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Archive for the ‘fraud’ tag

Your mortgage documents are probably fake

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There Oughta Be A Law
There Oughta Be A Law

If you didn’t read about Lynn Szymoniak recently, you should familiarize yourself with her lawsuit against the corrupt mortgage banking industry. According to her research, some $1,400,000,000,000 of mortgage-backed securities are actually not mortgage-backed securities. That’s a lot of missing cheese!

If you know about foreclosure fraud, the mass fabrication of mortgage documents in state courts by banks attempting to foreclose on homeowners, you may have one nagging question: Why did banks have to resort to this illegal scheme? Was it just cheaper to mock up the documents than to provide the real ones? Did banks figure they simply had enough power over regulators, politicians and the courts to get away with it? (They were probably right about that one.)

A newly unsealed lawsuit, which banks settled in 2012 for $95 million, actually offers a different reason, providing a key answer to one of the persistent riddles of the financial crisis and its aftermath. The lawsuit states that banks resorted to fake documents because they could not legally establish true ownership of the loans when trying to foreclose.

This reality, which banks did not contest but instead settled out of court, means that tens of millions of mortgages in America still lack a legitimate chain of ownership, with implications far into the future. And if Congress, supported by the Obama administration, goes back to the same housing finance system, with the same corrupt private entities who broke the nation’s private property system back in business packaging mortgages, then shame on all of us.

(click here to continue reading Your mortgage documents are fake! – Salon.com.)

Some additional back-story here

Sometimes That's How It Works
Sometimes That’s How It Works

and what her lawsuit revealed is systematic, intentional fraudulent activity:

A mortgage has two parts: the promissory note (the IOU from the borrower to the lender) and the mortgage, which creates the lien on the home in case of default. During the housing bubble, banks bought loans from originators, and then (in a process known as securitization) enacted a series of transactions that would eventually pool thousands of mortgages into bonds, sold all over the world to public pension funds, state and municipal governments and other investors. A trustee would pool the loans and sell the securities to investors, and the investors would get an annual percentage yield on their money.

In order for the securitization to work, banks purchasing the mortgages had to physically convey the promissory note and the mortgage into the trust. The note had to be endorsed (the way an individual would endorse a check), and handed over to a document custodian for the trust, with a “mortgage assignment” confirming the transfer of ownership. And this had to be done before a 90-day cutoff date, with no grace period beyond that.

Georgetown Law professor Adam Levitin spelled this out in testimony before Congress in 2010: “If mortgages were not properly transferred in the securitization process, then mortgage-backed securities would in fact not be backed by any mortgages whatsoever.”

The lawsuit alleges that these notes, as well as the mortgage assignments, were “never delivered to the mortgage-backed securities trusts,” and that the trustees lied to the SEC and investors about this. As a result, the trusts could not establish ownership of the loan when they went to foreclose, forcing the production of a stream of false documents, signed by “robo-signers,” employees using a bevy of corporate titles for companies that never employed them, to sign documents about which they had little or no knowledge.

Written by Seth Anderson

August 13th, 2013 at 12:23 pm

Posted in Business,government

Tagged with , ,

Identity Theft and Your Tax Return

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 Darth Vader

Darth Vader

Scary stuff, actually. A million phony tax returns being filed annually seems to me to be a bigger threat to our nation financial security than kissing Grover Norquist’s, uh, ring.Too bad the Republican Do Nothings in Congress have partisanship on their mind, party over country… 

Besieged by identity theft, Florida now faces a fast-spreading form of fraud so simple and lucrative that some violent criminals have traded their guns for laptops. And the target is the United States Treasury. With nothing more than ledgers of stolen identity information — Social Security numbers and their corresponding names and birth dates — criminals have electronically filed thousands of false tax returns with made-up incomes and withholding information and have received hundreds of millions of dollars in wrongful refunds, law enforcement officials say.

The criminals, some of them former drug dealers, outwit the Internal Revenue Service by filing a return before the legitimate taxpayer files. Then the criminals receive the refund, sometimes by check but more often though a convenient but hard-to-trace prepaid debit card.

The government-approved cards, intended to help people who have no bank accounts, are widely available in many places, including tax preparation companies. Some of them are mailed, and the swindlers often provide addresses for vacant houses, even buying mailboxes for them, and then collect the refunds there.

Postal workers have been harassed, robbed and, in one case, murdered as they have made their rounds with mail trucks full of debit cards and master keys to mailboxes.

