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Larry Summers, Director of the National Economic Council, and former Clinton Treasury Secretary, said the admin's hands were tied about blocking bonuses because of the sanctity of contracts. Yet the admin made contract changes part of auto workers and mortgage bailouts. He is just protecting his Wall St. cronies and should be fired.

Like many progressives, I was more than a little dismayed when the guys Obama picked to run his economic program were Wall Streeters who had worked for Bill Clinton but advocated and enacted many of the deregulatory and trade practices that gutted our economy.

But I hoped that those who said Obama needed insider technicians to affect change were right. Now after months of bailouts on terms the Bush administration could have written, that is no terms at all just a blank check, it is clear that the defenders of those choices were dead wrong.

The breaking point came this weekend when Larry Summers, Director of the National Economic Council, and former Clinton Treasury Secretary, said on This Week with George Stephanopoulos that the administration's hands were tied about blocking bonuses because of the sanctity of contracts.

As Glenn Greenwald pointed out, the administration eventually got around this sanctity when it came to allowing bankruptcy judges to renegotiate bad mortgages, had no trouble asking autoworkers to make contract concessions, and I would add that Obama's Education Secretary, Arne Duncan, had no problem ignoring contracts when he fired schools full of teachers at a time in Chicago, and his merit pay proposal, if enacted, would gut many contracts.

The corporate honchos on Wall Street likewise had no problem figuring out how to break contracts themselves when they wanted to raid employees pensions.

In spite of their loud protests about the AIG bonuses, Obama's economic team isn't moving too fast to actually stop their payout or other abuses of taxpayer provided bailout money. Their creative solutions seem to be limited to writing blank checks to guys they were were working with and for just a few months ago.

Could it be that some contracts are more sacred than others?

Isn't it looking more and more like Summers, Rubin, and company are there not to reform Wall Street but to protect their buddies back at their firms from real change and punishment for the historic damage caused by greed?

Recently, a story said that the Obama administration is bracing for a populist backlash to all the bailouts. Instead of bracing for the backlash, he could prevent it by starting to take actions that show Wall Street is not being allowed to dictate their own punishment and reform.

He should not only fire Larry Summers, he should grab him by the collar, drag him out the front door of the White House and kick his ass off the porch.

If the rest of his economic team continues to bow and scrape to the various perfumed princes, trust fund babies, and sociopaths on Wall Street, they should be given the same shoe leather pink slip in short order.

The public needs to see some heads on pikes, and if Obama can't bring himself to do it to those on Wall Street, he could at least do it to their apologists in his own administration.

Originally posted to Professor Smartass on Tue Mar 17, 2009 at 10:58 AM PDT.

Poll

Should Obama fire Larry Summers for protecting his Wall Street cronies?

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13%18 votes
8%11 votes

| 129 votes | Vote | Results

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Comment Preferences

  •  Hey Diarist - pls. post (4+ / 0-)
    Recommended by:
    bustacap, 0hio, Mr Stagger Lee, tech ed

    a tip jar! Great diary, great points. Thanks.

    The Bible is not inerrant, and corporations are not gods.

    by CoExistNow on Tue Mar 17, 2009 at 11:01:18 AM PDT

      •  Timothy Geithner, Lawrence Summers, Robert Rubin, (0+ / 0-)

        Greenspan, etc ENOUGH!!!!!!!!!

        Brooksley Born, Joseph Stiglitz, Paul Krugman,Ellen Brown, etc. are available!!!!!

        link

        http://www.nytimes.com/...

        link

        http://www.webofdebt.com/...

        Here's another bit of info that might surprise many, posted by alba yesterday.

        Congressional Record for Dec 15, 2000 indicates:

        Mr. HARKIN. Mr. President, I want to thank and commend Chairman LUGAR for all of his hard work and leadership in bringing the Commodity Futures Modernization Act to the point of this final, agreed upon bill, which will be a part of the appropriations measure passed later today. I am pleased to have had the opportunity to work with Chairman LUGAR on this important legislation and to cosponsor it.

