By Michael Ruhl, University of New Mexico – Talk Radio News Service

On the South Lawn of the White House today President Barack Obama said that the government must establish a regulatory framework to prevent future irresponsible activities such as those seen recently by AIG. Obama said that AIG used taxpayer funds inappropriately. He went on that the government is considering a power authority similar to that of the FDIC, which could exercise power proactively while moving to protect creditors, depositors, and consumers alike. The President said he has been working with Congressional leaders to this end, specifically with House Financial Services Committee Chairman Barney Frank (D-Mass.).

President Barack Obama said that although people in his administration did not cause AIG to inappropriately use taxpayers money, he himself was responsible for AIG’s overindulgences, because as president, “the buck stops with me”. Obama chagrined at having to “clean up after AIG’s mess”, and acknowledged that the American people are right to be upset with the situation. The president suggested that the country channel this anger to productive ends.

When questioned about recent calls for the resignation of Treasury Secretary Timothy Geithner, Obama said that Geithner has his complete confidence, and is “making all the right moves” after having been placed in a tough position.

By Kayleigh Harvey – Talk Radio News Service

TRNS is liveblogging the House Financial Services Committee Hearing on AIG bonuses. Updates will be added at the bottom of this post.

The Subcommittee hearing will be divided into two panels. The Committee will hear firstly from, Mr. Scott Polakoff, Acting Director for the Office of Thrift Supervision; The Honorable Joel Ario, Insurance Commissioner, Pennsylvania Insurance Department, on behalf of the National Association of Insurance Commissioners; Ms. Orice M. Williams, Director Financial Markets and Community Investment, Government Accountability Office; and Mr. Rodney Clark, Managing Director, Insurance Ratings, Standard & Poor’s.
On the second panel, the Committee will hear from Mr. Edward M. Liddy, Chairman and Chief Executive Officer, American International Group.

Prior to the start of the hearing some of the members of Code Pink came with protest signs on their t-shirts. One member stood on the chair until the Subcommittee chair asked for order. Medea Benjamin, founder of Code Pink wore a sign that said: AIG-JAIL” and “Give us our money back.”

Chairman of the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprise, Paul Kanjorski, said in his opening statement: “We need to ask what happened, why it happened, what is happening now, and what we can do going forward to prevent similar situations. To protect the taxpayers, we must also ensure that AIG acts prudently and pays back its borrowed funds promptly.”

Ranking Member Spencer Bachus (R-Al), said: “The blame game needs to be secondary.”

Congressman Michale Castle (D-DE) said: “The American people need answers and to be able to trust the government now more than ever.”

Congressman Michael Capauno (D-Mass.) asked the members of the first panel “where you were when AIG made their decisions.”

Congressman Paul Hodes (D-DH) said: “AIG now stand for arrogance, incomptence and greed.”

The greater outrage should be 4 bailouts later, no end in sight, over a congress and a president who could have orevented all of this.

Congressman David Scott (D-GA) said: “We have got to put a pause button on these bailouts.”

Mr. Scott Polakoff said in his opening statement: “The rapid decline of AIG stems from liquidity problems.”

Ms. Williams said in her opening statement “AIG has had mixed success” from federal government assistance. Ms. Williams said that there are no final result on the extent to which federal government assistance has helped AIG at this time.

Sub-committee Chair Paul Kanjorski made a passing remark that he had not anticipated so much attention to this hearing.

Ms. Williams said in response to a question from Congressman Scott Garrett (R-NJ), on how to act on this situation: “This is an issue that we will do what you instruct us to do.”

Ms. Williams responded to Ranking Member, Spencer Bachus’s (R-AL), question on the current status of AIG: “We looked at where they are and we noted some challenges…results are ongoing.”

Congressman Gary Ackerman (D-NY) said: “There’s a company called ‘I can’t believe it’s not butter,’ at least they have the decency to tell you that it’s not butter.” He added that it would have been nice if the company had admitted that what people were getting really wasn’t insurance, but if that had been the case then people may not have bought it. “We need to make sure that people who think they are buying insurance, are buying insurance,” Ackerman added.