The fraud, which has spread around the country, is costing taxpayers hundreds of millions of dollars annually, federal and state officials say. The I.R.S. sometimes, in effect, pays two refunds instead of one: first to the criminal who gets a claim approved, and then a second to the legitimate taxpayer, who might have to wait as long as a year while the agency verifies the second claim.

J. Russell George, the Treasury inspector general for tax administration, testified before Congress this month that the I.R.S. detected 940,000 fake returns for 2010 in which identity thieves would have received $6.5 billion in refunds. But Mr. George said the agency missed an additional 1.5 million returns with possibly fraudulent refunds worth more than $5.2 billion.

Career criminals know easy money when they see it. The police say they run across street corner drug dealers and robbers who have been in and out of prison for years now making lots of money by filing fraudulent returns. Some have been spotted driving Bentleys and Lamborghinis.

“A gentleman, a former armed robber, said: ‘I’m not doing robberies anymore. This is much cleaner. I don’t even have to use a gun,’ ” said Sgt. Jay J. Leiner of the economic crimes unit in the Broward Sheriff’s Office, which has formed a multiagency task force.

Mr. Ferrer, the United States attorney, said he had seen tax fraud overtake violent crime in Overtown, a poor, high-crime section of Miami. He said criminals there were holding filing parties, at which they would haul out laptops and, for a fee, teach others how to run the swindle.

“There is no real competition,” Mr. Ferrer said. “They are not fighting each other. Altogether, they are stealing from the I.R.S.”

(click here to continue reading With Personal Data in Hand, Thieves File Early and Often – NYTimes.com.)

Written by Seth Anderson

May 27th, 2012 at 9:56 am

Posted in government

Tagged with , , ,

Chase at Very Center of Bernie Madoff Fraud

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A Fool Too Long

In a perfect world, the white collar crooks involved in this fraud would lose their freedom, and their business would be disbanded. As we all know, this won’t happen, J.P. Morgan Chase will pay a token settlement, and all the bankers will go home to their country estates unscathed.

Senior executives at JPMorgan Chase expressed serious doubts about the legitimacy of Bernard L. Madoff’s investment business more than 18 months before his Ponzi scheme collapsed but continued to do business with him, according to internal bank documents made public in a lawsuit on Thursday. Enlarge This Image

On June 15, 2007, an obviously high-level risk management officer for Chase’s investment bank sent a lunchtime e-mail to colleagues to report that another bank executive “just told me that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme.”

Even before that, a top private banking executive had been consistently steering clients away from investments linked to Mr. Madoff because his “Oz-like signals” were “too difficult to ignore.” And the first Chase risk analyst to look at a Madoff feeder fund, in February 2006, reported to his superiors that its returns did not make sense because it did far better than the securities that were supposedly in its portfolio.

Despite those suspicions and many more, the bank allowed Mr. Madoff to move billions of dollars of investors’ cash in and out of his Chase bank accounts right up until the day of his arrest in December 2008 — although by then, the bank had withdrawn all but $35 million of the $276 million it had invested in Madoff-linked hedge funds , according to the litigation.

The lawsuit against the bank was filed under seal on Dec. 2 by Irving H. Picard, the bankruptcy trustee gathering assets for Mr. Madoff’s victims. At that time, David J. Sheehan, the trustee’s lawyer, bluntly asserted that Mr. Madoff “would not have been able to commit this massive Ponzi scheme without this bank.”

(click here to continue reading JPMorgan Said to Have Doubted Madoff Long Before His Scheme Was Revealed – NYTimes.com.)

WSJ adds:

J.P. Morgan Chase & Co. stood “at the very center” of Bernard Madoff’s fraud, according to a lawsuit unsealed Thursday that reveals for the first time how bank employees’ concerns allegedly went unheeded and irregularities in his accounts were overlooked.

The $6.4 billion lawsuit, filed in December and unsealed in federal bankruptcy court Thursday, says J.P. Morgan reported its long-held suspicions of Mr. Madoff to British authorities in late October 2008, less than two months before he surrendered and the fraud was exposed.

The 115-page lawsuit, which seeks the return of $1 billion in J.P. Morgan’s profits and fees, and $5.4 billion in damages, also goes into great detail about the bank’s efforts, starting in about 2006, to make money by offering products tied to Mr. Madoff through investment funds that fed money to him.

It also says the bank didn’t pay attention to billions of dollars passing through the Madoff’s firm’s main J.P. Morgan account, much of it by hand-written check, or discrepancies in the account balance and unreported obligations, including a $95 million loan.

