As I anticipated, AIG was not in fact able to gather all the information Andrew Cuomo wanted before the New York attorney general's 4pm deadline. Cuomo wrote a letter to AIG this morning demanding information about the millions of dollars of bonus money it's handing out to employees of its financial services division—the same division that got it into the mess it's currently in. As the deadline passed this afternoon, Cuomo called performance bonuses for AIG executives "oxymoronic" and said he was issuing subpoenas immediately.

OnceIf Cuomo gets the names, you can expect the executives who received bonuses to be very publicly shamed. Maybe then some of them will give the money back.

When I was in the Air Force and 26 or 27, I worked with a civilian named Jim. Nice guy. He was about 45, wife and two kids. He'd recently been forced off active duty due to a weird heart glitch unlikely to flare up, and he was miserable about being forced out of uniform. I, on the other hand, was a total gym rat and fashion plate with an unlimited military future. I worked out so, I had to have my uniform sleeves tailored for my sculpted, Michelle-kiss-my-heinie arms. I monitored everything that went into my body and everything that went into anybody's body around me. I subscribed to magazines like Muscle and Fitness and would have competed in bodybuilding competitions had I not been too busy going to school at night to get ahead. Jim, with his Homer Simpson gut and comb over, got winded just using the copier. One day, he came in wincing and limping. He'd actually hurt himself stretching before one of his infrequent attempts to exercise. I laughed and laughed. Thought it was the funniest thing in the world, and only realized in retrospect that he was not sharing the joke. A callow, overconfident youth, it never occurred to me then that my reaction was cruel. And stupid. What, did I think I'd still be bench-pressing my body weight at 80?

In my late 30s, when my own mystery aches and pains began, and now nearly 50 when I never see the inside of a gym that doesn't have -boree after it, styling in my Walmart stretch pants and feeling my gut pillowing into my lap when I'm naked, I have one burning desire—to tell Jim I'm sorry I was such a bitch. Well, two: I'd also thank him for not slapping me. He respectfully tried that day to convince me that eventually age would catch up with me, too, and I wouldn't always be a young hottie, free to work out all evening, apply careful makeup everyday, and fuss over my complicated hairdo. What nonsense! I believe I actually went 'talk to the hand' on that nice man. He might as well have predicted I'd end up becoming a Buddhist monk or a lion-tamer. Never, ever would I "let myself go." "Never would I age," I must have thought. Never would I lose my zeal, or the time, to take care of myself first. 

Well, much as I'd like to, I can't apologize to Jim and commiserate with him over the follies of youth. That "unlikely weird heart glitch" glitched; and a former coworker called a few years after that to tell me JIm had keeled over dead at his desk.

All of that to say this to the young feminists so offended by this elder's critique: One day, you'll have your own Jim story to tell. One day, when you've lived through more of this bitch called life, but without all that youth and vigor, you'll hear yourself saying something like, "These young women today just don't get it. Not like we did." When you've made hideous mistakes you know were because you talked the feminist talk but didn't walk the feminist walk. When that day comes, if I haven't keeled over at my desk, please have the grace to call me up so we can laugh together at youth's callow overconfidence and refusal to listen with respect, if not agreement.

As my father used to say: Even a fool can give you something you can use. But you have to hear him out. I'm not a fool, so why not ask me what I meant, then sift through those insights for the nuggets you buy into? Or, just go on believing you're impervious to either error or critique.

But wait! I started it, right? I was disrespectful first, no? Grow up, girlies. When all those random grannies on the street criticize the way I've dressed my kids or what I'm letting them eat, I just say "thank you" or "have a nice day" or pretend not to have heard. When my mother gets in my business, I say "yes ma'am," then do exactly as I please. Unless she was right, then I take her advice. But however annoying my mom, however much of a busybody the old lady across the street is, I do not growl back. I do not tell them to mind their own business or point out how their generation might have won WWII but what about Jim Crow?

When I was in the military, I sought out the more senior females, took them to lunch, and listened. Same with the female partners at my firm when I was considering the law. Ditto my elders in publishing and journalism. Ninety percent of it was useless to me (or so I thought), but oh that 10 percent.