The House Financial Services Committee stopped as the House was called to vote. During the recess, protestors from Code Pink began shouting at the Representatives to stay and listen to them. They demanded more money to be spent on education and for AIG to be made to give taxpayers their money back. Two members stood on chairs inside the room. All Representative’s left the room to vote.

The hearing resumed with continued questioning of the first panel.

Congressman Brad Sherman (D-CA) said “It is clear that the $170 billion has gone not just pay the bonuses but has gone to take care of the counterparts…it is time that they are put into receivership.”

Congressman Michael Capauno (D-Mass.) said “It’s everybody’s fault…everybody here allowed it to happen…it’s done, we are where we are. AIG to me is just one of the many problems.”

Mr. Polakoff said: “The question of whether that money ca be paid back…from an insurance perspective the answer is yes.”

Mr. Clark said: “We are not certain when AIG is going to become profitable.”

Congressman Stephen Lynch (D-Mass.) said: “We have received 0 in information in terms of AIG….we had sx months of silence basically…you folks are supposed to be out there helping us…why did we have to wait for six months, until this week…what’s the problem with getting the answer to where the tapayers money is going?”

Mr. Polakoff was not able to form a conclusive answer to this question.

Congressman David Scott (D-GA), said: “Seems to me that somebody was asleep at the switch. This is an issue that borders on fraud and criminality.”

The committee concluded its questions from the first panel at 1.22pm. A number of television cameras and photographers entered the room in anticipation for Edward Liddy’s entrance. Code Pink held up their protest signs.

Sub-committee Chairman Paul Kanjorski, was extremely stern in calling the Committee room to order. Asking the Code Pink ladies to sit down. In his opening statement Chairman Kanjorski, made it clear that Mr. Liddy does not earn a CEO salary. He wanted to make this clear as he feared that Mr. Liddy and his family had received some very hostile responses as a result of the unfolding AIG scandal.

Member’s of the Committee wanted to allow Mr. Liddy ‘unlimited’ time to give his opening testimony.

Mr. Liddy said: “We way every decision we make with one priority in mind…will we make this money back to pay back to the government.”

With regard to the large bonuses paid out by AIG, Liddy said: “It was distasteful to have to make these payments.”

“We have heard the American people loudly and clearly these last few days…We have asked those who received bonuses in excess of $100,000 to return at least half of those payments…some have offered to pay back 100 per cent of those payments,” Liddy added.

Mr. Liddy said: “Everything we do is done in partnership with the Federal Reserve.”

Chairman Paul Kanjorski asked: “Do you realize that the actions you took at AIG…may jeopardize the ability of this Congress to pass legislation to send further large checks to assist the economic depression/recession?”

Mr. Liddy responded: “I am.”

Congressman ScottvGarrett (R-NJ), asked Mr. Liddy about the AIG exit strategy.

Mr. Liddy said: “The exit strategy i think is a solid one. It has been in place for a while now.”

Proceedings were stopped momentarily during Mr. Liddy’s questioning for Police to remove signs from Code Pink protestors. The ladies peacefully surrendered their signs to the Police,

Congressman Barney Frank (D-Mass.) joked that he was glad the Chairman had not also asked them to remove their t-shirts, which were also covered in protest slogans.

Congressman Frank asked that Mr. Liddy submit the names of those who received bonuses without restriction, to the Committee.

Mr. Liddy responded that his request was “legitimate” but was hesitant as he feared for the safety for those who received the bonuses and for the safety of their families.

Congressman Frank said he understood the fear of threats, calling such threats “despicable”, but would “keep the request for those names on the table.”

Speaking about AIG’s debt, Mr. Liddy said: “It’s a range of $80 billion, that’s what we actually owe…we owe $40 billion from TARP funding…plus $50 billion that the Federal Reserve has invested.”

Congressman Gary Ackerman (D-NY), thanked Mr. Liddy for performing his role to the best of ability. He apologized on the majority of decent American’s for the threats he had received. He said: “I want to try and help you…pay the $165 million back…it is not worth the aggravation and angst that you have suffered.”

Congressman Michael Castle (R-DE), asked Mr. Liddy about his correspondence with Secretary of the Treasury Timothy Geithner.

Mr. Liddy said:”I had a meeting with Secretary Geithner and he informed me that he had only been made aware a week prior to that.”

