The Foreclosure Climate Has Made the Mood of the People Bellicose

March 31st, 2009 | Tags: Foreclosure

It is not surprising that the foreclosure climate has made the mood of the people bellicose. To add fuel to the fire of their anger is stories that banks have pocketed as bonus, money coming from the taxpayer’s kitty meant to ease the foreclosure situation.

Feelings were strong when the first instalment of TARP money vanished into the coffers of the bank without explanation and without impacting on the foreclosure battlefront. But this time the mood was really nasty when it came to be known that $165 million stimulus money had been swallowed by AIG executives as bonus. The government reacted by charging 90% as income tax. The stick worked and 9 out of 10 of the bonus takers have agreed to return the money.

On March 23rd the Attorney General of New York State, Andrew M. Cuomo said that he had persuaded these men to return the money. Simultaneously the Senate withdrew its plans to tax the bonuses. Cuomo is combing through a list of the employees of AIG and ranking them by the size of their bonuses. Already he has got a commitment that $50 million out of $165 million awarded as bonuses will be returned. Originally he had intended to release the names of the beneficiaries but now he is declining to do so. He explained to reporters, “If the person returns the money, I don’t think there’s a public interest in releasing the names.”

Harry Reid the majority leader of the Senate said such efforts to recover bonus money through punitive measures would delay proceedings. Others echoed these sentiments saying the momentum picked up in the Congress had considerably slowed down. Obama too had voiced misgivings about the whole drama.

Cuomo is optimistic about recovering finally $80 million of the bonuses given out in March this year to the employees of AIG. The extra $85 million had gone to individuals not in America and his office did not have legal empowerment to pursue the matter outside the country. This means people connected with AIG in London will be let off. London is the centre of AIG’s business dealing with credit-default swaps. The latter are the derivatives that were largely responsible for nearly sinking the company and by doing so paralyzed the entire global financial structure. Cuomo frankly admitted, “We have a very aggressive theory about our jurisdiction, but we don’t have a theory that gets us to London.”