have with the Obama administration was that Federal Reserve Board representatives have attended some meetings.

Mr. Liddy reported that AIG has been in contact with various members of Congress or their staff about the bonuses but none of the Congressmen at the hearing volunteered any further information. Congressman Paul Kanjorski (D-PA) got defensive at that remark and retorted to Mr. Liddy why he had not been keeping Congress up to date. Many sources are reporting that during the House-Senate Conference Committee hearings to get the stimulus package approved in January of this year there was knowledge of the bonuses to come and that preventative action could have been taken . Save for three Republican Senators and 11 Democrats the bill was passed as a Democratic initiative.

The justification for AIG to award bonuses to the some of the same persons who caused the fiscal crisis was not welcomed. While defending the bonuses as necessary to keep the talented people required to resolve the asset crisis at AIG , Mr. Liddy admitted that there were likely equally qualified people currently unemployed on Wall Street who could replace them. Another point of defense for the bonuses that Liddy tried to make about the risk of lawsuit damages from disgruntled employees for breach of contract was questioned severely by former lawyer Congressmen who replied that when Mr. Liddy was the CEO of Allstate Insurance Co. he made a reputation of taking contract disputes to court.

A few members of Congress accussed AIG of carrying out illegal activities. Congressman Steven Lynch (D-MA) echoed the feelings of many that a former contract attorney told Mr. Liddy that the bonuses were not legal because they insulated the employees from any risk of loss and tried to hide the true condition of the corporation. California Congressman Republican Edward Royce accused AIG of using the bailout money in an illegal scheme to purposefully undercut other insurance companies by underpricing their product.

Those eleven Democrats have grown to fifteen who are openly questioning the wisdom of the President and the liberal leaders of the Congress in passing such high spending bills. Senator Evan Bayh (D-IN) along with his colleagues are forming a “Moderate Working Group” which according to a statement from his office will “on the upcoming budget negotiations and the importance of passing a fiscally responsible spending plan in the Senate.”

The Obama administration says they just learned of the bonuses this week and Treasury Secretary Geithner says he just became aware of them last week. However, based upon testimony and other Washington revelations that have come out today there are growing questions about when Senate Democratic leaders in Congress first knew about the bonus provisions and why they took no action. Controversy is beginning to surround Senator Chris Dodd (D-RI) who has received over $9 million dollars in contributions over the past five years from Wall Street. AIG gave the most donations in 2008 to President Barack Obama $104,000 and then Senator Dodd at $103,000 according to watch group OpenSecrets.

The House Republicans who have been the objects of levity by the liberal media as the “ Party of NO” have clearly now been redeemed. As they predicted big government does not work because waste, negligence, favoritism, graft, and worse always follows.

Thanks for reading Contempo Magazine blog which discusses issues for McAllen, the Rio Grande Valley, and America from a conservative Hispanic point of view. Tony Magaña grew up in McAllen Texas, attended Texas A&M University, served as an officer in Army Reserve, and holds a doctorate from Harvard University. The co-founder of Contempo Magazine has participated in Valley business for over 20 years. He is a member of the National Association of Hispanic Journalists and also writes for the American Daily Revew

The current AIG debacle in which AIG paid 73 employees bonuses from $1 to 6.4 million including some who are not even working at AIG anymore was absolutely avoidable. Many are beginning to wonder if the new President and his administration have a problem in paying attention to detail. Treasury Secretary Geithner had the responsibility to oversee the contractual relationship between AIG and the U.S. government when it increased the bailout to AIG after the Obama administration had taken office. Already AIG had a track record of spending hundreds of thousands of dollars for business “junkets” which included pedicures, manicures, escorts, and who knows what else.

If the government had declared bankruptcy in the first place then all contracts would have been immediately required to come under renegotiation. Instead because Democrats did not want to create a precedent that would force labor unions such as the United Auto Workers to change their contracts in the Detroit bailouts so they came up with the idea of these loans against equity in the company. As I have reported in the American Daily Review there are many legal scholars who think that not only was the decision to avoid bankruptcy unwise but perhaps even unconstitutional.

Panic among politicians of both political parties that caused them to pass hasty legislation has resulted in a doubling of the national debt in just the first 60 days since President Obama was inaugurated. Now we are feeling the pain of having laws that are written on thousands of pages that no actual Congressman or Senator has read. In Washington no one wants to pay attention to any details of their duty but instead just want to get that good sound bite and have the appearance of responding to the popular mantras of the mainstream media. What other surprise omissions or mistakes in the unread legislation that became law  will spring upon the American public in the months or years to come?

The economy is the most important issue before our country and President Obama is not giving financial crisis enough attention. He is seeing the forest but not the trees. As time goes on he appears to be a great speaker and inspiration builder but not a lover of detail. Theorectical postulates of ideal government make a for good campaign and a happy crowd but once the election is over good government is only gotten by effective consistent administration that pays attention to detail.

Over 100 appointments which are vital to the Treasury Department remain empty. Many moderate Democrats like Senator Evan Bayh and Russ Feingold are beginning to question if putting the country in so much debt is really worth it. Business leaders who supported Obama initially are now putting greater and greater distance between themselves and his administration. In the space of three days, appointees of the Obama Administration said we needed to double the bailout of the banks because the economy needed more stimulus and then said that was a mistake. President Obama promised to end earmarks but instead signed a budget bill with the most earmarks in history.

The Obama Presidency is beginning to look like a dance where you take two steps forward, one step back, and then one to the side. At the end one can not tell if one is making progress, falling behind, or just lost.

Thanks for reading Contempo Magazine blog which discusses issues for McAllen, the Rio Grande Valley, and America from a conservative Hispanic point of view. Tony Magaña grew up in McAllen Texas, attended Texas A&M University, served as an officer in Army Reserve, and holds a doctorate from Harvard University. The co-founder of Contempo Magazine has participated in Valley business for over 20 years. He is a member of the National Association of Hispanic Journalists and also writes for the American Daily Revew