“They had, legally, an obligation to make inquiry, and they didn’t,” said David Sheehan, an attorney for Irving Picard, the trustee recovering losses for victims of the Ponzi scheme. “You’re literally seeing millions of dollars going in and out on a daily basis, and not one phone call is being made.”

(click here to continue reading Madoff Trustee’s Suit Says J.P. Morgan at ‘Very Center’ of Fraud – WSJ.com.)

Written by Seth Anderson

February 3rd, 2011 at 2:02 pm

Posted in Business

Tagged with , ,

Autism Study a Fraud

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Bin-Seena Pharmacy

Gee, really? What took the British Medical Journal and Lancet so long to discredit, Ileal-lymphoid-nodular hyperplasia, non-specific colitis, and pervasive developmental disorder in children? As punishment, Andrew Wakefield should contact each and every parent who didn’t give their kid a needed vaccine, and apologize.

An influential but now-discredited study that provoked fears around the world that childhood vaccinations caused autism was based largely on falsified data, according to an article and editorial published Wednesday in the British Medical Journal.

The article, by journalist Brian Deer, found that important details of the cases of each of 12 children reported in the original study either misrepresented or altered the actual experiences of the children, the journal said. “In no single case could the medical records be fully reconciled with the descriptions, diagnoses, or histories published in the journal,” the editorial said. It called the study “an elaborate fraud.”

The original article, by British doctor Andrew Wakefield and other researchers, was published in the highly regarded journal The Lancet in 1998. The study concluded that the measles, mumps and rubella vaccine—a mainstay of public health disease prevention efforts around the world—was linked to autism and gastrointestinal disorders.

The findings provoked a still-raging debate over vaccine safety and they prompted thousands of parents to forgo shots for their children. Measles outbreaks were subsequently reported in several Western countries. Several epidemiological studies conducted since the Wakefield paper by public health authorities haven’t found any link between the vaccines and autism.

The Lancet withdrew the article in January of last year after concluding that “several elements” of the paper were incorrect. But the journal didn’t describe any of the discrepancies as fraud. A British regulator stripped Dr. Wakefield of his medical license last May, citing “serious professional misconduct” in the way he handled the research.

(click to continue reading Medical Journal Says Autism Study a ‘Fraud’ – WSJ.com.)

And the British Medical Journal article, begins:

In the first part of a special BMJ series, Brian Deer exposes the bogus data behind claims that launched a worldwide scare over the measles, mumps, and rubella vaccine, and reveals how the appearance of a link with autism was manufactured at a London medical school

When I broke the news to the father of child 11, at first he did not believe me. “Wakefield told us my son was the 13th child they saw,” he said, gazing for the first time at the now infamous research paper which linked a purported new syndrome with the measles, mumps, and rubella (MMR) vaccine.1 “There’s only 12 in this.”

That paper was published in the Lancet on 28 February 1998. It was retracted on 2 February 2010.2 Authored by Andrew Wakefield, John Walker-Smith, and 11 others from the Royal Free medical school, London, it reported on 12 developmentally challenged children,3 and triggered a decade long public health scare.

“Onset of behavioural symptoms was associated by the parents with measles, mumps, and rubella vaccination in eight of the 12 children,” began the paper’s “findings.” Adopting these claims as fact,4 its “results” section added: “In these eight children the average interval from exposure to first behavioural symptoms was 6.3 days (range 1-14).”

 

(click to continue reading How the case against the MMR vaccine was fixed — Deer 342 — bmj.com.)

Written by Seth Anderson

January 6th, 2011 at 10:27 am

Posted in health

Tagged with ,

Confidentiality Cloaks Medicare Fraud

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Any Porthole in a Storm

Medicare costs are one budget item that needs to be reigned in. Especially when fraud by doctors and insurance brokers is part of the cause. Case in point:

There are plenty of reasons why Medicare often fails to stop questionable payments up front. To protect law-abiding doctors and hospitals—the vast majority—Medicare is required to pay nearly everybody within 30 days. Medicare says it is reluctant to suspend payments to providers who may have made honest mistakes, out of concern that beneficiaries might go without needed treatment. Law-enforcement agencies and Medicare contractors, overwhelmed by the sheer volume of Medicare fraud cases, can’t investigate and prosecute them all. Sometimes, prosecutors and investigators ask Medicare to keep paying so as not to tip off targets of an investigation.

But a central problem is that Medicare hasn’t fully exploited its most valuable resource: its claims database, a computerized record of every claim submitted and every dollar paid out.

