AIG Paid Bonuses at the Expense of Tax Payers

The news that some employees in AIG's Financial Products unit received $165 million in retention bonuses has caused severe commotion throughout United States. This division dealt heavily in instruments called credit defaults swaps that lead to billions of dollars of losses. Government has paid AIG $170 billion in bailout money to help the insurer from going bankrupt and to avoid a serious blow to the world economy. In total, AIG is dishing out $450 million in retention bonuses. It was revealed in 2008 that some top executives of AIG spent more than $400,000 on spa treatment after the bailout money was committed by the government. This is the company that lost almost $62 billion in the last quarter of 2008.

The government of United States did nothing to stop AIG from paying out the bonuses. It has essentially made a mockery out of the tax payer's money. It seems as if the ordinary Americans are working hard, day and night, to fill the pockets of the same bankers and insurers who are responsible for pushing the US and the world into the financial mess. And the US government seems to be a party to this crisis. This is the government that controls or atleast thinks it controls almost the entire world. Why then, does it seem so helpless against its own bankers and insurers? It appears as if the people in the government are trying hard to cover up the financial king pins so that maximum amount of taxpayers' money is distributed among them before these giant companies collapse.

Public outrage is increasing day by day and the government will not be able to play games for long. People will, sooner or later, realize that the government is playing "good cop, bad cop", just to make a fool out of them. The preseident does nothing to stop the bonuses in the first place and then expresses his outrage in public to show the world the extent of his shock. It is becoming clearer that the people in power are just an extension of the greedy bankers and they are helping eachother out at the expense of the tax payer.

The Socialist America

According to Merriam-Webster dictionary, Socialism is "any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods." Sounds familiar? Well, United States seems to have turned into the biggest socialist country that the world has ever seen. No other government before must have spent billions, rather trillions of dollars in an attempt to buy, stabilize or support private organizations at such a large scale. United States in the past have insisted of being the champion of capitalism. So why the sudden change of heart? Well, because the heart condition is pretty bad. The "doctrine of necessity" had to kick in. This same country has been criticizing the socialist system for too long now. However, when it deemed appropriate, it felt no shame in adopting the same system. Why not let those go into bankruptcy that deserve it? Probably because its not the American people that the government cares about; its those bankers that it doen't want to lose. There is a very very strong lobby that does not want the system to break down. Such a break-down would not only bring changes in the finanical climate of the world, it would also turn upside down the global political system too. Someone, somewhere does not want that to happen. Whose interests are these politicians serving? Not the American people ofcourse. Something is terribly wrong. The American public needs to know the truth.

And why is the American government so inclined towards protectionism as is mentined in the latest Obama Spending Bill that has been critized by Canada, Europe and Asia. Is it justified to talk about globalization when it suits you and shun it when it does'nt? Is it right to tell other countries to open up their markets while you close your borders more and more? In order to have a just political and finanical system in the United States and the world, just policies would have to be implemented. This may only come about if the current financial system is allowed to fail or it inevitably fails. This would be very painful in the short run, however it may bear fruit in the longer run.

Financial Crisis Timeline: February 2009

Feb. 2nd 2009: US spending and income fall
According to the Commerce Department American consumers cut spending for a sixth consecutive month as it fell 1% in December 2008. Incomes fell by 0.2%.

Feb. 2nd 2009: California withholds tax refunds
Due to the current $16 billion budget gap projected to reach $42 billion by June 2010, California has withheld payments worth $3.5 billion that includes around $2 billion in cash refunds.

Feb. 2nd 2009: Macy’s to cut 7,000 jobs
The department store operator, Macy’s will cut 7,000 jobs and quarterly dividends as its quarterly earnings fell much below than expected that made its stock to fall.

Feb. 3rd 2009: PNC Financial to layoff 5,800 workers
PNC Financial Services Group will layoff 5,800 workers after suffering losses.

