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AIG backlash heats up

Dick Taffe — Thu, 24 Dec 2009 16:40:02 +0000

The heat continues to increase on insurance giant AIG, which got $182 billion in taxpayer bailouts yet gave out $165 million in bonuses. New York Senator Chuck Schumer says President Obama’s pay czar should be given the power to recover the “outrageous” bonuses. Law Professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law, says taxpayers also must be concerned about AIG’s ability to unravel and the complex debt obligations that led to the financial meltdown.

“Refusing to pay back ’08 bonuses, and maneuvering for ’09 payouts, gives us little confidence that their efforts at unwinding the complex products they created will be done in the best interests of the company’s taxpayer-shareholders. Why should we be trusting the same AIG folks that created these products to drive the hard bargain with counterparties to AIG? Where is Elizabeth Warren and her TARP oversight white hat when needed?”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu

AIG breaks bonuses promises

Dick Taffe — Wed, 23 Dec 2009 15:37:46 +0000

Insurance giant AIG, bailed out by taxpayers to the tune of $180 billion, had promised to return $45 million of the $165 million in bonuses it paid despite the bailout. But most of that remains unpaid, the Washington Post reports. Former Federal Reserve Bank examiner Mark T. Williams, who teaches finance at BU’s School of Management and whose book “Uncontrolled Risk” about the fall of Lehman Brothers will soon be published, says AIG is just greedy.

“If these executives do not want to honor their obligation to refund bonuses, then the government should impose an AIG bonus tax to have these funds returned. At minimum, the government needs to remind AIG executives who they are now owned by.”

Contact Mark T. Williams, 617-358-2789, williams@bu.edu

Citigroup repayment costs taxpayers

Dick Taffe — Wed, 16 Dec 2009 20:54:54 +0000

On the one hand Citigroup is repaying Uncle Sam that TARP bailout money, which is good for taxpayers. On the other hand, they’re getting a multi-billion dollar tax break in the process. Economics Professor Laurence Kotlikoff, a former senior economist in the White House Council of Economic Advisors, doesn’t like the tax breaks built into the repayment program.

“This is Uncle Sam handing out money under the rug. This is expected of a third-world dictatorship, not our country.”

Contact Laurence Kotlikoff, 617-353-4002, or kotlikoff@bu.edu

BofA to repay TARP loans

Dick Taffe — Thu, 03 Dec 2009 22:32:03 +0000

Bank of America has received Fed approval to repay the $45 billion in Troubled Asset Relief Program bailout loans it got from taxpayers over the past year. Former Federal Reserve Bank examiner Mark T. Williams, who teaches finance in the School of Management, says the payback might be too early.

“Banks are beginning to earn their way back to health, and BofA is on much stronger financial footing than even six months ago. But banks still need to rebuild capital positions that were destroyed over a long period of wonton risk taking.”

Contact Mark T. Williams, 617-358-2789, williams@bu.edu

GMAC needs more bailout

Dick Taffe — Wed, 28 Oct 2009 20:22:38 +0000

Troubled consumer finance company GMAC reportedly needs more taxpayer bailout money, on top of the $12.5 billion it’s already received. Robert Bench, an ex-deputy Comptroller of the Currency and now senior fellow at the Law school’s Morin Center for Banking and Financial Law, says it’s understandable because GMAC concentrated most of its risk on a selected consumer product – autos.

“It is exactly that risk that causes a dearth of private sector financial support for GMAC, requiring billions in federal financing to keep it operating.”

Contact Robert Bench, 617-353-5428, bobbench@bu.edu

Remake Fannie & Freddie?

Dick Taffe — Thu, 06 Aug 2009 16:20:38 +0000

It’s reported that an overhaul of mortgage giants Fannie Mae and Freddie Mac may be in the works. The Obama administration’s plan would be to strip them of billions in troubled loans and build a new structure to support the home-loan market. Robert Bench, a former deputy Controller of the Currency, now a senior fellow at the School of Law’s Morin Center for Banking and Financial Law, thinks a Freddie/Fannie remake is smart.

“For most of their existence, Fannie and Freddie were utilities that served the public well. If they can return to a ‘utility’ culture, deploying conservative lending standards for the benefit of the overall mortgage market, they would accelerate reform and repair of retail mortgage conditions.”

Contact Robert Bench, 617-353-5428, bobbench@bu.edu

Bailed-out Citi raising salaries

Dick Taffe — Wed, 24 Jun 2009 13:46:59 +0000

Coping with a government bailout/buy-in and a share price down 84 percent from last year, Citigroup reportedly intends to raise base salaries as much as 50 percent to offset smaller annual bonuses. School of Management Professor Fred Foulkes, director of the Human Resources Policy Institute, can discuss how this might go over with the Obama administration’s new “pay czar.”

Contact Fred Foulkes, 617-353-4281, ffoulkes@bu.edu

Salary caps nixed for bailed-out firms

Dick Taffe — Wed, 10 Jun 2009 14:21:31 +0000

Reports say plans to cap salaries at firms getting bailout money is being nixed by the Obama administration, which will leave it to Congress to limit bonuses. But the White House will name a “pay czar” to monitor bailed-out companies and will still push to revamp compensation practices in the financial industry. School of Management Professor Fred Foulkes, director of the Human Resources Policy Institute, can discuss trends in executive compensation.

Contact Fred Foulkes, 617-353-4281, ffoulkes@bu.edu

What about the bailed-out banks’ warrants?

Dick Taffe — Wed, 10 Jun 2009 13:38:27 +0000

With 10 large banks repaying the public billions in bailout money, it divorces the government from running the banks. But Treasury still owns stock warrants in those banks, which could become valuable over time. School of Law Professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law, thinks the warrants should be sold on the open market — the sooner the better.

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu

Chrysler sale to Fiat set

Dick Taffe — Wed, 10 Jun 2009 13:21:00 +0000

With the Supreme Court declining to hear a creditors’ challenge to it, Fiat is set to purchase most of Chrysler’s assets which will lead the Italian automaker deeply into the American market. School of Management Dean Louis Lataif, the former head of Ford Motors in Europe, can discuss the big-picture impact of the deal.

Contact Louis Lataif, 617-353-2668, lelataif@bu.edu