“That’s really the crux of the issue,” said Kimberly Brandt, who led Medicare’s antifraud efforts from 2004 through June of this year. She said the program is “definitely on the right path” to making better use of its database, “but it’s not going to be a flip of the switch or an easy transition.”

The Wall Street Journal originally identified Dr. Wayne and the other medical providers discussed in this article through a Medicare database that is much more limited than the one available to fraud investigators. The database, obtained in conjunction with the nonprofit Center for Public Integrity, contains records only through 2008, and includes the claims of just 5% of randomly selected Medicare beneficiaries.

Under a three-decade-old court decision protecting physician privacy, Medicare is prohibited from releasing to the public details of doctors’ billings. The Journal agreed not to publish individual physician billing information obtained solely through the database as part of its arrangement with the Centers for Medicare and Medicaid Services, or CMS. Billing figures for doctors named in this article were obtained from the providers themselves or from others familiar with their businesses.

(click to continue reading Confidentiality Cloaks Medicare Abuse – WSJ.com.)

Classless Society

Mark Schoofs and Maurice Tamman did find a few questionable cases, such as:

Christopher G. Wayne doesn’t look like a typical family-practice doctor. Known to admirers as the “Rock Doc,” he wears his hair spiked, punk style, and festoons himself with chains, bangles and leather bracelets.

He uses his upscale Miami Beach home as a production studio for Playboy photo spreads, and his MySpace page shows him posing with celebrities such as Paris Hilton and Aerosmith’s Steven Tyler.

There’s something else about Dr. Wayne that doesn’t resemble a normal family-practice doctor: his earnings from Medicare, the government insurance program for the elderly and disabled. Dr. Wayne took in more than $1.2 million from Medicare in 2008, according to a person familiar with the matter, a large portion of it from physical therapy. That’s more than 24 times the Medicare income of the average family doctor, according to a Wall Street Journal analysis of Medicare-claims data.

•A physical therapist in Brooklyn who billed for so much therapy—more than $2.5 million in 2008 alone—that it would have been virtually impossible for him to have performed it all within state and Medicare guidelines, fraud experts say. Medicare has continued to pay him, shelling out nearly a million dollars through July of this year.

•A second doctor in Florida who pocketed more than $1.8 million from Medicare in 2007, much of it from physical therapy on patients with an extremely rare condition. Even after a Medicare antifraud contractor flagged this doctor, the agency paid him at least $6.7 million over more than two years.

•A Houston doctor whose Medicare billing under her provider number spiked from zero to more than $11.6 million in less than a year. At the time, this doctor was being investigated for misconduct in a company owned by a Nigerian with an alleged history of fraud.

Or this guy

One Florida physician—not Dr. Wayne—made almost all his money from physical therapy, according to the Journal’s analysis of the 5% database. According to separate billing totals reviewed by The Wall Street Journal, this internal-medicine doctor took home more than $8.1 million from Medicare from 2007 through 2009.

The Journal cannot name this doctor because the paper was able to learn a crucial piece of information about his practice—the type of disorder he billed for—only from the database, not from any other source.

From 2006 through 2008, more than 40% of this doctor’s patients in the database were described as suffering from brachial neuritis. That’s a rare nerve-and-muscle condition estimated to occur in about three out of every 100,000 Americans. In 2008, the Florida doctor earned at least 25% more from brachial neuritis patients than any other provider, according to the Journal’s database analysis.

Read the rest of this long article, and tell me what the solution is, other than making this data publicly available (website with patient information redacted, perhaps?)

Written by Seth Anderson

December 27th, 2010 at 9:17 am

Posted in Business,government

Tagged with ,

Crisis Dominoes Start Falling With Lehman Audit

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plus ça change…

I tweeted about this yesterday, but Matt Taibbi is a little more fiery, and amusing:

It took more than two years, but there might finally be some capital sentences handed out for crimes committed during the financial crisis. That’s metaphorically speaking, of course. Like the accounting firm Arthur Anderson, whose head was sacrificed during the Enron debacle, the once-proud financial auditing firm Ernst and Young now looks poised to take a spin down the toilet of history thanks to its role in the Lehman Brothers debacle.

New York State Attorney General Andrew Cuomo is about to file civil fraud charges against E&Y for the work it did helping Lehman cook its books during 2007 and 2008. The short version of what happened goes something like this. Lehman Brothers, like all the other big banks on Wall Street in those years, was nearing insolvency and desperate for cash. In advance of its quarterly reports in 2007, the firm executed a series of something called Repo 105 transactions in an attempt to make their balance sheet look healthier than it was.

