What Obama and the Treasury arn't telling us

It appears even after inject 182 billions dollars (with more probably to come), the US still refuses to negotiate retention bonuses and insert clawback dialogue into contracts with AIG:

So, knowing that the Treasury was under orders to block these payments, it was with some cynicism that I read the eight new agreements filed by A.I.G. at 7:43 p.m on Friday. These agreements document the government’s third reworking of its A.I.G. investment and include a securities purchase agreement for up to $40 billion and an amendment to the now $60 billion credit facility. Since Treasury has put its 77.9 percent share ownership in A.I.G. into a trust, these documents are the only way the government can directly exercise its interest over A.I.G.

My cynicism proved correct. The only thing in these agreements (accessible here, here andhere) that the Treasury did to pursue these retention bonuses is to deduct the $165 million in total payments from the approximately $183.5 billion made available to A.I.G. In addition, the Treasury charged A.I.G. a commitment fee of $165 million to be paid from the operating cash flow of the company. Since money is fungible, and the government has now agreed to support the company anyway, the latter requirement is meaningless.

But there was nothing else. Despite the many grounds contract scholars have put forth to claw back this money, there was no obligation to force A.I.G. to sue to recollect the bonuses and for the government to be able to direct that litigation. No prohibition on further contracts with the financial products subsidiary. No language about the future retention payments that are to be paid. Clearly, the government has passed on over this issue. I wonder when Mr. Obama will let the public know about this?

At least they are preventing golden parachutes:

In fairness, there are some compensation limitations in the agreement. Essentially, golden-parachute and retention payments to senior executives of A.I.G. are now limited to 3.5 times their annual salary and bonus for 2008. In addition, the annual bonus pools payable to the senior executives in 2008 and 2009 shall not exceed the average of the annual bonus pools paid to them in 2006 and 2007.

And apparently the government is paying TWO sets of lawyers because lets face it, any money AIG spends at this point is really taxpayer dollars:

Instead, the government hired Simpson Thacher to represent it. A.I.G. then hired its own lawyers at Sullivan & Cromwell and the two negotiated these intricately documented arrangements for each reworking of the bailout. There are now approaching 20 different agreements between the government and A.I.G. I wonder how much A.I.G. paid Sullivan alone to negotiate these agreements?

But the government is afraid to really do what it should, which is take control of A.I.G. as an owner. Given that the government has more than a $100 billion invested in the company, it is astounding that it should continue to write these agreements. Instead, if we controlled A.I.G. as the government could and should, it could simply monitor these payments. Moreover, it can begin to restructure the company to allow for its dismemberment or bankruptcy without systemic effects.