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Last week I predicted Obama will make the bonus tax bill go away.

And indeed, it didn’t even have to go to a veto or senate vote. Turns out that

Democrats prepare to ditch AIG bonus bill

the Democratic leadership in both the House and the Senate have signaled they will drop the measure.

On Tuesday, House Majority Leader Steny Hoyer said, “If the [AIG bonus] money is returned, the legislation may no longer be necessary.”

On the Senate side, Majority Leader Harry Reid on Monday said the chamber would delay consideration of its version of the House bill until sometime next month—supposedly to allow Republicans more time to study the legislation.

It was that easy. All it took was some “uneasiness” from Obama created by Wall Street. From then on, it was all political theater, including the so called hearing in the House on AIG bonuses.

As for the AIG bonuses, the hearing produced no new revelations. Geithner continued to claim that he knew nothing of the bonuses until March 10. This in spite of published reports in major newspapers such as the Wall Street Journal documenting that his aides—both when he served as president of the New York Federal Reserve and since becoming treasury secretary—discussed, approved and helped to draft the AIG executive bonuses.

Bernanke said that he was aware of the AIG bonuses, but claimed that Federal Reserve attorneys had told him he had no ability to block their disbursal. Geithner and Bernanke both argued that the AIG bonuses were contractually guaranteed, and therefore could not be touched.

As for the claim that the lack regulatory authority caused all this…

The claim that the AIG collapse was caused by a lack of regulatory authority is self-serving. In fact, the federal bodies with powers to monitor the financial industry—including the Securities and Exchange Commission and the Federal Reserve—not only turned a blind eye to the financial skullduggery of AIG and scores of other firms, they actively encouraged it.

So, now the political 3 steps are completed, and the posturing is concluded, we are back to where we started: Wall Street rules the government just like in Bush times. And I have yet to hear anyone in the media utter words such as “waffle” or flip-flop”.

Updating it as of May 22

A criminal probe into AIG was dropped for no apparent reason