These Repo 105 transactions are just loans that Ernst and Young and Lehman Brothers conspired to book as revenue from sales. If I go to you and I ask you to lend me a hundred bucks to pay for Knicks tickets, that’s a loan, and you and I and the SEC and every investor on Wall Street all know I’m in debt to you, that I owe you a hundred bucks.

Here’s how Lehman Brothers paid for their Knicks tickets: a week before the game, they went to you and offered to you “sell” you their worthless puke-stained lava lamp for a hundred bucks, with the understanding that two days after the Knicks game, it would come back and “buy” the lamp back for the same $100 (plus a small commission for your trouble). And when Lehman pocketed that $100 from the initial transaction, they decided to call that not borrowing but a true sale, i.e. they booked that hundred bucks as revenue from an honest sale of a worthless piece-of-shit lava lamp.

In 2007 and 2008 Lehman would do this before the end of every quarter. They would “sell” billions of dollars of assets, typically bonds, to various companies, and use that money to pay down debt before the quarter’s end, so that they didn’t look so flat-ass broke to investors. Then, a week or so after the end of the quarter, they would go out and borrow more money, and then “buy” the assets back. The reasons they did this were myriad, but in most cases the assets they were “selling” were depressed in value at the time and could not have been sold at anything like face value had they really gone out on the market and tried. So instead of really “selling” these items on their balance sheet, they worked together with other companies to jury-rig these “repurchase” agreements that looked like sales but were actually loans.

(click to continue reading Crisis Dominoes Start Falling With Lehman Auditor | Rolling Stone Politics | Taibblog | Matt Taibbi on Politics and the Economy.)

The WSJ article I linked to begins:

New York prosecutors are poised to file civil fraud charges against Ernst & Young for its alleged role in the collapse of Lehman Brothers, saying the Big Four accounting firm stood by while the investment bank misled investors about its financial health, people familiar with the matter said.

State Attorney General Andrew Cuomo is close to filing the case, which would mark the first time a major accounting firm was targeted for its role in the financial crisis. The suit stems from transactions Lehman allegedly carried out to make its risk appear lower than it actually was.

Lehman Brothers was long one of Ernst & Young’s biggest clients, and the accounting firm earned approximately $100 million in fees for its auditing work from 2001 through 2008, say people familiar with the matter.

The suit, led by Mr. Cuomo, New York’s governor-elect, could come as early as this week. It is part of a broader investigation into whether some banks misled investors by removing debt from their balance sheets before they reported their financial results to mask their true levels of risk-taking, a person familiar with the case said. The state may seek to impose fines and other penalties.

The transactions in question, known as “window dressing,” involve repurchase agreements, or repos, a form of short-term borrowing that allows banks to take bigger trading risks. Some banks have systematically lowered their repo debt at the ends of fiscal quarters, making it appear they were less risk-burdened than they actually were most of the time.

Lehman Brothers dubbed transactions of this type “Repo 105.” The maneuver came to light in March, when the bankruptcy examiner investigating the firm’s collapse more than two years ago found that it moved some $50 billion in assets off its balance sheet. Lehman labeled those transactions as securities sales instead of loans, which led investors to believe the firm was financially healthier than it really was.

The bankruptcy examiner’s report and the attorney general’s investigation found that Lehman Brothers carried out the Repo 105 transactions on a quarterly basis in 2007 and 2008 without telling investors. Mr. Cuomo’s investigation found that Repo 105 transactions started as far back as 2001, said the person familiar with the probe.

(click to continue reading Ernst & Young Faces Fraud Charges – WSJ.com.)

Assholes.

Written by Seth Anderson

December 21st, 2010 at 10:11 am

Posted in Business

Tagged with ,

Reading Around on August 25th through August 27th

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A few interesting links collected August 25th through August 27th:

  • Mac OS X Automation: Services Downloads – Download free services. Service collections are grouped by color. Some services will install required Automator actions and may require an adminstrator password to do so.”
  • One_Billion_Dollar_Daley_Chicago_Reader.jpg
  • Chicago vice – chicagotribune.com – Chicago Police Sgt. John F. Mangin displays a bushel of marijuana leaves and a jar of ground marijuana found Sept. 27, 1945, in a flat at 601 W. Madison St.. Six men were arrested in the narcotics bust, including a 60-year-old man that Mangin said was the first person he arrested when he joined the narcotics detail in 1931.

