New York Times columnist who demanded concessions from auto workers, “makes case” for AIG bonuses

By David Walsh
18 March 2009

New York Times columnist Andrew Ross Sorkin "made the case" Tuesday for paying American International Group (AIG) executives some $165 million in bonuses. In the face of a public outrage that he acknowledges, Sorkin suggests: "Maybe we have to swallow hard and pay up, partly for our own good."

It should be recalled that Sorkin, the Times chief mergers and acquisitions reporter and editor of the newspaper's daily financial report, called for the "government-sponsored" bankruptcy of General Motors in November 2008 and the slashing of auto workers' living standards. At the time, he described their benefits as "off the charts" and falsely claimed that at GM, as of 2007, "the average auto worker was paid about $70 an hour, including health care and pension costs."

Now, in regard to the AIG bonuses, the columnist suggests the fundamental question "is the sanctity of contracts." Imagine the mess "if the business community started to worry that the government would start abrogating contracts left and right."

Sorkin cites the comments of veteran compensation consultant Pearl Meyer, who suggests that failing to honor the contracts at AIG "would put American business on a worse slippery slope than it already is." In other words, the Times columnist asks someone in the business of seeing that executives extract every penny possible whether or not the AIG employees should receive their millions.

"If government officials were to break the contracts, they would be ‘breaking a bond,' Ms. Meyer says." Sorkin reproduces this with what one takes to be a "straight face."

What sort of "bonds" are presently respected by corporate America? This is a country where workers are treated like dogs, routinely tossed out the door with barely a moment's notice and have essentially no rights in relation to their corporate masters. Companies lie to and cheat their employees as a matter of course.

The "bond" between a firm and its workforce in the US lasts no longer than a fluctuation in its share price. At every possible opportunity, senior and more highly paid workers are replaced by cheaper labor. Factories and offices are closed down, operations moved to more "business-friendly" environs, without a thought for the destruction of lives and entire communities. There is no God in corporate America but the accumulation of personal wealth.

Only a week ago, a bankruptcy judge in New York upheld his earlier decision that Delphi, the auto parts maker, has the right to end health and insurance benefits to 15,000 retirees and their spouses as of April 1. The Detroit News noted, "Attorneys representing a group of the white collar retirees argued in the Southern District of New York court that Delphi's former owner, General Motors Corp., promised them lifetime coverage." So much for "bonds."

Numerous commentators have pointed to the glaring double standard. The bonus agreements with AIG are sacred, but autoworkers' contracts (and others) can be opened and altered at will. Sorkin has an answer for this, however: "The big difference is that there is a negotiation [in auto]; no one is unilaterally tearing up contracts."

The journalist is a sophist of the first order. There is no "negotiation" between the autoworkers and the companies in any meaningful sense. The corporations, the media, the government and the UAW line up on one side, threatening the most dire consequences: the destruction of massive numbers of jobs, bankruptcy, the closing down of the entire industry—for workers and their families, the loss of virtually everything—if the latter don't accept concessions. They face extortion of the most highly organized and vicious variety. And if the workers dared to reject the concessions, the political establishment, including the New York Times, would scream bloody murder and demand their firing.

On the other hand, the government owns 79.9 percent of AIG. It could do what it likes, replace management, invalidate contracts, launch criminal investigations and more. But, in this case, supported by the likes of Sorkin, a handful of corporate scoundrels hold society hostage and demand their blood money.

AIG is engaged in blackmail. Sorkin admits as much. Of the firm's complex role in world financial markets, he writes, "A.I.G. built this bomb, and it may be the only outfit that really knows how to defuse it.

"A.I.G. employees concocted complex derivatives that then wormed their way through the global financial system. If they leave...they might simply turn around and trade against A.I.G.'s book. Why not?... So as unpalatable as it seems, taxpayers need to keep some of these brainiacs in their seats, if only to prevent them from turning against the company."

The white paper AIG dispatched to the government making its case for paying the 400 executives includes other kinds of threats.

The document reports that AIG's derivative portfolio stands at some $1.6 trillion "and remains a significant risk." It suggests that if, for some reason, AIG were to default on a major contract, this could trigger "other cross-defaults over the entire portfolio of AIGFP [AIG Financial Products]."