         This bill will bring much-needed modernization, legal certainty, clarification and reform to the regulation of futures, options and over-the-counter financial derivatives. At the same time, it maintains regulatory oversight of the agricultural futures and options markets and continues and improves protections for investors and the public interest with regard to futures, options and derivatives.

         The legislation carries out the recommendations of the President's Working Group on Financial Markets. Members and staff of the Working Group, especially the Department of the Treasury, the Commodity Futures Trading Commission and the Securities and Exchange Commission, were instrumental in helping to craft the bill. And it is significant that this final version of the bill is strongly supported by all members of President's Working Group on Financial Markets. I ask unanimous consent that a letter from the Working Group be printed in the RECORD at the conclusion of this statement.

          . . . . . .

         Exhibit 1
        DECEMBER 15, 2000.
        Hon. TOM HARKIN,
        Ranking Member, Committee on Agriculture, Nutrition, and Forestry U.S. Senate, Washington, DC.

         DEAR SENATOR HARKIN: The Members of the President's Working Group on Financial Markets strongly support the Commodities Futures Modernization Act. This important legislation will allow the United States to maintain its competitive position in the over-the-counter derivative markets by providing legal certainty and promoting innovation, transparency and efficiency in our financial markets while maintaining appropriate protections for transactions in non-financial commodities and for small investors.

         Sincerely,

         
        Lawrence H. Summers,

         
        Secretary, Department of the Treasury.

         
        Arthur Levitt,

         
        Chairman, Securities and Exchange Commission.

         
        Alan Greenspan,

         
        Chairman, Board of Governors of the Federal Reserve.

         
        William J. Rainer,

         
        Chairman, Commodity Futures Trading Commission.

        Contact President Obama and tell him how you feel about Timothy Geithner, Lawrence Summers!

        link

        http://www.whitehouse.gov/...

        President Obama, didn't I hear you use the word, ENOUGH?

        Fire Geithner, Summers, etc., TAX BONUSES given to AIG employees.

        HIRE Brooksley Born, Joseph Stiglitz, Paul Krugman,Ellen Brown, etc.

        ENOUGH!!!!!!!!

        Hi! My name is Chip Reid and I'm a perfect asshole.

        by 0hio on Tue Mar 17, 2009 at 01:11:27 PM PDT

        [ Parent ]

  •  I'm goin' with: (7+ / 0-)

    he should grab him by the collar, drag him out the front door of the White House and kick his ass off the porch.

    "Now you git the hell off my land afore I fill yer backside with buckshot!"

    ... and we have seen the black suns | pouring forth the night. -- Clark Ashton Smith

    by bustacap on Tue Mar 17, 2009 at 11:01:25 AM PDT

  •  What of the Constitutional Protection (2+ / 0-)
    Recommended by:
    sundancekid11, tapu dali

    of Contracts ? I'm not thrilled with the contracts but I'm not willing to throw out the Constitution just to get back 150 million. That is what is being asked in the long run.

    Free Charles Lynch, He is facing 100 yrs in prison for following Ca. Laws. Charged w/5 non-violent Marijuana violations. Does that equal what Madoff did ?

    by SmileySam on Tue Mar 17, 2009 at 11:04:01 AM PDT

  •  Like it or not (2+ / 0-)
    Recommended by:
    sundancekid11, tapu dali

    Summers did have a point about the sanctity of contracts. It's a legal principle that's been around since the Black Plague.

    "You Can't Piss on Hospitality... I WON'T ALLOW IT!" Michael Waits, Troll 2

    by Larry Madill on Tue Mar 17, 2009 at 11:06:15 AM PDT

  •  I Would Take A Bullet For Barack Obama...But (3+ / 0-)

    Summers and Geithner have been big disappointments for me.  I have no confidence in these two Wall Street elitists, and it won't hurt me to see them go.

