Financial world is swimming naked

Naked dippers abound, and none was more outrageous than last week's furor over the AIG's US$165 million bonuses for the company's executives at its Financial Products Unit, the very branch whose toxic products brought the company down and dragged the world economy to sink with it.

America's taxpayers have paid AIG — ridiculed by many as Arrogance, Incompetence and Greed — US$170 billion to bail it out, the lion's share of the US$800 billion Troubled Asset Relief Package (TARP) fund.

But AIG apparently used most of the money to pay its gambling partners in U.S. and Europe, including Goldman Sachs, Merrill Lynch and Citigroup. BofA, UBS and Deutsche Bank. Ed Liddy, the dollar-a-year CEO appointed by government, stirred a hornet nest last week by funneling a whopping US$165 million to top executives as “retention pay” — a euphemism for bonuses.

The whole country was fired up in rage, as Liddy was grilled and humiliated in Congress for his failure to block the payment. President Obama was angry, at least in appearance, vowing to let his treasury secretary, Tim Geithner, to “pursue every single legal avenue” to block the bonuses.

The enraged House of Representatives responded by approving a 90 per cent tax rate on bonuses which would virtually wipe out the bonuses entirely, taking into consideration that there are both state and local taxes on bonuses.

Obama's economic team suffered a heavy blow to its prestige and credibility.

His top economic advisers, Larry Summers and Tim Geithner from the Wall Street club, have been roundly criticized for their close ties to the bailed-out banks.

Also Senate Banking Chairman Christopher Dodd was hit by a ricochet, for a last-minute change in AIG's bail-out contract allowing the company to pay bonuses to top executives.

The financial tsunami has exposed the flip side of American capitalism, not a bad thing if the country can start a recovery and revival from where it has stumbled.

But it must act quickly and decisively, and this tests President Obama's leadership. America did it before, in 1933, when Franklin D. Roosevelt pulled the nation from Great Depression.

There is no reason why the country cannot do it again under Obama, who galvanized Americans last year during the presidential campaign with the resounding slogan “Yes, We Can!”

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