Shell Oil Bails On Renewable Energy

This is very, very bad. Shell Oil's putting all their chips behind biofuels instead.

-AF

Before The Market Goes To Shit

Wall St. weasels' change their performance bonuses into "retention bonuses." Kevin Drum explains:

Of course they got their comp locked down when they saw the storm ahead of them...

What happened at AIGFP is standard practice throughout corporate America. America's corporate titans like to talk endlessly about performance-based pay and how capitalism rewards risk, but in real life compensation packages are almost always constructed to avoid as much risk as possible. If you work in a growing industry, your bonus depends on raw growth rates. If you work in a declining industry, your bonus is linked to relative growth rates. If the market is up, your bonus is paid in stock. If it's not, suddenly deferred comp and increased pension contributions are the order of the day. Heads you win, tails you win.

We may not like it. Hell, we rarely even know it. But the public, we're always the ones stuck assuming the risk. We literally pay for their mistakes.

Mr. Drum points to Hilzoy's take on AIG's contracts:

I hope the Obama administration is looking very hard at this question. The introduction to the contract says that one of its aims is to "recognize the uncertainty that the unrealized market-valuation losses in AIG-FP's super-senior credit derivative and originally-rated AAA cash CDO portfolios have created for AIG-FP's employees and consultants."

That certainly suggests that AIG-FP was aware that there might be significant losses, as does the fact that they got their compensation locked down in a way that made it independent of their profits or losses. (Unless their bonus pool exceeded the amount guaranteed in the contract -- then they got to keep more!) And hard as it is to imagine that AIG's general management had somehow overlooked the signs of trouble in the subprime market in early 2008, it's even harder to imagine that whatever whoever signed off on this would not have asked: why does AIG-FP want this? How bad do they think it's going to get?

I imagine it would be worth scrutinizing the public comments of AIG executives between the first quarter of 2008, when this contract was written, and September, when it collapsed. But that's only one point. I hope that every law enforcement agency with anything resembling jurisdiction goes over everything about AIG-FP with a fine-tooth comb. There are more than enough peculiar aspects to this story to warrant it.

I hope the Obama administration is looking very hard at this question. The introduction to the contract says that one of its aims is to "recognize the uncertainty that the unrealized market-valuation losses in AIG-FP's super-senior credit derivative and originally-rated AAA cash CDO portfolios have created for AIG-FP's employees and consultants."

That certainly suggests that AIG-FP was aware that there might be significant losses, as does the fact that they got their compensation locked down in a way that made it independent of their profits or losses. (Unless their bonus pool exceeded the amount guaranteed in the contract -- then they got to keep more!) And hard as it is to imagine that AIG's general management had somehow overlooked the signs of trouble in the subprime market in early 2008, it's even harder to imagine that whatever whoever signed off on this would not have asked: why does AIG-FP want this? How bad do they think it's going to get?

Over at Digby's joint dday digs deeper. Bottom line: AIG execs brazenly lied to everybody -- the Fed, the Treasury, SEC, regulators, investors -- about everything. How AIG chose to conduct their business positively drips with fraud.

Somebody's gonna go to jail for this.

-AF

Wall Street Entitlement: Family edition

Great stuff on AIG’s disgraceful bonuses by people smarter than I... The TPM crew rips away here, here, here plus AIG's internal bonus docs. Jane Hamsher dismantles the “Blame Dodd” fib. Digby takes down Limbaugh & the GOP’s new “AIG Stimulus” mantra.

On Tuesday, Rush Limbaugh claimed Wall Street firms' “salaries are pretty small. They work on bonuses, via contract based on merit." This is where my father would say, "Does what you're saying to me, make sense to you?"

If the current AIG contracts specify compensation is to consist primarily of bonuses "based on merit", the bonuses wouldn't have been paid at all. Fer chrissakes the AIG & Merrill-types not only have done a spectacularly shit job but they've also completely cocked up the world economy! How can they possibly justify "merit" bonuses? Simple. Regardless of their companies' profitability, Masters of the Universe believe huge bonuses are their god-given right.

Case in point: I just got off the phone w/my 75-year old mother. Mom's income is largely dependent on her modest portfolio. Sadly, it's w/Merrill Lynch for the foreseeable future. (Due to the nature of her investments it's currently too complicated & costly to switch).

Last week Mom spoke with her Merrill "financial advisor." Her "advisor" was whining about the cost of putting her two kids thru private school. Mom chimed in, "You did recently received a big bonus." Advisor snapped back, "I deserved it!"

This financial advisor's sense of entitlement & her disconnect goes a long way towards explaining Tim Geithner's inaction, Larry Summers' "The government cannot just abrogate contracts" position & the Fed's inability to inform Obama about AIG's bonuses until the day before (WTF?!?).

It's bad enough stopping AIG, Merrill & BOA's bonuses didn't occur to any of them. But it's astonishing they failed to foresee the oh-so-predictable outrage to follow.