    And like the drowning man, who, in despair, Doth clutch the frail and weakly straw --Thomas Horatius Delpho

    by terry2wa on Tue Mar 17, 2009 at 11:10:57 AM PDT

    •  and Rubin and Bernanke (1+ / 0-)
      Recommended by:
      tech ed
      •  The current crop of economists has really had its (3+ / 0-)

        day. I agree completely that free traders and supply side economics need to go. They are responsible for the problems we are having now.

        "...our goal is clearly not to find a qualified and interested US worker." -Lawrence Lebowitz

        by tech ed on Tue Mar 17, 2009 at 11:28:05 AM PDT

        [ Parent ]

      •  Bernanke isn't as bad as the Rubin disciples (1+ / 0-)
        Recommended by:
        Fire bad tree pretty

        Bernanke is a qualified academic economist will all the pluses and minuses that it implies.  He has even written defending the New Deal from the revisionists that try to claim that it hasn't worked, which is more than I can say for the greater neo-liberals out there (because I don't think you can find a non-neo liberal economist aside from the Krugman, Stiglitz, Roubini Axis of Being Right).

        "An army of principles can penetrate where an army of soldiers cannot." - Thomas Paine

        by Mister Gloom on Tue Mar 17, 2009 at 11:30:35 AM PDT

        [ Parent ]

    •  I agree with the Washington Post this scandal (2+ / 0-)
      Recommended by:
      slinkerwink, justCal

      has dealt a serious blow to the Obama Adminstration, not a fatal one of course, but this thing needs to be contained. One more thing, it is no use by Obama supporters, trying pin this on Bush
      and Paulson, the hot potato is in this administration's lap. Geithner and Sumers must fall on the swords, or this will get out of hand. People are pissed off out here, and the President is looking like Jimmy Carter during the Iran Hostage crisis

      America, They were yours, Honor Them, Do Not forget them-IGTNT.

      by Mr Stagger Lee on Tue Mar 17, 2009 at 11:37:37 AM PDT

      [ Parent ]

  •  Summers and Geithner are Dragging Obama Down (6+ / 0-)

    They may the smartest guys in the room, but the room they've been hanging out in is and always has been a room full of Wall Street insiders.

    If anybody in the federal government needs to get outside his usual box, it's Geithner. Tim, head out to Flint or Gary or Charlotte, sit down in a friendly tavern, order you up a PBR, and take in the sight and sounds.

    The moral arc of the universe is long, but it bends towards justice. - Martin Luther King, Jr.

    by easong on Tue Mar 17, 2009 at 11:11:49 AM PDT

  •  May I respectfully remind people (7+ / 0-)

    that many of those who were opposed to these appointments were told to "shut up, Obama's the boss"?

  •  I'm not defending Summers but I see the problem (4+ / 0-)
    Recommended by:
    elmo, sundancekid11, Marcion, stella0710

    Here's the difference between UAW and AIG.  The AIG retention plan was made in the PAST.  Contracts law requires both sides to be willing participants in any alteration of any contract.  There is NO indication that the bonus recipients are in any way going to alter their contracts.  Now, let's look at UAW and GM.  UAW/GM has to provide a business model going FORWARD.  Naturally since UAW wants to continue to be at the table, they "have to" negotiate with GM.  That's the problem.  

    Legally, if AIG were to retract the bonuses then AIG would be liable for all sorts of lawsuits by their employees.  This in turn would cost the taxpayers more, as it is evident AIG has NO money and if AIG goes bankrupt the whole thing goes kaplooey.

    •  bring these execs to the table, then bulldoze the (2+ / 0-)
      Recommended by:
      0hio, tech ed

      room the table is in.

    •  isn't it difficult to sue federal gov't? (0+ / 0-)
      •  I never said that they would sue the government (0+ / 0-)

        The employees would sue AIG.  AIG would be involved in massive lawsuits in which they would be liable.  We would be on the hook for AIG in the risk they go bankrupt.  Ipso facto, we would have to pay for these lawsuits.  

        •  AIG Is owned by the government... (0+ / 0-)

          AIG can claim to be a quasi-nationalized entity with all the liability from lawsuits that that implies.