Feb. 5th 2009: US jobless claims rise to highest levels since 1982
Labor Department reported the number of newly jobless workers seeking benefits rose last week to a seasonally adjusted 626,000 from the previous week’s upwardly revised figure of 591,000.

Feb. 5th 2009: GSK to cut 10,000 jobs
British pharmaceutical group GSK will cut 10,000 jobs which amount to around 10% of its work force. The company’s net profits declined 11.7% to 4.6 billion pounds in 2008.

Feb. 6th 2009: Emerson to cut 14,000 jobs
St. Louis based Emerson Electric Co, manufacturer of garbage disposals, will cut 14,000 jobs this year. The company has slashed 7,000 positions since October last year due to lower demand.

Feb. 6th 2009: Regulators close failed banks
Regulators have closed nine federally insured financial institutions this year, the latest being First Bank Financial (California), Alliance Bank (Georgia) and County Bank (Georgia). Twenty five US banks failed in 2008, more than in the previous five years combined.


Feb. 6th 2009: Sharp to cut 1,500 jobs
Sharp will cut 1,500 jobs in its home market Japan after suffering heavy losses and sales slides.

Feb. 7th 2009: News Corp. suffers $7.6 billion in losses
News Corp. reported a $7.6 billion operating loss in the second quarter after it was hit by a downturn in advertising sales and booked a $8.4 billion write-downs in television licenses, goodwill and the value of newspapers assets.

Feb. 9th 2009: Nissan to layoff 20,000 jobs
Japan’s Nissan will cut 20,000 jobs worldwide by March 2010.

Feb. 10th 2009: GM to layoff 10,000 employees
General Motors, which was granted $13.4 billion in government loans in December 2008, will cut 10,000 global jobs (14% of workforce) in 2009 and impose pay-cuts on most remaining white collar US workers.

Feb. 10th 2009: FedEx Freight to cut 900 jobs
FedEx Freight, a unit of FedEx Corp. will cut 900 jobs at around 150 of its facilities.

Feb. 11th 2009: World oil use to fall most since 1982
According to International Energy Agency (IEA) world oil use in 2009 will fall to lowest level (84.7 million bpd), a fall of 980,000 barrels per day.

Feb. 11th 2009: US trade deficit falls to lowest level in six years
According to the Commerce Department, the US trade deficit fell by 4% in December 2008 to $39.9 billion due to depressed demand in imports as economy falters.

Feb. 11th 2009: US mortgage applications slump to 8 year low
The Mortgage Bankers Association said the seasonally adjusted US mortgage applications index fell nearly 25% to 235.9 last week that ended on 6th Feb 2009. This is the lowest level since the year 2000.

Feb. 11th 2009: UBS faces worst loss in Swiss history
The Swiss bank UBS suffered a 11 billon pounds loss in 2008 – the worst in Swiss history.

Feb. 11th 2009: Wal-Mart to layoff 800 employees
Wal-Mart will layoff 800 employees at its Arkansas headquarters and fewer new stores will be built.

Feb. 11th 2009: Chinese Chinalco to invest $19.5 billion in Rio Tinto
Chinese state-owned aluminum group Chinalco will spend up to $12.3 billion on stakes of up to 50% in nine of Rio Tinto’s mining assets and buy $7.2 billion of bonds convertible into shares. The deal will secure resource supplies to China and help cut Rio’s debts.

Feb. 11th 2009: Caterpillar offers early retirement to 2,000 employees
Caterpillar that laid off 20,000 employees last month is now offering voluntary retirement to around 2,000 production workers in United States.

Feb. 12th 2009: Spain enters recession
Spain’s entered recession for the first time since 1993 as its economy shrank 1% during the fourth quarter of 2008.

Feb. 12th 2009: Pioneer to cut 10,000 jobs; close television business
Japanese electronics giant Pioneer said it would cut 10,000 world-wide jobs and close television business as it braces for a record loss. The company will also reduce its top management’s pay by 20-50%.

