Jobs that Obama can take credit for...losing.

Do you suppose the Obama administration will include these in its next "created or saved" calculation?

The Ritz-Carlton Hotel Co will close its five-diamond property in Las Vegas this May, after the hotel struggled with a slide in demand and revenue.

"It's nothing the hotel did. It's a simple lack of business and a decline in the tourism industry," said Ritz-Carlton spokeswoman Vivian Deuschl.

...

Luxury hotels have also suffered from the backlash from the so-called "AIG effect," referring to the uproar caused by American International Group's decision to fly top brokers and executives to a resort shortly after receiving a bailout check from the U.S. government.

"The whole demonization of luxury meetings and companies' pulling back on having their high-end meetings in luxury hotels -- this has had a tremendous impact on Las Vegas," Deuschl said. "I can't think of another destination that has had to defend itself more against comments from politicians."

Congratulations, Barack, for demonstrating, again, the power of the bully pulpit.

The Ritz-Carlton Lake Las Vegas property employs some 350 people...

So, they've "created or saved" some 600,000 to 2 million jobs, depending on who you listen to. But they never seem to mention the four million destroyed...

An AIG resignation letter

A must-read from yesterday's New York Times - a letter from a manager in the AIG Financial Products division to AIG (government-installed, $1 per year) CEO Ed Liddy:

DEAR Mr. Liddy,

It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:

I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials.
...
I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.

There's a lot more, and it's all good. Again, when we speak of scape-goating, when we speak of unintended consequences, when we speak of class warfare - that's what has been going on with the AIG bonuses, and it is an understatement to say that it reflects badly on the politicians involved (mostly Democrats, but certainly not all, as one of the most offensive comments came from Republican Senator Grassley.)

Utilitarian criticism of AIG bonus mob

When I wrote about the obscene vilification and congressional overreach on the AIG bonuses last week, I criticized it on mainly constitutional and philosophic grounds. Other critiques are popping up now, many of them on utilitarian grounds.

Wall Street Journal:

Few in Congress thought the Smoot-Hawley tariff was a disaster in 1930, but it led to retaliation and a collapse of world trade. The question amid Washington's AIG bonus panic is whether Congress's war on private contracts and the financial system is a similarly destructive moment. It is certainly one of the more amazing and senseless acts of political retribution in American history.

...

With such a sweeping assault on contracts and punitive taxation, Congress is introducing an element of political risk to economic decisions that is typical of Argentina or Russia. The sanctity of U.S. contracts has long been one of America's competitive advantages in luring capital, a counterpoint to our lottery tort system and costly regulation. Meanwhile, the 90% tax rate marks a return to the pre-Reagan era when Congress and the political class behaved as if taxes didn't matter to growth or incentives. It is a revival of the philosophy of redistributionist "justice" of the 1930s, when capital went on strike for an entire decade.

The financial system will suffer in particular, just when the Obama Administration is desperately seeking more private capital to ride out future losses.

Tom Friedman, NY Times:

I ran into an Indian businessman friend last week and he said something to me that really struck a chord: “This is the first time I’ve ever visited the United States when I feel like you’re acting like an immature democracy.”

...

If you want to guarantee that America becomes a mediocre nation, then just keep vilifying every public figure struggling to find a way out of this crisis who stumbles once — like Treasury Secretary Timothy Geithner or A.I.G.’s $1-a-year fill-in C.E.O., Ed Liddy — and you’ll ensure that no capable person enlists in government. You will ensure that every bank that has taken public money will try to get rid of it as fast it can, so as not to come under scrutiny, even though that would weaken their balance sheets and make them less able to lend money. And you will ensure that we’ll never get out of this banking crisis, because the solution depends on getting private money funds to team up with the government to buy up toxic assets — and fund managers are growing terrified of any collaboration with government.

Financial Times:

Senior executives on both sides of the Atlantic on Friday warned of an exodus of talent from some of the biggest names in US finance, saying the “anti-American” measures smacked of “a McCarthy witch-hunt” that would send the country “back to the stone age”.

There were fears that the backlash triggered by AIG’s payment of $165m in bonuses to executives responsible for losses that forced a $170bn taxpayer-funded rescue would have devastating consequences for the largest banks.

“Finance is one of America’s great industries, and they’re destroying it,” said one banker at a firm that has accepted public money. “This happened out of haste and anger over AIG, but we’re not like AIG.”

The banker added: “It’s like a McCarthy witch-hunt...This is the most profoundly anti- American thing I’ve ever seen.”

The question that needs to be asked right now is this - is this happening because the Obama administration is utterly incompetent or is it happening because the Obama administration wants it (the destruction of wealth and the financial system) to happen?

Neither answer is a good one, of course.

Banana Republicans (but mostly Democrats...)

I'm obviously not a lawyer. John Hinderaker, who is, expresses concern and dismay about the same issues that I was concerned and dismayed about yesterday.

