Deutsche Bank was AIG’s second largest counterparty

Here’s Deutsche CEO Josef Ackermann on Feb. 5, the day compensation limits were announced for TARP recipients

“If you are only going to be able to pay a $500,000 bonus, I think talent will be happy to work for us. At the end of the day, this is a people business, about who has the best talent,” he said.

His comments, made as Deutsche announced its biggest annual net loss since the second world war, come amid growing political pressure in the US and Europe for pay restrictions at banks that accept public funding. They followed Mr Obama’s description of the $18.4bn Wall Street bonus pot for 2008 as “shameful”.

Mr Ackermann and other Deutsche executives have forgone their bonuses for 2008 after the bank’s €3.9bn loss, its largest in 50 years. The bank has not received government funds.

After heavy trading losses during the last three months of 2008, he stressed Deutsche’s ability to remain a “broadly diversified investment bank”.

Now we know that the assertion, "The bank has not received government funds", is false. Mr. Ackermann’s bank received billions in U.S government funds, as did UBS, Societe General, and Barclays, all of which have large operations in the U.S.

During last week’s Senate hearing on AIG , while refusing to name the counterparty names, Fed Vice Chairman and Wall Steet pool boy, Donald Kohn, acknowledged the "moral hazard" stemming from the bailout.

Fed Vice Chairman Donald Kohn conceded that the government’s action helped the firms avoid losses and as a result "will reduce their incentive to be careful in the future."

That’s right. And they are now in a position to pay outrageous bonuses to the very Wall Street cowboys whose recklessness created the problem in the first place. Those employees will have every incentive to take even greater risks. Why not? The sucker U.S. taxpayers will bail them out of their bad counterparty risk decisions.

Lest this come off as xenophobic, foreign firms aren’t my only concern. Good old, all-American Goldman Sachs, AIG’s largest counterparty, is saying they will repay the TARP money this year to avoid compensation limits, and many analysts believe they are in a position to do so.

If they don’t want compensation limits, then let them buy back their shit assets at the same price that the American taxpayers paid for them.

I have written to all of my representatives about this, and I hope you will, too. Particularly if Chris Dodd is your Senator or Barney Frank is your representative, I urge you to do so.