Feb. 13th 2009: Obama’s stimulus package passed by Senate
The US senate yesterday approved President Obama’s $787 billion stimulus bill with 60-38 votes. The Sentate voted the compromise bill on the same day House of Representatives also passed it. Bipartisanship as expected by Obama was not achieved as votes were divided on party lines. The bill now awaits Obama’s signature to turn into a law.

Feb. 13th 2009: Lloyds shares sink as HBOS suffers a $12.8 billion loss
Shares of UK’s Lloyds Banking Group were down 31.6% as the announcement that HBOS (it acquired last year) suffered a loss of $12.8 billion in 2008 was made.

Feb. 13th 2009: Borgwarner to cut 4,500 jobs
US based auto parts manufacturer Borgwarner hasl cut 4,500 jobs in US and Europe ude to adverse conditions in the automobile sector. Other cost-cutting measures will also be taken.

Feb. 15th 2009: Japan’s economy is in biggest slump since 1974
Japan’s economy shrank 3.3% in the fourth quarter of 2008, the most since 1974 when the country faced problems due to the oil crisis.

Feb. 15th 2009: British economy to shrink 3.3% in 2009
The Confederation of British Industry has said that Britain’s economy will shrink 3.3% in 2009.

Feb. 15th 2009: Obama forming Auto Task-force; will drop “Car Czar” idea
Obama is forming a government task force to re-structure the dwindling Auto industry instead of naming a “Car Czar” with sweeping powers.

Feb. 17th 2009: Financial firm accused of massive fraud
Securities and Exchange Commission accused Robert Allen Stanford, chief of the Stanford Financial Group, of fraud in the sale of around $8 billion of high yielding certificates of deposit held in the firm’s bank in Antigua.

Feb. 17th 2009: Gold hits 7-months high
Spot gold rose to $966.15/968.15 an ounce in New York, a fresh seven-month high, after US manufacturing data showed weaker performance than expected

Feb. 17th 2009: Barclays closes down Equifirst
Barclays has shut down its US mortgage business organization, Equifirst, less than 2 years after buying the business.

Feb. 17th 2009: California out of cash; may layoff 20,000 state workers
California, the world’s eighth biggest economy, is on the brink of running out of cash and will notify around state 20,000 workers today that their jobs may be eliminated.

Feb. 17th 2009: Trump Entertainment files for bankruptcy
Trump Entertainment Resorts that owns three casino hotels in Atlantic City and New Jersey including Trump Taj Mahal, Trump Plaza and Trump Marina, filed for Chapter 11 bankruptcy protection due to declining gambling revenues.

Feb. 17th 2009: Liberty Media saves Sirius XM from bankruptcy
Liberty Media will invest $530 million in Sirius XM Radio for a 40% stake and thus save the company from impending bankruptcy.

Feb. 17th 2009: Smithfield Foods to layoff 1,800 workers and close plants
Smithfield Foods will cut 1,800 jobs and close six plants by December 2009 in United States

Feb. 17th 2009: Clariant to cut 1,000 jobs
Swiss chemicals manufacturer Clariant will cut 1,ooo jobs as it faced heavy fourth quarter losses in 2008. The company will specify later where the losses will be made.

Feb. 18th 2009: Obama unveils $275 billion housing plan
US President Obama unveiled the $275 billion to help 9 million American families from losing their homes.

Feb. 18th 2009: Taiwan’s economy hits recession
Taiwan’s economy showed an 8.36% recession in the last quarter of 2008 and is expected to fall by 3% in 2009. The Central Bank announced a 0.25% cut today which was the seventh such cut since September 2008.

Feb. 18th 2009: Goodyear plans to cut 5,000 jobs
Goodyear, the largest US tire maker plans to cut 5,000 world-wide jobs or 6.7% of its workforce in addition to freezing salaries world-wide and cutting production.

Feb. 25th 2009: Pacific Brands to cut jobs and eliminate labels
Australia’s biggest manufacturer of underwear, Pacific Brands will reduce 23% of jobs, eliminate labels and end most of its manufacturing.