The AIG white paper gives the example of a possible default set off by the resignation of an unhappy senior manager at a French subsidiary and the appointment of a replacement by the French banking regulator. "Such an appointment would constitute an event of default...and potentially cost tens of billions of dollars in unwind costs."

In other words, AIG officials might detonate a financial time bomb if their bonuses are not paid.

Professor William K. Black, a leading figure in the investigation of the savings and loan scandal in the 1980s, points to another side of the AIG extortion. "A.I.G. is holding a gun to their own heads, saying ‘unless you help us continue to have this incredible life in terms of bonuses, we're going to die and the taxpayers will be faced with a catastrophe'... It's too bad Marxists don't believe in god. Otherwise they'd be thanking him for having sent A.I.G. down to earth to destroy capitalism."

The various types of blackmail pointed to by Sorkin and others are not reasons for paying the AIG executives, but indicting them. The comments paint a picture, for all intents and purposes, of financial terrorists.

Sorkin has another argument in his pocket, one of the most popular with the American public at the moment: that AIG needs to pay the $165 million in bonuses, and millions more next year, to retain the services of the "the best and the brightest." Yes, a crowd of real geniuses, whose unscrupulous activities have helped bankrupt the country and world economy.

The Times columnist cites the comment of another executive compensation specialist, Robert M. Sedgwick, who tells him that the AIG jobs "are terrible.... You have to read about yourself in the paper every day. These people are leaving as soon as they can." One can barely restrain one's sympathy.

Sorkin assures us, through Ms. Meyer again, that the AIG employees "are being heavily recruited."

Does Sorkin think anyone gives a damn? In what world do such people live? Safely distant from popular sentiment, and from the concerns and anxieties of broad layers of the people. Sorkin's defense of the bonuses provoked a flood of largely hostile and caustic responses from Times readers.

A few typical comments:

From a reader in Minnesota: "The truth is, the government ought to be going after many of these employees with criminal fraud charges. Its pretty obvious they sold more credit default swaps than their company could afford to pay off. Those were contracts too."

From Boston: "How can Mr. Sorkin argue that the forced breach of labor contracts (or the payment of bondholders) to GM and Chrysler is any different than AIG's? This boggles the mind!

"Because at GM this is a matter of negotiation? Please!!! Under the menace of bankruptcy if the negotiated terms are not acceptable to the new bankers, i.e. the US government? Is this truly a negotiation? With a gun to the forehead? At GM and Chrysler there is no negotiation, but the imposition of terms by the government...just what the government has lacked the fortitude to do at AIG."

From California: "Mr. Sorkin, what is it that you don't understand? This is not about the government telling business how much their executives can earn. This is about what happens when a business fails on the basis of its own faults, and then, when graced with a taxpayers' windfall to help restructure the business, the executives' first thought is to line their pockets."

A business and commercial transactions attorney from Ann Arbor, Michigan: "It is particularly ironic that the government calls for the auto companies to cram down the pay of those overpaid autoworkers on Main Street in order to allow GM to qualify for a few paltry billions of bailout money—but when it comes to derivatives traders on Wall Street being rewarded with millions of dollars for playing dice with the global financial system—here, nothing can be done."

All thinking is social thinking, justice is class justice. Sorkin is a representative of the American upper middle class: insulated, selfish, arrogant. He lives and breathes in a world of wealth and privilege, rubbing shoulders daily with the "movers and shakers" of the financial world. This shapes his impoverished outlook and interests. Each of his pieces, in one way or another, returns to a central problem: how can this or that situation be turned to financial gain for the social layers he speaks for and embodies?

Under the present conditions of financial disaster and growing social tension, this is what fuels his animosity toward the autoworkers and the working class as a whole.

Last November 18, at the time of the bailout crisis, Sorkin lashed out at labor costs in the auto industry, which were "already coming down slightly because of a renegotiated deal with U.A.W. last year, but not nearly enough."