But, then, I went in assuming I didn't know everything about being a woman in a sexist world or navigating the currents of a profession as volatile as mine. And I went in with some old-fashioned home training.

I'm not talking about reverence, I'm talking about a thirst for the kind of knowledge that will help in the battles all your responses claim to be fighting so diligently for. Here's my final example: I take seriously the chidings of people who've been dead for as much as 150 years.

European Banks

Paul Krugman thinks Europe is in worse shape than the United States:

On the fiscal side, the comparison with the United States is striking. Many economists, myself included, have argued that the Obama administration’s stimulus plan is too small, given the depth of the crisis. But America’s actions dwarf anything the Europeans are doing.

The difference in monetary policy is equally striking. The European Central Bank has been far less proactive than the Federal Reserve; it has been slow to cut interest rates (it actually raised rates last July), and it has shied away from any strong measures to unfreeze credit markets.

....Why is Europe falling short? Poor leadership is part of the story. European banking officials, who completely missed the depth of the crisis, still seem weirdly complacent. And to hear anything in America comparable to the know-nothing diatribes of Germany’s finance minister you have to listen to, well, Republicans.

There's a third side to this too: fixing the banking system.  I'm not quite sure what's going on here, though.  Back in September and October we heard a lot about how European banks were even more highly leveraged than American banks: leverage of 40:1 or even 60:1 wasn't uncommon among some of Europe's largest banks.  This suggested that their banks were headed for even worse trouble than ours and might very well need even bigger bailouts.

But since then, nothing.  Britain's banks are falling like flies, and Eastern Europe is in big trouble, but I've been reading very little about the big Western European banks that compares with the drumbeat of calls for nationalizing Citigroup or Bank of America.  (Though here's a recent example of just that.)  Is this because European banks, despite their astronomical leverage, are in better shape than American banks?  Or is it because European regulators have their heads in the sand and don't want to deal seriously with their bad banks any more than ours do?

I'm not sure, and I'm going to dig around a bit and see if I can get up to speed on this.  But any way you look at it, this needs to be on the agenda too.

Andrew Cuomo, New York's attorney general, is a demanding man. First he demanded bonus information from Merrill Lynch, which paid out billions to its employees before announcing it lost over $15 billion in the fourth quarter of 2008. When Merrill wasn't forthcoming, he asked for it again and demanded the same information from Bank of America, which bought Merrill Lynch in late 2008. Now he's demanding bonus information from AIG, and he wants it by 4pm today. If Cuomo doesn't get what he wants by then, he'll be issuing subpoenas for it. Given Cuomo's recent history, it's unlikely he's bluffing. In his letter (PDF) to AIG CEO Edward Liddy, Cuomo writes:

We were disturbed to learn over the weekend of AIG's plans to pay millions of dollars to members of the Financial Products subsidiary through its Financial Products Retention Plan. Financial Products was, of course, the division of AIG that led to its meltdown and the huge infusion of taxpayer funds to save the firm. Previously, AIG had agreed at our request to make no payments out of its $600 million Financial Products deferred compensation pool.
We have requested the list of individuals who are to receive payments under this retention plan, as well as their positions at the firm, and it is surprising that you have yet to provide this information.

Cuomo has yet to get the list of individuals he originally requested. If you've been following the attorney general's modus operandi, you'll know what happens next. He didn't get what he originally wanted, so now he's asking for more:

In addition, we also now request a description of each individual's job description and performance at AIG Financial Products. Please also provide whatever contracts you now claim obligate you to make these payments. Moreover, you should immediately provide us with a list of who negotiated these contracts and who developed this retention plan so we can begin to investigate the circumstances surrounding these questionable bonus arrangements. Finally, we demand an immediate status report as to whether the payments under the retention plan have been made.

Judging from AIG's past history and general incompetence, it seems unlikely that the business will want to or be able to put together the information Cuomo wants in the next few hours. It's probably safe to assume that subpoenas will be forthcoming.