Congressman Gary Ackerman (D-NY), asked whether Mr. Liddy would submit the names of those who received the bonuses to the Attorney General. Mr. Liddy was very evasive in his response.”

Mr. Liddy said: “I want to be sure that if I turn over the names, there will not be a list of names, addressees and photos attached to them.” He added that he would “follow the advice fo his General Counsel and do the right thing.”

Congressman Brad Sherman (D-CA), asked Mr Liddy to submit to the Committee a chart that would show the Committee in the future, bonuses, the cost of the bonuses and who would receive these bonuses.

Congressman Michael Capauno (D-Mass.) asked: “When you were doing these bonuses, did you expect it to touch a nerve witht the american people?”

Mr. Liddy said: “Yes. I did…but not a the level it has.”

Congressman Michael Capauno (D-Mass.) then asked Mr. Liddy whether ir not he felt that those who received the bonuses were the only people who were capable of doing their jobs.

Mr. Liddy responded: “No.”

Congressman Michael Capauno (D-Mass.) suggested that Mr. Liddy could have fired those individuals and hired some of the capable unemployed people out there for less money.

Mr. Liddy disagreed with this point. He said that they had a special expertise that AIG could not afford to lose. In his response he repeated the phrase “risk assessment” several times when weighing up the pros and cons to paying out the bonuses.

Congresswoman Melissa Bean (D-Ill) asked Mr. Liddy about AIG’s current financial situation and whether he felt they would be asking for more financial assistance. Mr. Liddy responded: “I believe we are adequately capitalized…very much a question of what happens with capital markets around the world.”

Mr Liddy said: “It is not a failed company, it is a failing company unless we plan to do something about it.”

Congressman Stephen Lynch (D-Mass.), said: “You have basically immunized yourself, protected yourself from one of the most stupid decisions from AIG,” when referring to a document outlining AIG’s bonus policy written in 2008.

Mr. Liddy replied: “I take offense at what you just said.” To which Congressman Lynch responded: “Offense was intended.” Congressman Lynch became increasingly frustrated with Mr. Liddy’s responses to his questions, raising his voice as he spoke.

Mr. Liddy said: “Its a fact of life. AIG owes those counterparts that money”.

The hearing went into recess for one hour as the House was called to vote.

On Wednesday the heads of several of the largest lending institutions in the United States were called to testify before the House Financial Services Committee. All of the individuals testifying represented lending institutions which received financial assistance from the federal government several months ago under the Troubled Assets Relief Program (TARP). Committee members inquired about the use of the TARP money thus far.

Committee Chairman Barney Frank (D-Mass) said that the aim of the hearing was to adopt rules to make sure this situation did not happen again in the future, while restoring the system of extending credit in the United States. Frank said that although the hearing would focus on what transpired in getting the country into this situation, his committee would be “looking forward” at what progress can be made. Congressman Paul Kanjorski (D-Penn)said that when these lending institutions took taxpayer money, they “moved into a fishbowl”, and that all eyes are justifiably on how they use the money. Recent public outrage at the seeming misuse of taxpayer money in the form of executive compensation (anger which Chairman Frank called “justifiable”) has left many asking what role the federal government should play in overseeing the use of these funds to make sure that the taxpayer money is being used wisely.

Lloyd Blankfein of Goldman Sachs said that the TARP bill was important to maintaining the overall stability of the financial system. Most of the executives testifying said that their institutions are still lending, but after and extended amount of inquiry from committee members, it is uncertain if the TARP money has actually encouraged these institutions to lend more than they have in the recent and distant past, respectively. Jamie Dimon of JP Morgan Chase & Co. said that his company is committed to helping homeowners avoid foreclosure and stay in their homes. Vikram of Citi said that taxpayers have a right to expect a return on their investments, and said that he personally has volunteered to have his salary set at one dollar per year until the company returns to a profitable state. Chairman Frank asked the members of the lending community to withhold any new foreclosures until Treasury Secretary Tim Geichner’s program could be put into place, but at present it is uncertain whether than will happen.

By Michael Ruhl, University of New Mexico – Talk Radio News Service

Neel Kashkari, the Interim Assistant Secretary of the Treasury for Financial Stability, defends the Treasury Department’s decision to fund healthy banks, comparing it to an individual who receives a stimulus check being more likely to spend it if they are in a healthy financial condition. Karshaki goes on to say that this decision is imperative to bringing confidence back to the credit market (0:27).