I'm stupefied to find that some people are defending the constitutionality of Nancy Pelosi's discriminatory, confiscatory and retroactive tax on people who receive bonus income from companies that got TARP money. I would have considered it a bright line rule that the government can't identify a class of unpopular people and impose a special tax on them. ...If the Pelosi bill is actually enacted into law (which I still think is doubtful) and upheld by the courts, there is no limit to the arbitrary power of Congress. In that event, we have no property rights and there is no Constitution--no equal protection clause, no due process clause, no impairment of contracts clause, no bill of attainder/ex post facto law clause. Instead, we are living in a majoritarian tyranny...even if you think it was wrong for AIG to pay them, Pelosi's proposed confiscatory tax--total taxes would exceed 100 percent in some jurisdictions--is an outrage. If Congress can appease a howling mob of demagogues by enacting discriminatory tax legislation against a group of people who are, for the moment, politically unpopular...then the idea that the Constitution affords us any sort of protection against arbitrary government power is an illusion.

He's right, obviously, and it's well worth reading, though, like many things well worth reading right now, both depressing and scary.

Out of control

This is horrifying.

Acting with lightning speed, the Democratic-led House has approved a bill to slap punishing taxes on big employee bonuses from firms bailed out by taxpayers. The vote was 328-93...Republicans called it a legally questionable ploy to paper over Obama administration missteps.

Honestly, doesn't this kind of heavy-handed punitive taxation frighten anyone? If Congress can do this (which I don't think it actually can constitutionally, though that's obviously not going to stop it), what's next? What's to prevent them from deciding that tobacco company profits can be taxed at 90%? Or oil company profits. What is to prevent them from deciding that MLB or NBA player bonuses are excessive and unnecessary and confiscating them? And what is to prevent them from deciding that a salesman making $100K doesn't need that $20K bonus that he earned?

In Germany they first came for the Communists,
and I didn't speak up because I wasn't a Communist.

Then they came for the Jews,
and I didn't speak up because I wasn't a Jew.

Then they came for the trade unionists,
and I didn't speak up because I wasn't a trade unionist.

Then they came for the Catholics,
and I didn't speak up because I was a Protestant.

Then they came for me —
and by that time no one was left to speak up.

- Pastor Martin Niemöller

Look, I know that this isn't Kristallnacht . I know that no one is rounding up Jews or dragging anyone off to concentration camps. But this is a terrible, horrible, no good, very bad precedent, and as a free people, we ought not allow our representatives to get away with this abuse of their powers. And I know that the class envy card works really well in this country - still - but it has to stop.

And I know this - once Congress decides/realizes that it can just confiscate some individuals contractual bonus, it is extremely unlikely to stop there. Any one in the middle class who is exulting that some rich Wall Street banker is getting publically flogged and robbed needs to stop and consider how many people are making less than he is. And he needs to consider that the same constitutional protections for his income are the ones being abrogated to attack the AIG bonuses. And he should be terrified.

AIG bonuses? I. Do. Not. Care.

I know that the following statement will put me squarely in the (apparently very small) minority, but there it is. I'm willing to stand there if I must.

Here it comes:

I am not outraged, offended, or even upset by the AIG bonuses.

There. I said it.

AIG is a company that is in business right now because the US Government made the decision to bail it out. When the government assumed responsibility for AIG's business operations, they assumed responsibility for pre-existing contracts, such as those that required that these bonuses be paid. As a (now forced, with the rest of my fellow-citizens) part-investor in AIG, I really would prefer that the company be operated in such a way as to eventually make that investment back. This uproar drummed up by the President and the Democratic congressional leadership makes that less likely and, as such, is counterproductive in the extreme.



"If they don't give the money back, we'll put in place new law that will allow us to tack [sic: presumably he means either "attack" or "tax"] these bonuses at a very high rate. So for those of you who will be getting these bonuses, be forewarned - you will not be getting to keep them."

(For those wondering why such a law would not be grossly unconstitutional [Article 1, section 9: No Bill of Attainder or ex post facto Law shall be passed], I'm wondering that same thing. Of course, gross unconstitutionality has never presented the Democratic majority from passing a law before, and there's really no reason to expect that concern for the niceties of our constitutional process would suddenly appear.)

Ol' Chuck's being pretty solicitous of the welfare of the American taxpayer, huh? Good old Senator Schumer, always concerned about the American taxpayer getting bang for the buck. The American taxpayer is out $170 Billion for AIG so far, but he really wants to make sure we get .0097% of that back, even if it means putting the other 99.001% at greater risk.

(By the way, this is the response of Senator Schumer to complaints about pork in the stimulus bill, items like $200 million [21% more than the AIG bonuses] "to 'design and furnish' the Department of Homeland Security headquarters" or $300 million [82% more than the AIG bonuses] "to buy 'green' cars for federal employees":



"And let me say this to all the chattering class that focuses on those little, tiny, yes, porky amendments - the American people really don't care."

If the American people "really don't care," Senator Schumer, what makes you think that they care about contractual bonuses to AIG employees which represent 1/10 of 1 percent of the bailout funds going to AIG, bonuses which the company is contractually obligated to pay because it wasn't allowed to go bankrupt?)



I am far more outraged by the behavior of Obama's teleprompter, Charles Schumer, Chris Dodd and Barney Frank than I am at the AIG bonuses. Far more.