AARP stands unrivaled as a public voice for old folks. Yet so much of what they have to say about the current economic crisis, which has hit us geezers especially hard, is just godawful drivel. On my own blog last week, I commented on AARP magazine’s relentlessly upbeat take on being old and out of work. A recent bulletin piece was full of the same kinds of useless pick-me-ups. What really took the cake for me this time, though, was the financial planning advice offered to recession-battered geezers:

Avoid early withdrawals. “Taking hits on your retirement accounts, especially when the stock market is falling, generally isn’t a good idea,” says Matt D’Arcy, of Greybridge Financial in Cleveland. Seek professional help. “There are a lot of strategies that might help people avoid touching retirement investments,” he says. “The point is to sit down with someone who can help you map a plan.” If possible, delay Social Security. Benefits are reduced before full retirement age.

OK, let's just take these statements one-by-one. First, "Avoid early withdrawals." Nice advice if you can afford it. Or maybe not even then: These financial “experts” have been warning us for more than a year not to take our money out of the market. I just checked to see where the Dow Jones Average was a year ago–hovering around 12,000. I don’t need to tell you where it is now. Here’s a chart that tells the story all too clearly:


Now, don’t you wish you’d made a couple of “early withdrawals” some time in the last year? Instead, we’ve been told again and again that we have to “hold tight” and “wait it out.” Not very useful for people who are already retired and depending on their savings–and could die before this thing hits bottom.

Former Rep. Rob Simmons, a Republican who represented Connecticut's very blue (it went for Obama by 19 points) second congressional district from 2000 to 2006, announced on Sunday that he will challenge Sen. Chris Dodd in 2010. Despite the (R) next to his name, Simmons stands a chance: a recent poll showed him ahead of the once-popular incumbent.

Zombie Banks

Over at our main site, I've got a piece up that I think of as "Nationalization 101."  (The official title is "Real Capitalists Nationalize," a phrase I stole from Steve Randy Waldman.) It's a quick overview of how banks work, why toxic assets have frozen the credit market, and what the options are for dealing with it.  Option #4 is the Swedish solution: selective, temporary nationalization of the weakest banks:

President Obama clearly has considered the Swedish experience: "They took over the banks," he said on Nightline last month, "nationalized them, got rid of the bad assets, resold the banks, and a couple years later, they were going again. So you'd think looking at it, Sweden looks like a good model." Yet, he went on, the United States has a "different set of cultures" than Sweden, and Americans would find nationalization a hard pill to swallow.

Unsaid but implicit in Obama's statement, though, is that Americans could likely be persuaded to accept nationalization if they understand that all the alternatives are worse. In fact, this may have been exactly the point of the bank rescue plan Obama's treasury secretary, Timothy Geithner, announced shortly after that interview. A key element of the plan involves a mandatory "stress test" for the country's biggest banks, which sounds remarkably similar to Hempton's third-party auditor and Sweden's Bank Support Authority. It could turn out to have been a smart PR move as much as anything: Get everyone talking about the stress tests, worrying about the stress tests, gossiping about the stress tests — and by the time the results become public, it's hard to imagine any recourse other than nationalization for the banks that don't pass.

The stress test is also a way to address both of the two big problems with nationalization. Not only can it fairly decide which banks are solvent and which ones aren't, but it also addresses the dreaded "contagion" problem: Since investors are wiped out when a bank is nationalized, the mere fear of nationalization can scare private investors away from every bank, even the good ones. But if stress tests are done on every bank and the bad ones are all nationalized at once, the good banks are freed from fears that they might be next on the government chopping block.

You'll notice that in this piece I'm still holding out hope that Geithner's stress tests are basically designed to give him an excuse for selective nationalization.  I'm still hoping that's true, I think, but it's hard to say what's really going on.  Last night, for example, Ben Bernanke was asked on 60 Minutes if all the big banks the Fed regulates are solvent, and he answered flatly, "I believe they are, yes."  But then he followed up by mentioning the stress tests and suggesting that if a big bank is insolvent, they'd  "try to wind it down in a safe way." What's that supposed to mean?

Add to that the fact that Citigroup and Bank of America, the two banks most often mentioned as basket cases, have recently sworn on stacks of Bibles that their capital position is rock solid.  No more bailouts for them!  And considering that their toxic asset pool was guaranteed by the government a few months ago, which limits their downside losses, they might even be right.  Or, they might be lying through their teeth.  Who knows?