The Times columnist suggested that "part of the problem is summed up by comments" made by GM worker Kandy O'Neill, who had told the Detroit News, "I think we've given enough," about the cuts to her salary and pension plan. Sorkin then observed, "When you read a line like that you might sympathize with her, but then you realize that nothing can be accomplished without bankruptcy."

These comments came in the midst of the trillion-dollar bailout of the American corporate elite. For Sorkin, and others like him, the problem lay not in the insatiable greed of a handful or the evident irrationality of the existing economic system, but in the "unsustainable" living standards of autoworkers. On the WSWS, Ms. O'Neill, a fifth-generation autoworker from Goodrich, Michigan, answered Sorkin quite forthrightly. (See "Michigan GM worker answers attack by New York Times columnist")

On the Charlie Rose program in November, Sorkin sneered that a "bloated" GM was in "the welfare business," and "the health business"—in other words, that it was bound by contract to provide elementary benefits for its employees. All of this, he made clear, had to go. His solution, a month earlier, for a proposed GM-Chrysler merger, "everything that is impolitic...cut salaries and benefits, and lay off a lot of people, fast."

Here, in the liberal newspaper of record, is the brutality of the American elite. The working class will have to develop its own independent socialist program for the crisis every bit as ruthlessly.

Obama administration backs immunity for author of Bush torture memos

By Patrick Martin
9 March 2009

In legal arguments before a federal court in San Francisco Friday, the Obama administration stepped in to defend one of most notorious figures in the Bush administration, John Yoo, author of legal memoranda used to justify torture and indefinite detention without trial as part of the "war on terror."

The intervention makes clear that the Obama administration opposes any serious effort to shed light on the attacks against democratic rights carried out by its predecessor or to hold any officials of the previous administration accountable for their actions. Moreover, its court interventions amount to a defense of the Bush administration's assertions of quasi-dictatorial presidential powers.

Friday's court hearing before US District Judge Jeffrey White concerned a civil suit brought by Jose Padilla, the US citizen who was imprisoned without charges for more than three years in a US Navy brig after Bush designated him an "enemy combatant."

Padilla is now in federal prison, serving a 20-year sentence after being convicted on trumped-up conspiracy charges that had nothing to do with the sensationalized claims of the Bush administration that he was the leader of a plot to detonate a radioactive "dirty bomb" in an American city.

He has filed suit against numerous Bush administration officials, charging that his detention at the Navy brig, during which he was held in isolation and tortured, violated his constitutional rights. Yoo is being sued as the author of the legal opinion that upheld the arbitrary presidential authority under which Padilla was being held.

The Bush administration vigorously defended Yoo and the legal opinions he issued and sought to have the case thrown out on the grounds that US government employees cannot be sued for actions taken in the course of their official duties.

Immunity from lawsuits over official acts is an accepted US legal principle, but there is a broad exception for known criminal acts and abuses of power. Under the precedent set by the Nuremberg Trials after World War II, "just following orders" is not an adequate legal defense, particularly for those who were in a position to give the orders or define how they were to be interpreted. Yoo's position in 2001 as an attorney at the Justice Department's Office of Legal Counsel, which produces the official legal rationale for executive actions, clearly fits that description.

Padilla is not seeking either release from his current imprisonment or significant monetary damages. His claim against Yoo, for instance, is for $1, but his suit seeks a declaration from the federal government that his three-year ordeal in the Navy brig was illegal. "Plaintiffs seek to vindicate their constitutional rights," his lawyers argue, "and ensure that neither Mr. Padilla nor any other person is treated this way in the future."

Justice Department lawyers told the court Friday that despite the changeover from Bush to Obama, there would be no change in the legal position of the government in this case. Their declarations came in response to written questions issued by Judge White the day before, asking whether the position taken by Yoo's attorneys had been "fully vetted" by the new administration.

One government lawyer, Mary Mason, told Judge White that permitting the lawsuit against Yoo to go forward could make government employees unwilling to do their jobs. These employees might decide that "I'm not designating you an enemy combatant, and I'm not going to interrogate you, because I might get sued," she argued.