          "An army of principles can penetrate where an army of soldiers cannot." - Thomas Paine

          by Mister Gloom on Tue Mar 17, 2009 at 11:32:24 AM PDT

          [ Parent ]

          •  I don't know how that would work (0+ / 0-)

            We're not working there, and we have no apparatus.

          •  federal employees can sue the government (2+ / 0-)
            Recommended by:
            sundancekid11, stella0710

            for breach of contract. Government entities waive sovereign immunity in many contexts, employment law being one of them.

            Law is a light which in different countries attracts to it different species of blind insects. Nietzsche

            by Marcion on Tue Mar 17, 2009 at 11:46:12 AM PDT

            [ Parent ]

            •  Ah but here's a question for you... (0+ / 0-)

              Is the government liable for entities contracts that it takes over that were signed before they took over?  Because banks have been taken over in the past and I'm not sure that the government was liable then.

              "An army of principles can penetrate where an army of soldiers cannot." - Thomas Paine

              by Mister Gloom on Tue Mar 17, 2009 at 12:00:11 PM PDT

              [ Parent ]

              •  usually (1+ / 0-)
                Recommended by:
                Mister Gloom

                The general rule is that when you take something over, you assume all of its liablities and step into its shoes, although certain liens and obligations can be extinguished by taking advantage of legilsative schemes such as foreclosure sales or bankruptcy. I am not an expert on the legislation behind the FDIC, but I'm guessing that since the function of the FDIC is to maintain investor confidence in the banks being taken over, they would tend to take over most liabilities rather than abrogate them.

                Law is a light which in different countries attracts to it different species of blind insects. Nietzsche

                by Marcion on Tue Mar 17, 2009 at 12:11:51 PM PDT

                [ Parent ]

                •  FDIC can abbrogate contracts.. (0+ / 0-)

                  Found the section on their own website detailing it (note, a PDF file is the link): http://www.fdic.gov/...

                  Quote: "a receiver may repudiate any burdensome contract within a 'reasonable period of time' of its appointment"

                  "An army of principles can penetrate where an army of soldiers cannot." - Thomas Paine

                  by Mister Gloom on Tue Mar 17, 2009 at 12:15:57 PM PDT

                  [ Parent ]

                  •  That was never the question (1+ / 0-)
                    Recommended by:
                    Marcion

                    Of course they could.  The question was whether they should.  You will pay more on the back end versus acting like a populist on the front.  It's a tough scenario they went through, and I'm assuming that they decided to act rationally versus acting with emotion.  Ultimately, it's cost the WH political capital, but that's what they decided.  

                    •  Well... (1+ / 0-)
                      Recommended by:
                      Marcion

                      when we get the populance putting its foot down to what they see as the looting of the treasury for Wall Street bigshots benefit and you have a populance that will gladly acceptance economic armaggedon even if it costs them (I fully expect a "Not One Penny More" movement to start up and get a decent sized amount of support).  That will be more damaging than the problems they get related to supporting AIG.

                      "An army of principles can penetrate where an army of soldiers cannot." - Thomas Paine

                      by Mister Gloom on Tue Mar 17, 2009 at 12:30:17 PM PDT

                      [ Parent ]

      •  why are you asking? (0+ / 0-)

        I was certain you must be an experienced litigator considering the conclusive argument about the legality of the bonus contracts you've made in this diary.

    •  Auto-audit for suing AIG employees... (0+ / 0-)

      ...have the IRS run a fine tooth comb over those assholes returns...you know they'd be hiding something.

      "An army of principles can penetrate where an army of soldiers cannot." - Thomas Paine

      by Mister Gloom on Tue Mar 17, 2009 at 11:31:45 AM PDT

      [ Parent ]

    •  Oh Stop (3+ / 0-)
      Recommended by:
      elmo, bottl4, calchala

      That sounds entirely too reasonable.  Law? Honoring the word of law and contracts?  I say, nay to the law, storm the bastille!  Where is my pitchfork? Who cares about the law and how much money it would take to recoup those ill gotten gains.  It's the principle!