Written by swanksalot

August 27th, 2009 at 5:00 pm

Rule of Law and Sancitity of Contracts

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Glenn Greenwald notes the absurdity of the claim that AIG’s outrageous bonuses must be paid because we are a nation of laws.

Soulsville cropped

Apparently, the supreme sanctity of employment contracts applies only to some types of employees but not others. Either way, the Obama administration’s claim that nothing could be done about the AIG bonuses because AIG has solid, sacred contractual commitments to pay them is, for so many reasons, absurd on its face.

To use Larry Summer’s eloquent phrase (perversely deployed to justify the AIG bonus payments)1: if “we are a country of law,” we would probably do something about these severe violations of law that are right in front of our faces, particularly since we all know exactly who the lawbreakers are.  

Apparently, this “we are a country of law” concept means that hundreds of millions of dollars in taxpayer money must be transferred to the AIG executives who virtually destroyed the financial system, but it does not mean that something must be done when high government officials get caught plainly breaking the law. What an oddly selective application of the “rule of law” this is.

…In comments, EJ has an excellent suggestion as to how the Government can enable AIG not to pay these bonsues:
Couldn’t Congress just give poor, well-meaning AIG immunity from lawsuits? Novel idea, huh?

That would certainly solve the problem.  If Congress (with Obama’s support) was willing to immunize lawbreaking telecoms from lawsuits brought by their illegally-spied-upon customers, shouldn’t Congress be willing to immunize AIG from bonus-seeking lawsuits brought by their executives who helped spawn the financial crisis?

[From The sanctity of AIG’s contracts – Glenn Greenwald – Salon.com]

Yes we are a nation of law, but we are also a nation of lawyers, and since when is a business contract sacrosanct? Just ask a labor union about renegotiating contracts.

such as:

Associated Press, February 18, 2009:

The United Auto Workers’ deal with Detroit’s three automakers limits overtime, changes work rules, cuts lump-sum cash bonuses and gets rid of cost-of-living pay raises to help reduce the companies’ labor costs, people briefed on the agreement said today. The UAW announced Tuesday that it reached the tentative agreement with General Motors Corp., Chrysler LLC and Ford Motor Co. over contract concessions, as GM and Chrysler sent plans to the Treasury Department asking for a total of $39 billion in government financing to help them survive.

Concessions with the union are a condition of the $17.4 billion in government loans that the automakers have received so far.

or, for example, a concession that has nothing to do with bailouts:

Members of the San Francisco Chronicle’s largest union have agreed to contract concessions that parent company Hearst Corp says are essential to keeping the newspaper open.

Members of the California Media Workers Guild voted by a 10-1 margin to approve concessions that would allow the Chronicle to cut at least 150 union jobs and eliminate various benefits and rights, according to a statement on the union’s website posted on Saturday evening.

New York-based Hearst had threatened to close the paper unless it could secure immediate concessions. The company also says that it may close the Seattle Post-Intelligencer newspaper, or possibly take it online only with a much smaller staff. A decision may come next week.

[From San Francisco Chronicle union OKs concessions | Reuters ]

So please, no bullshit about AIG bonuses being immune to renegotiation. I don’t believe it, and neither should you.

Obama can read between the lines too:

President Obama vowed to try to stop the faltering insurance giant American International Group from paying out hundreds of millions of dollars in bonuses to executives, as the administration scrambled to avert a populist backlash against banks and Wall Street that could complicate Mr. Obama’s economic recovery agenda.

“In the last six months, A.I.G. has received substantial sums from the U.S. Treasury,” Mr. Obama said. He added that he had asked Treasury Secretary Timothy F. Geithner “to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole.”

In strongly-worded remarks delivered in the White House East Room before small business owners, Mr. Obama called A.I.G. “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 A.I.G. warranted any bonuses at all, much less $165 million in extra pay,” Mr. Obama said. “How do they justify this outrage to the taxpayers who are keeping the company afloat?”

White House officials said that the administration is not looking to take A.I.G. to court to stop the company from paying out the bonuses. But they said the Treasury Department would be trying to figure out what they can do to block A.I.G. from making the payments within the legal confines of A.I.G.’s contractual obligations to the

[click to continue reading Obama Orders Treasury Chief to Try to Block A.I.G. Bonuses – NYTimes.com]

Footnotes:
  1. We are a country of law. There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system. []

Written by Seth Anderson

March 16th, 2009 at 11:12 am