 

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House Majority Leader Steny Hoyer (D-Md.) announced that Congress would be prepared to vote on the bailout for the Big 3 automakers today, pending discussion with those in the Senate.

During a pen and pad session, Hoyer elaborated on the details of the legislation, “Any tax payer assistance will be covered with vigorous oversight, and it’s included in the bill.”

While the Majority Leader stated that they will be prepared today, the Senate may vote first if success seems more likely through that avenue.

Hoyer also discussed prospects for an economic stimulus package, “President-elect Obama has made it very clear that he wants to see a very substantial economic stimulus package passed. He wants to sign such a package in January,” said Hoyer.

“After eight years of economic policies that have lead us to arguably the worst economic performance, the greatest loss of jobs, the most difficulty confronting our people since the great depression it’s critically important that we have legislation that will assist in getting this economy going. We plan on doing this very early next year before President-elect Obama is sworn.”

The Majority Leader also said that he and ten other representatives, including ranking member of the Foreign Affairs Committee Rep. Illeana Ros-Lehtinen (R-Fla.), will be presenting Obama with a series of suggestions to help end the genocide in Darfur.

During a press conference on a bailout for the auto industry held by the Democratic leadership of the House and Senate, Speaker Nancy Pelosi (D-Calif.) said, “Until we see a plan where the auto industry is held accountable and a plan for viability on how they go into the future…we cannot show them the money.” (0:19)

 

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The Democratic leadership from the House and Senate held a press conference to announce that since the auto industry has failed to convince Congress that their suggested rescue plan will not be their last request, there will be no agreement on a bailout this week. However, the CEOs from the Big 3 automakers will have another opportunity to make their case to Congress

“We’re requesting that they submit a plan to Congress through Chairman Frank and Chairman Dodd no later than December 2nd. These two very able men will review the plan if necessary hold hearings during the week of December 2nd to fully vet the auto industry’s proposal,” said Senate Majority Leader Harry Reid (D-Nev.).

Reid stated that Congress was prepared to come back in session the week of December 8th, but only if the Big 3 auto makers submitted a plan that will provide accountability.

“Until we see a plan where the auto industry is held accountable and a plan for viability on how they go into the future…we cannot show them the money,” said House Speaker Nancy Pelosi (D-Calif.).

Pelosi went on to reject the calls that have been made for the automakers to declare bankruptcy.

“This is our response to those who would say ‘let them go, let them go and deal with it after that’. This is an important industry in our country and we intend to save it. We can only do this if we work together and the auto industry has to come up with a plan for innovation, accountability, and viability,” said Pelosi.

Christ Dodd (D-Conn.), Chairman of the Committee on Banking, Housing, and Urban Affairs, describes the recent financial problems facing the auto industry as self-inflicted wounds (0:17).

 

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In a hearing on a bailout for the auto industry before the House Financial Services Committee, Chairman Barney Frank (D-Mass.) points out a distinction between reaction to proposed aid for white-collar jobs and proposed aid for blue-collar jobs. When the AIG and financial-industry bailouts were being debated, there was no discussion of the salaries for the employees, yet in the current debate there has been significant discussion of salaries of auto workers. Frank says people seem to be more willing to accept aid to the white-collar industry than to the blue-collar industry. (0:43)

 

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At a press conference today, Secretary of the Treasury Henry Paulson said that although the financial situation is still fragile, the steps taken have helped America’s system. He stated that the Treasury had acted quickly and in coordination with other systems around the world, but that the market turmoil is not likely to end until the housing crisis is over.

Paulson said that the primary focus must be on recovery and repair, as he stressed the importance of banks continuing to lend. He stated that by the time Congress approved the bailout money, the Treasury realized it was too late and would take too long to invest the money as it had originally intended. Instead, they decided the money would best be used to strengthen liquidity in banks, not housing.

In conclusion, Paulson described the stability of the financial system as their highest priority, He emphasized three steps to accomplishing this goal. First they will seek to reinforce the stability of the financial system; second, seek to support important non-bank financial institutions; third, continue to o explore ways to reduce foreclosures.