In any case, the full Swedish solution will be a tough sell.  Not only would it involve temporary nationalization of one or two big banks, but it would also feature a systemwide guarantee of all bank obligations.  But that's basically what we did for AIG, and bailing out all of AIG's counterparties hasn't exactly gone down well in the heartland.  Doing the same thing for the rest of the financial system, nationalized or not, would certainly help restore confidence in the banking system, but getting Congress to agree won't be easy.

The Boston Globe has assembled a spectacular photo essay of the chaos afloat off the shores of Somalia, where pirates have stepped up attacks on commercial shipping in the last year. Enjoy it for yourself here.

You bail it out, you own it.

That's the problem that Barack Obama is encountering. The federal government on his watch has poured tens of billions of dollars into AIG. And then comes the news that the failed insurance giant has awarded its execs hundreds of millions of dollars in bonuses. Though these rewards were set up by contracts established before the feds showered AIG with taxpayer dollars, the Obama administration is in a position to get blasted for this. After all, it's hard for the Obama White House to defend shoring up AIG with $170 billion in money from the Federal Reserve while its executives are scoring big.

Assuming propping up AIG is good policy, Obama has to sell this rescue--and all the others--to the public, and that's not any easier if AIG execs are lining their own pockets at the same time. Treasury Secretary Timothy Geithner has tried to pressure AIG chief Edward Liddy on these bonuses, and Liddy has attempted to hold firm, claiming much of these bonuses are necessary for the firm to retain talent. (Obvious response: if this is what you call talent, perhaps it's time to hand AIG over to amateurs.)

So Obama has to attack AIG while aiding it. He took a stab at this on Monday morning. At a White House appearance, when he was supposed to be talking about his plans to bolster small businesses, he took the opportunity to poke at AIG:

[AIG] is a corporation that finds itself in financial distress due to recklessness and greed.

Under these circumstances, it’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. How do they justify this outrage to the taxpayers who are keeping the company afloat?

In the last six months, AIG has received substantial sums from the US Treasury. I’ve asked Secretary Geithner to use that leverage and pursue every legal avenue to block these bonuses and make the American taxpayers whole....This isn’t just a matter of dollars and cents. It’s about our fundamental values.

All across the country, there are people who are working hard and meeting their responsibilities every day, without the benefit of government bailouts or multi-million dollar bonuses....All they ask is that everyone, from Main Street to Wall Street to Washington, play by the same rules. That is an ethic we must demand.

What this situation also underscores is the need for overall financial regulatory reform, so we don’t find ourselves in this position again, and for some form of resolution mechanism in dealing with troubled financial institutions, so we have greater authority to protect the American taxpayer and our financial system in cases such as this. We will work with Congress to that end.

Will this approach--slam AIG, help it survive, and push financial reregulation--work politically? It probably depends on how much feeling--and what sort of feeling--Obama puts into the slamming part. A little anger won't hurt. There may be building--or seething--outrage beyond the Beltway. Obama has to make sure he's not blind-sided by it. And those recipients of federal largess at AIG are not helping.

From Fareed Zakaria, himself a Very Serious Person in good standing, breaking ranks with the Very Serious People who have a chokehold on American foreign policy:

The problem with American foreign policy goes beyond George Bush. It includes a Washington establishment that has gotten comfortable with the exercise of American hegemony and treats compromise as treason and negotiations as appeasement.

On a related note, I think this partly accounts for one of my pet peeves: the popularity of the "carrot and stick" metaphor that gets used so often when politicians and pundits talk about how we should deal with foreign powers.  Most national leaders are comfortable with the idea of negotiating with us based on competing interests, but I don't think there's a leader in the entire world who doesn't bristle at the idea of being bribed like a schoolboy into cooperation with the United States.  It's a fantastically counterproductive way of publicly describing foreign relations, but nobody on this side of the Atlantic even seems to notice how fundamentally demeaning and offensive it is, or how difficult it makes it for foreign leaders to avoid the charge that they're "caving in" if they come to terms with us.

A better description of the bargaining process is simple: we have things we want, they have things they want, maybe we can strike a deal.  That's the way adults negotiate.  It's time for the carrot and the stick to be buried for good.