AIG lists partners that received bailout money; Pakistan's government bows to opposition.

AIG lists partners that received bailout money; Pakistan's government bows to opposition.

AIG lists partners that received bailout money; Pakistan's government bows to opposition.

A summary of what's in the major U.S. newspapers.
March 16 2009 6:41 AM

AIG Writes a Receipt

The New York Times, Washington Post, and Los Angeles Times lead with American International Group releasing the names of trading partners that got a big chunk of the federal bailout money the ailing insurance giant began receiving six months ago. Members of Congress have been demanding to know the names of the institutions that got money from AIG, a company that has received more than $170 billion and is now about 80 percent owned by U.S. taxpayers. After arguing for weeks that it couldn't release those details due to privacy considerations, AIG unexpectedly released a list of nearly 80 trading partners that received nearly $100 billion in the final months of 2008. (The WSJ says $120 billion.)

The Wall Street Journalleads its world-wide newsbox with, and almost everyone else fronts, news that the Pakistani government has agreed to reinstate the former chief justice of the Supreme Court. The "stunning concession" ( NYT) ended a political showdown between President Asif Ali Zardari and opposition leader Nawaz Sharif, who was heading to the capital for what was expected to be a huge protest. USA Todayleads with a look at a series of reports that say the U.S. missile-defense system that has been proposed for Europe would cost billions to deploy and may not work. More than $100 billion has been used to develop the system, but it continues to fail some basic tests. It could cost as much as $13 billion to deploy in Europe, and some analysts insist it would be relatively easy for anyone to get around the system.

Advertisement

The list of companies that received payments from AIG "reads like a who's who of global finance," notes the WSJ. Some of the biggest U.S. financial institutions are on the list, including Goldman Sachs, which got nearly $13 billion, and Merrill Lynch, which received almost $7 billion. There are also major foreign banks on the list, including Société Générale of France and Germany's Deutsche Bank, which received around $12 billion each. The insurance giant also reported that municipalities in dozens of states received $12 billion.

The government had always said that it was necessary to rescue AIG because its failure could lead to a series of other collapses, since the insurance giant is so interconnected in the financial system. The NYT points out that the list released yesterday "could bolster that justification by illustrating the breadth of losses that might have occurred had A.I.G. been allowed to fail." At the same time, there are "political risks to the disclosures," notes the WSJ. It's not just that AIG is serving as a funnel to save numerous private businesses. That some of the institutions have received bailouts of their own and that some are based overseas won't make it any easier for taxpayers to accept the situation.

The long-awaited disclosure came on a day when the airwaves were filled with public outrage over the revelation that AIG paid hundreds of millions of dollars in bonuses. AIG executives said they had no choice but to fork over $165 million in bonus payments that were due Sunday for executives at its Financial Products unit, which lost $40.5 billion last year. Although much attention has been paid to that number, it is hardly the whole story. The WSJ breaks down the numbers and says that employees at the troubled unit had been promised $450 million in bonuses before the government rescue. In addition, the company will be paying $121.5 million in incentive bonuses to 6,400 employees as well as $619 million in retention payments to 4,200 employees. In total, "the three programs could result in roughly $1.2 billion in retention and bonus payments to AIG employees."

AIG and government lawyers say that the company is obligated to make payments. "The easy thing would be to just say ... Off with their heads, violate the contracts," Lawrence Summers, Obama's top economic adviser, said. "But you have to think about the consequences of breaking contracts for the overall system of law, for the overall financial system." Others weren't quite convinced by that argument. "We need to find out whether these bonuses are legally recoverable," Rep. Barney Frank said.

Advertisement

Even as it described itself as having no choice but to accept the bonuses, administration officials brought on full-on outrage about the situation at AIG during the Sunday talk shows. In a front-page analysis, the NYT says it was the administration's latest effort "to distance itself from abuses" in the financial system as it grows increasingly concerned about a "populist backlash against banks and Wall Street" that could turn into anger at Congress and the White House. This could make it harder for Obama to get any additional bailouts through Congress and prevent him from pursuing other big-ticket items in his agenda. "Never underestimate the capacity of angry populism in times of economic stress," warned Robert Reich, labor secretary under President Bill Clinton.

The WSJ goes high with word that the Obama administration has started to outline its plan to overhaul the oversight of the financial markets. "We want to accelerate the pace of change on the reform agenda," Treasury Secretary Timothy Geithner said. The administration wants to give more power to the Federal Reserve to police the system and require banks to hold more capital during good times so they have a bigger cushion if there is a downturn. The White House is also likely to ask Congress to give regulators the authority to take over a large financial company that is failing.

The WP points out that the Pakistani government's decision to reinstate the chief justice, along with other deposed judges, "marked an extraordinary victory for Pakistan's legal community." A lawyers' movement had been campaigning for two years to reinstate Iftikhar Mohammed Chaudhry but it became stronger after opposition leader Nawaz Sharif joined the protests. There was a widespread belief that Zardari didn't want to reinstate Chaudhry out of fear that he would reopen old corruption cases against him. Zardari's reversal appeared to be further evidence that he is losing his grip on power and cemented Sharif's role as the main face of the opposition.

The WP notes that newly released excerpts from a report by the International Committee of the Red Cross reveals that the humanitarian group concluded that the way al-Qaida detainees were treated inside CIA "black site" prisons "constituted torture." The Red Cross was given access to 14 "high-value" detainees who were transferred to Guantanamo in 2006 and they all gave very similar accounts of the rough interrogation practices they had to endure. A piece by Mark Danner published yesterday by the New York Review of Booksquotes extensively from the report, which was given to White House officials in 2007. Although many of the details were already known, "the ICRC report is the most authoritative account and the first to use the word 'torture' in a legal context," says the Post. "It could not be more important that the ICRC explicitly uses the words 'torture' and 'cruel and degrading,' " Danner said in an interview. "The ICRC is the guardian of the Geneva Conventions, and when it uses those words, they have the force of law."

The NYT fronts word that European countries are raising doubts about taking in prisoners from Guantanamo. Several European government officials have been emphasizing that they can't make a commitment to take in prisoners until they're clear on the security risks and whether the Obama administration will also commit to resettle some detainees in the United States. The White House and European Union officials will hold today a first round of talks on these issues that everyone says will be critical to begin answering some key questions about Obama's plan to close the prison.

USAT reports that computer scientist J.F. Crook has published what he describes as a foolproof way to beat Sudoku puzzles in the current Notices of the American Mathematical Society. Although some strategy guides have outlined similar steps to what Crook proposes, "he says his study offers the first mathematically guaranteed way of solving the puzzles," notes USAT.  "Sudoku has become the passion of many people the world over," Crook wrote. "The interesting fact about Sudoku is that it is a trivial puzzle to solve."

Daniel Politi has been contributing to Slate since 2004 and wrote the Today’s Papers column from 2006 to 2009. Follow him on Twitter.