Feb. 26th 2009: Fannie Mae seeks aid after $25.2 billion loss
Fannie Mae lost $25.2 billion in the fourth quarter of 2008 and has asked the government for $15.2 billion in aid. Fannie Mae was taken over by regulators in September 2008.

Feb. 27th 2009: Obama unveils $3.55 trillion spending plan
Obama has unveiled a $3.55 trillion spending plan that would make the deficit hit $1.75 trillion in the current fiscal year and raise taxes on the wealthy.

Feb. 27th 2009: US economy shrinks 6.2% in fourth quarter of 2008
The Commerce Department announced that the US economy shrank at an annual rate of 6.2% in the final quarter of 2008, much steeper than the earlier expected 3.8% drop.


Feb. 27th 2009: New Jobless claims reach 667,000
The Labor Department has said that the US workers who lost their jobs filed 667,000 new claims for unemployment insurance last week. The number of job hunters receiving continuing unemployment benefits topped 6.5 million, a record.

Feb. 27th 2009: US oil demand lowest in a decade
The US oil demand in December 2008 was revised by 4% from an early estimate to 19.199 million barrels per day, lowest since 1988.

Feb. 27th 2009: US Treasury to raise stake in Citigroup
The Treasury Department has reached a deal with Citigroup whereby its stake in the struggling company would increase to 36% from 8% as Citigroup announced its 2008 loss to have reached $27.7 billion. Under the deal the Treasury Department agreed to convert up to $25 billion of preferred stock investment in the bank into common stock.

Feb. 27th 2009: 40,000 Council jobs threatened in UK
At least 40,000 jobs are expected to be lost in UK this year as Councils plan to layoff.

Feb. 27th 2009: Nordic region in steep recession
Nordic region has entered steep recession as Denmark confirmed it is in its worst recession in three decades while output in Sweden and Finland have shrunk the most in at least 17 years.

Feb. 27th 2009: GM posts $9.6 billion fourth quarter loss
GM has posted a $9.6 billion fourth quarter loss in 2008. In total GM lost $30.9 billion in the year 2008.

Feb. 27th 2009: GM spins off Opel; wants $4billion from Government
The European arm of General Motors announced it would spin off its German subsidiary Opel in to a separate company and will also need $4 billion from government as bailout money.

Feb. 27th 2009: Sotheby’s to cut more jobs and reduce selling in Amsterdam
Auctioneer Sotheby’s will cut more jobs and reduce selling in Amsterdam as part of a restructuring plan in UK and Continental Europe.

Feb. 27th 2009: JP Morgan Chase revises layoff figure to 14,000
JP Morgan Chase announced it would cut 14,000 jobs, up from the 9,200 figure it announced in December 2008.

Feb. 27th 2009: Dell’s net income drops 48%; may cut jobs
Dell’s net income dropped by 48% for the quarter ended Jan 31, 2009. The company may cut jobs in the Asia-Pacific region.

Feb. 27th 2009: Nortel to cut additional 3,200 jobs globally
Nortel Networks will cut 3,200 additional jobs globally in the coming months due to the “unprecedentent economic environment” as put by the company.

Feb. 27th 2009: California unemployment reaches 10.1%
Unemployment rate in California has reached 10.1%, highest in 26 years.

Feb. 27th 2009: RBS suffers historic loss
UK’s Royal Bank of Scotland announced it suffered $24.1 billion, UK’s biggest ever loss by any company as the government agreed to put in $25 billion bailout money in the bank as fresh capital.

Feb. 28th 2009: AIG nears pact with Government
AIG is close to a deal with US government that would include an additional $30 billion equity commitment, more lenient terms on existing preferred investment and a lower interest rate on an existing $60 billion government credit line. Last year government had increased its aid to the troubled insurer to $150 billion US.

Feb 28th 2009: HSBC plans shares sales up to $18 billion
Britain’s HSBC will announce a share sale of up to 418 billion, in what could become the country’s biggest ever rights issue.