Exclusively in the new print issue of CounterPunch

WHY MORMON MEN CAN’T BE TRUSTED — A ex-Mormon woman looks back at the Church. PLUS It’s fifty years since the Port Huron statement. Alexander Cockburn on the origins of SDS and one of the crucial documents of the 1960s. PLUS Two ounces of oil + a fishing boat + Homeland Security Incident #995038 = the onward march of totalitarianism in America. Read Captain Knutson’s story.

March 17, 2009

Treasury Gives AIG Big Break, But Not GM

Cuts for Autoworkers, Bonuses for Derivatives Traders

by PETER MORICI

Washington and the nation are enraged that AIG is paying millions in bonuses to retain financial wizards who sold insurance on mortgage-backed securities with few assets to back up their promises.

backed securities with few assets to back up their promises.

AIG is telling us that it must pay those bonuses, because they are required by employment contracts necessary to retain its financial engineers.

Treasury Secretary Timothy Geithner has expressed outrage. Instead, he should be embarrassed.

When the Bush administration agreed to bail out General Motors and Chrysler, it required those companies to renegotiate their labor contracts —- that’s right, contracts —- and they are doing just that to keep their federal largess.

The Obama Treasury, headed by Geithner, is forcing the terms of that deal on the United Autoworkers.

Why did Henry Paulson and Geithner not require the same at AIG? Remember, Geithner was president of the New York Federal Reserve Bank and a key player when financial giants like Citigroup and AIG were being bailed with the taxpayers’ cash.

Those bailouts continue, with easy terms for the bankers and their contracts, on Geithner’s watch.

The threat was the same with AIG and GM. If either shut down, the economy would plummet into chaos and depression, we were told.

So Mr. Geithner, instead of being outraged at AIG’s last revelations, perhaps you can explain to all of us why a UAW worker earning $29 dollars an hour must give back wages and benefits to keep their company alive, while the architects of the biggest financial disaster in history get to keep their gold-plated contracts?

We are waiting for your answer.

PETER MORICI is a professor at the Smith School of Business, University of Maryland School, and former Chief Economist at the U.S. International Trade Commission.