-AF

*Update: More TPM on potential fraud charges for AIG here & here.
**Edited slightly for clarity.

Bring Me The Heads Of The Jonas Brothers #3

"Retention" Bonus My Ass

NYT:

The bonuses that the American International Group awarded last week were paid to 418 employees and included $33.6 million for 52 people who have left the failed insurance conglomerate, according to the office of the New York attorney general.
(Emphasis added).

I'm betting Ed Liddy's explanation will sound something like: "AIG is contractually obligated to award retention bonuses regardless of whether or not we actually retain an employee."

-AF

Punker Than You

Early this morning I stumbled across a recent NYT piece, "This Band Was Punk Before Punk Was Punk." Needles to say Death had my undivided attention immediately. In the fine tradition of The Chambers Brothers, the three Hackney brothers are brothers. Oh, and they flipped off Clive Davis too!

I was smitten with Death before I heard a note. That never, ever happens. Bolting to iTunes I downloaded their entire 7-song catalog.

Recorded in 1975, but released just last month, Death's ...For the Whole World to See's is fantastic. It's the missing link between Detroit's proto-punk MC5/The Stooges generation & the later Negative Approach et al. All but one tune motors along at breakneck speed. Singer Bobby doubles on bass; his voice a dead ringer for Bad Brains' HR.* (More properly the other way around as Death predates Bad Brains). Bold enough to nick a bit of Zep, guitarist/songwriter/founder David, spits out muscular yet melodic riffs. Death's secret weapons comes courtesy of brother Dannis. His drumming is crisp, propulsive & he has a helluva right foot.

To the eyes & ears of the vast majority of the local scene, these kids might as well have been space aliens. This was a mid-'70s Detroit musical landscape that had Bob Seger (Ugh!) at one end, Funkadelic at the other and disco looming large on the horizon. Playing futuristic politically charged punk rock to an at best indifferent Motown club or house party crowd circa 1973 ends one of only two possible ways: a band gets mighty tough or it dies before its time. After three years of ever-increasing frustration, Death packed it in for good.

The stones music remains. Dig the "A" side of Death's 1976 single "Politicians In My Eyes". If it tickles your pink, snag the rest of ...For the Whole World to See from iTunes, Drag City's website or better yet yer local indie shop.

-AF
*After writing this I discovered The Chicago Reader 's Peter Margasak concurs. The similarity is that obvious.

Bribery? This Isn't Bribery.

It's wasta.

-AF

Bring Me The Heads Of The Jonas Brothers #2

Only they could make Milie Cyrus look like Lydia Lunch.

-AF

I Was Just Thinking...

Writer’s block is a bitch.

Fresh off a verbal castration by Jon Stewart, the smartest thing Jim Cramer can do is go away. Surely his portfolio provides for his retirement.

I’m no rubbernecker. However, the Michael Steele train wreck stops me in my tracks every time.

I don’t wanna say he’s out of his depth but making Steele RNC chair was akin to throwing a baby tied to a cinder block into the Marianas Trench.

It’s probably a Northeast thang. Friendly’s Butter Crunch ice cream rocks my world.

The Republican Party needs an “ideological vasectomy.”

Doesn't that mean they’re all pricks?

Ari Fleischer should shut the fuck up. We’re wise to your lies. When Chris Mathews won’t tolerate it any longer, you gotta give up the jig & move on.

Didn’t Ari quit on Bush six years ago? Since Freedom’s Watch wasn't a smashing success, I guess he needs something to keep busy.

All the Bushies have too much time on their hands. Sucks to be them.

Always knew Chuck Norris was crazier than a shit house mouse. Didn’t realize is he’s a bloody seditionist.

"Weasels" is too kind a word to describe those who crashed our economy.

Citigroup would be smart to quit organizing against EFCA. They really do have more important things to do.

Make a principled stand but first ensure it makes sense, OK?

GOP governors refusing StimPak^TM cash couldn't be more stupid. Their respective electorates get more pissed off by the day.

National exposure makes you look tone deaf + foolish = political doom.

Amity Shlaes is metaphorically challenged & her diatribes on FDR's New Deal are complete BS.

I’m a total sucker for anything brickley, butterscotch, toffee or caramel.

This is sarcasm. However, were we ever to use DNA or retinal scans for voter ID, GOP voter caging bastards are finished.

Is it me or does Lindsey Graham become more and more cartoon-like each time he’s on TV?

Either that or the pharmaceutical grade LSD I took back in '98 is creeping up on me again.

-AF

They Said It. I Repeat It.

The Daily Show With Jon StewartM - Th 11p / 10c

Jim Cramer Unedited Interview Pt. 3

Daily Show Full Episodes
Important Things w/ Demetri Martin

Political Humor
Jim Cramer

There’s a market for cocaine and hookers! So what?

Jon Stewart's response to Jim Cramer.

-AF