hypocritexposer
Well-known member
"It's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay," Obama said. "How do they justify this outrage to the taxpayers who are keeping the company afloat?"
The employment contracts became so complex, with pay packages consisting of stock options and other forms of deferred compensation, largely because of Congress' attempts to control soaring executive salaries. In 1993, Congress limited the tax deduction companies could take for cash payments to $1 million. The result was a cottage industry of lawyers, consultants and advisors who structure even bigger pay packages with creative legal strategies that now make the AIG bonuses difficult to rescind.
“Before Congress got involved we used to give them a $2 million salary and a corporate jet,” said Lynn Stout, a UCLA professor who specializes in corporate governance and securities regulation. “And it was much cheaper and safer.”
In fact, it was a law approved by Congress in 2000 that allowed companies to place tens of trillions of dollars of these risky credit default swap bets.
After the 1998 collapse of Long Term Capital Management, a giant hedge fund that pioneered the use of derivatives, the Fed engineered a rescue to prevent the unwinding of risky bets from spreading to the larger financial system. That brought calls for tighter regulation of derivatives, including a push for greater derivatives regulation at the Commodity Futures Trading Commission, led by a former Wall Street attorney named Brooksley Born.
But strong opposition to the proposal from then-Fed Chairman Alan Greenspan and senior Clinton administration officials sank the idea. On Dec. 21, 2000, President Clinton signed into law the Commodity Futures Modernization Act, which further eased restrictions on derivatives like credit default swaps. The new law cleared the way for an explosion in credit default swaps
http://www.msnbc.msn.com/id/29724816/