      I bet Obama smells like warm cookies, fresh from the oven.

      by dancerat on Tue Mar 17, 2009 at 11:41:09 AM PDT

      [ Parent ]

    •  they have a law in place for future bonuses (0+ / 0-)

      The Stimulus bill has a provision that limits exeuctive compensation at bailed out instittuions goving forward, but it is not retroactive. Apparently nobody could see this coming, despire the fact that this was required under the contracts and easily quantifiable. Having done nothing about it when they could, our leaders now boldly cloak themselves in populist outrage and jump up and down. Very courageous.

      Law is a light which in different countries attracts to it different species of blind insects. Nietzsche

      by Marcion on Tue Mar 17, 2009 at 11:48:47 AM PDT

      [ Parent ]

    •  calchala, in a word, bullshit. (0+ / 0-)

      Hi! My name is Chip Reid and I'm a perfect asshole.

      by 0hio on Tue Mar 17, 2009 at 12:47:04 PM PDT

      [ Parent ]

  •  AIG had no trouble selling contracts . . . (3+ / 0-)

    for insurance that they couldn't back with adequate reserves.  In the real world, they call this fraud.

    For the life of me, I don't know why Summers would place AIG employees ahead of the counter-parties in AIG's contractual obligations.  Summers is writing bad checks against Obama's political capital with every blown interview he makes.

  •  Gibbs on TV right now... 'Outrage' is the meme (2+ / 0-)
    Recommended by:
    slinkerwink, Mr Stagger Lee

    He's used the word at least 5 times already.

    Give it up, Gibbs!

    Round up the crooks and throw their asses in jail.

  •  the Chris Dodd amendment (0+ / 0-)
    Chris Dodd inserted an amendment into the stimulus bill that capped execurive bonuses for all contracts after Feb 2009. Not before. Why Congress didn't do something to the bonuses that had been earned in 2008, and the amounts of which could have been easily calculated given that the government now has access to all AIG files, is beyond me. Perhaps it's because Dodd is the biggest receipient of AIG donations, or maybe they didn't think retroactive modificaiton of contracts of this type would stand up in court.

    Now people are jumping down the throats of the Treasury Department guys to do something that is illegal - to take away perfectly legal, contractually mandatory bonus payments. They can't do anything about it. Maybe the IRS can, that's Dodd's new idea. But the blame must be placed squarely wheere it belongs - on Congress, which approved the bailouts and stimulus without bothering to fix this problem, and then for taking the popular position and posturing for the cameras knowing full well that they could have done something and did not.

    Law is a light which in different countries attracts to it different species of blind insects. Nietzsche

    by Marcion on Tue Mar 17, 2009 at 11:43:29 AM PDT

    •  blame it on the Fed too ... (1+ / 0-)
      Recommended by:
      whenwego

      the first infusion into AIG was given by the Federal Reserve under its own powers. If memory serves this was around mid Sept 2008 when "the sky was falling" in terms of the domino effect of the disclosed near run on the banks as told to us WAY LATER. There is NO JUSTIFICATION for looking into precautions, but apparently no wonder Bernacke is SO LIVID with AIG because he has probably come to find out that there are plenty of skunks in that London office woodpile, AND the interrelated nature and mapping of all of AIG's credit default swaps underwriting was nothing more than a house of cards ...

      no wonder AIG will be paying HELL out of the next 30 billions ... AND there are very smart people in charge of breaking up AIG - between a sane and solid standard insurance company with global customers, and the sewer that is its Financial Unit where the 2-word concept of "risk management" was an oxymoron!

      Revolutions never go backwards.

      by sundancekid11 on Tue Mar 17, 2009 at 12:08:13 PM PDT

      [ Parent ]

  •  AIG's CEO broke contracts before: (0+ / 0-)

    The last time Edward Liddy (AIG CEO) faced a vexing compensation issue, as chief executive of Northbrook-based Allstate Corp., he cut costs with all the finesse of a blunderbuss: He axed 6,000 of Allstate's highest-paid agents.
    Chicago Tribune

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