Several memos drafted by Yoo in 2001 and 2002 were released by the Justice Department earlier this week as part of discovery in the lawsuit. The memos include extraordinary assertions of presidential authority to override the Constitution and the Bill of Rights in the name of the "war on terror," including suspension of the First and Fourth amendments and the use of the military against civilian targets within the United States. [See “US Justice Department memos: the specter of military dictatorship”]

Judge White, appointed to the federal bench by George W. Bush, took Yoo's assertion of quasi-dictatorial presidential authority far more seriously than the Justice Department lawyers who appeared before them. He called Yoo's arguments in one 2001 memorandum "a pretty scary position," and seemed reluctant to throw out Padilla's suit, despite Mason's argument that the torture memorandums had been largely withdrawn before the end of the Bush administration.

The following exchange gives the flavor of the arguments: "We're not saying we condone torture," Mason said. But whether a government lawyer could be sued for condoning torture "is for the executive to decide, in the first instance, and for Congress to decide," not the courts.

Judge White asked, "You're not saying that if high public officials commit clearly illegal acts, a citizen subject to those acts has no remedy in this court?" Mason responded by citing the position take by the Bush Justice Department last year that the courts should not interfere in wartime decision-making by the executive branch.

Heather Metcalf, an attorney for Padilla, noted that Yoo had served on the "war council" that set Bush administration policy for the treatment of prisoners, and that one of the specific purposes of his memorandums was to shield officials from future liability for their encroachments on constitutional rights. "Defendant Yoo," she said, "must not take refuge in the legal no man's land that he helped to create."

After the court session, a Justice Department spokesman, Matt Miller, sought to downplay the political significance of the intervention. "This administration has made no secret that we disagree with many of the previous administration's legal policies on national security issues," he said. "Nevertheless, we generally defend employees or former employees of the department in litigation filed in connection with their official duties."

Yoo himself is a completely unrepentant defender of both torture and unchecked executive authority. In an interview with the Orange County Register, he said that he doesn't "think he would have made the basic decisions differently," adding that he would have polished the arguments more if he had known the memorandums would be made public. "When you are in the government, you have very little time to make very important decisions," he said. "You don't have the luxury to research every single thing and that's accelerated in war time."

Apparently his legal "research" did not include the text of the Constitution, which clearly gives Congress decision-making power over "captures" in wartime, and entirely ignored the Constitution's Bill of Rights.

The position taken by the Obama administration in the Yoo lawsuit is consistent with its efforts in a whole series of court cases involving national security and democratic rights, where the Obama Justice Department has essentially adopted the Bush administration's standpoint as its own. This includes assertion of the "state secrets" privilege to suppress lawsuits against illegal kidnappings by the CIA ("rendition") and illegal surveillance by the National Security Agency.

Last week government lawyers opposed a request for US District Judge Vaughn Walker in San Francisco to consider whether legislation passed last year by Congress goes too far in authorizing blanket legal immunity for telecommunications companies that cooperated in warrantless surveillance of US citizens. A spokesman for the Justice Department declared the 2008 legislation—for which Senator Barack Obama voted—is "the law of the land, and, as such, the Department of Justice defends it in court."

So clear is the continuity between the Bush and Obama administrations in this area that the Wall Street Journal published an editorial Friday, headlined, "Obama Channels Cheney," hailing the new administration's stand on warrantless wiretapping. "The Obama Justice Department has adopted a legal stance identical to, if not more aggressive than, the Bush version," the newspaper's right-wing editorial board gloated.

Side show takes main stage

Gene Lyons

Posted on Thursday, March 5, 2009

URL: http://www.nwanews.com/adg/Editorial/254121/

If the economic situation weren't so scary, it'd be amusing watching so many Republicans go crazier than a peach orchard boar, as country folks say.

To the connoisseur of political folly, last week's Conservative Political Action Committee in Washington offered a rich spectacle. Except it wasn't the usual sideshow barkers who provided the most bizarre entertainment; it was the headline speakers, notably Rush Limbaugh and former Arkansas Gov. Mike Huckabee. Between them, they made Louisiana's Gov. Bobby Jindal sound statesmanlike.

Jindal, after all, was merely pitching sweet feed to the cattle. But was it wise to argue that government doesn't work by citing the Bush administration's feckless response to Hurricane Katrina? To mock as wasteful the U.S. Geological Survey's monitoring of volcanoes? The same agency funds river gauges and tidal monitors, of interest to the Bayou State. Heck, why not throw in the do-nothing National Weather Service? Why watch the weather if you can't change it?

Just once I'd like to see one of these Confederate Republicans acknowledge how much more their states receive from the Treasury than they pay in taxes. (For Louisiana, it's $1.45 for every dollar paid; for Mississippi, $1.77, etc.) But then what's a little hypocrisy among free lunch conservatives? Jindal also mocked an (imaginary) $8 billion earmark for a high-speed railway between Los Angeles and Las Vegas. Then he turned right around and solicited funding for a Baton Rouge-New Orleans line.

Back before free-lunch hypocrisy became gospel, Louisiana had a social structure like Guatemala's-low taxes on the wealthy, a beaten-down middle class and sprawling poverty. Economically, GOP doctrine consists of ignoring the obvious. Show me a low-tax, "pro-business" paradise like the Deep South before World War II, and I'll show you poverty, disease, illiteracy and stagnant opportunity.

Alternatively, try finding a wealthy country anywhere on earth with the economic policies the Jindals, Limbaughs and Huckabees recommend. They simply don't exist. Hence, the current nearhysteria on the right. We haven't seen its like since the 1960s, when many white Southerners panicked over the prospect of racial integration, the John Birch Society flourished, and billboards depicting "Martin Luther King at a Communist training school" lined rural highways.

Historian Richard Hofstadter described it in a seminal 1964 essay: "The paranoid spokesman sees the fate of conspiracy in apocalyptic terms-he traffics in the birth and death of whole worlds, whole political orders, whole systems of human values. He is always manning the barricades of civilization. He constantly lives at a turning point. Like religious millenialists he expresses the anxiety of those who are living through the last days."

Which brings us back to Limbaugh and Huckabee. Sweating like a draft horse, and appearing to have gained the hundredplus pounds that Huckabee famously lost, Limbaugh all but anointed himself titular head of the GOP. OK, so he's never held office or participated in open debate. Where an ordinary mind might be daunted by the spectacular economic wreckage left behind by George W. Bush, Limbaugh's is an other-worldly doctrine.

Conservatism cannot fail, it can only be failed; hence, its patron saint, Ronald Reagan, is remembered only for cutting income taxes during his first term. His subsequent tax increases-nearly doubling the Social Security tax, for example-are never mentioned. This, Bush refused to do, resulting in the near-doubling of the national debt that Republicans have suddenly rediscovered with a Democrat in the White House.

As at the CPAC event, Limbaugh rarely mentions President Obama without talking about how liberals are "gnashing their teeth when I say I want Obama to fail. Because I have violated political correctness. . . . You can't wish the first black president would fail. . . . The dirty little secret is that every Republican in this country wants Obama to fail, but none of them have the guts to say so. I am willing to say it. We want him to fail because we want to preserve our country as we found it. We do not want to see a successful attack on capitalism."

He's so brave, Limbaugh, hiding behind a microphone with a mute button thrashing straw men he invented. Exactly who said Obama can't be criticized because he's black? Nobody. What I hear Democrats like White House chief-of-staff Rahm Emanuel saying is how glad they are to see Limbaugh taking center stage.

Attack on capitalism? Most Americans understand that should Obama's efforts to save the banking system and kickstart the economy fail, we're in a world of hurt. Not Huckabee, however, a pragmatic moderate as Arkansas' governor, but a fire-andbrimstone shouter at CPAC. He claims that Obama's creating a new "Union of American Socialist Republics," adding that "Lenin and Stalin would love this stuff."

Lenin? Stalin? Why not Hitler, too?

Evidently, P.T. Barnum never actually said, "There's a sucker born every minute." He'd nevertheless have recognized a carnival act when he saw one.

· -–––––·–––––-Free-lance columnist Gene Lyons is a Little Rock author and recipient of the National Magazine Award.