Chorus of outrage over millions in AIG bonuses

[BlueStrat]

 

Because we own 'em now, or at least, have a majority share.

True, but I'm not so sure it is legal or fair to change the terms and conditions of a financial contract after the fact.

 

Another thing I haven't seen or heard discussed is the nature of bonuses and who gets them.

 

For instance, imagine that you work for a company. You are contracted to work for a lesser wage than the going market rate for a position such as yours, but you agree to a performance bonus that can make you far wealthier than a salary. Let's say that in the division of your company, you perform your job beyond expectations and bring x amount of dollars into the company, thereby entitling you to the bonus.

 

Now let's say that in another division of the company, someone else does something really stupid and it costs the company money. Everything that you made them and then some gets wiped away in one stupid deal after another.

 

Should you be required to relinquish your bonus even though you exceeded your contract goals but someone else was incompetent?

 

Sports teams operate this way, too-individual players sign contracts for performance bonuses even if the team has a losing record.

 

I don't know what the answer is, I'm just asking the questions: is everything as black and white as it appears?

[amplayer]

Because we own 'em now, or at least, have a majority share. Here's my question. We "have to" bail out AIG because California teachers had their pension in there, mortgage companies will get screwed over, etc. Wouldn't it be far more efficient to just let AIG fail, and give the bailout money that would have gone to AIG to the people who would suffer if AIG failed? Then there would be no bonuses for moron execs, either.

 

 

Well I must say that would be far more "fair" than what is currently going on, but it wouldn't have the suggested effect of freeing up credit.

 

In any case, it is not the fault of the taxpayer that CA teachers and others put their pension plans in Financial stocks such as AIG. It would be far more fair for the government to simply divide up any and all bailouts and stimulus to the taxpayers themselves. The taxpayers are the ones who will be paying it back, so it the money rightfully belongs to the taxpayers in the first place.

 

Bottom line: I sorely disagree with any government bailouts and any government stimulus unless the money goes directly to the taxpayers.

 

The fact that AIG is wasting some percentage of the bailout money is the fault of the President(s) and Congress for giving it to them in the first place.

I do, however, agree that any company that has its hand out to the government for bailouts deserves any and all government and public scrutiny they get. The leaders of said companies should've been ousted.

[Jotown]

For instance, imagine that you work for a company. You are contracted to work for a lesser wage than the going market rate for a position such as yours, but you agree to a performance bonus that can make you far wealthier than a salary?

When you are in upper management in a company that lost 150 billion dollars there is nobody in management who works there that deserves any kind of bonus. There is no intellectual argument for that, although AIG is trying to make a legal one.

 

There is a simple solution to this. AIG's stock had a high last year of around 50 dollars and it is currently trading for 83 cents. The should calculate the value of the bonuses based on the stock high. And then give them a one for one share swap at the going rate. That would cut the bonuses down to one 50th of what they want.

 

Sounds fair to me based on their performance.

[Super 8]

This is a reminder to me that the wealthy are used to pretty much doing and getting whatever they want. All of the uproar over these bonuses must seem very strange to them.
Undoubtedly they've rationalized all sorts of ways that they need and deserve it.

Should you be required to relinquish your bonus even though you exceeded your contract goals but someone else was incompetent?

I don't see why not. The bottom line is about whether or not the company prospered.
I used to drive for a company that did that. They paid us a nice bonus for no accidents. If one driver caused an accident, nobody got the bonus. It fosters accountability.

[Lee Knight]

Should you be required to relinquish your bonus even though you exceeded your contract goals but someone else was incompetent?

 

 

If it means the company you work for is failing... yes. I don't mean failing in degrees, I mean failing. Put another way...

 

A total collapse of AIG would mean equal opportunity joblessness for all concerned. This is the same criteria the bonuses fall under.

[bp]

I say give the bonuses to folks like Sully, who actually save lives rather than destroying them.

[UstadKhanAli]

Here's a campaign to stop the AIG bonuses:

 

 

Stop the AIG Bonuses The people in AIG's financial products division are perhaps more responsible for the severity of our economic meltdown than anyone else. And yet, they're getting $450 million in bonuses. That's just plain unacceptable. On Wednesday, we have a chance to let AIG's leaders know what we think of their bonuses. When AIG's executives appear before the House subcommittee, we'll make sure they hear your voices. We'll deliver all the signatures and comments we receive before 5 p.m. ET on Tuesday in time for Wednesday's hearing.

 

[Lemmy Caution]

While I'm all for stringing up ever single boardmember, of every single corporation, that created this financial mess.. (lets face it, this was economic terrorism...as devastating as any 9/11..if not much more so) ...and they should be treated as terrorists for all intents and purposes.

 

However, when considering the outcry over this bonus 'rallying point', its really a distraction. Like the uproar over earmarks, its all a spit in the ocean by comparison to the overall spending, but it makes for easy soundbites for politicians and the public to focus anger.

Unfortunately AIG is a monster of our own making. We're told because its tentacles reach into every aspect of the current crisis, they must be used to funnel money into other banking systems, which is why you see them paying off their debts to the likes of citicorp and some european banks.

[spokenward]

While I'm all for stringing up ever single boardmember, of every single corporation, that created this financial mess.. (lets face it, this was economic terrorism...as devastating as any 9/11..if not much more so) ...and they should be treated as terrorists for all intents and purposes. However, when considering the outcry over this bonus 'rallying point', its really a distraction. Like the uproar over earmarks, its all a spit in the ocean by comparison to the overall spending, but it makes for easy soundbites for politicians and the public to focus anger. Unfortunately AIG is a monster of our own making. We're told because its tentacles reach into every aspect of the current crisis, they must be used to funnel money into other banking systems, which is why you see them paying off their debts to the likes of citicorp and some european banks.

I wrote just about the same post yesterday and dumped it. This is a distraction. The bonus information came out at the same time as the counterparty disclosures. The accounting for ~180 Billion is ignored. The public documents like the "systemic risk" pdf I linked earlier and the AIG FP disclosures tell more of the real story but those are going unnoticed. The AIG Financial Products unit "set us up the bomb." The 180~ B are just the fees for turning the dial on the Wayback Machine to the point when these swaps collapsed. The players on the other side of these transactions are the global banks. Increasingly those global banks are swinging in the direction of the sovereign wealth funds. CDB, Temasek, and the Investment Authorities of Qatar, Abu Dhabi, Kuwait, etc.

I have lived in big cities and I can usually recognize the difference between an insurance salesman and a gangster. However, this has blurred that line. The speculative vehicles that AIG wrote marketed the sale of fire insurance to arsonists. That is what we are paying off. I hope everybody learns that sacred capitalism isn't inherently perfect and benevolent. It only appears that way to the one that is ahead.

[Billster]

I wrote just about the same post yesterday and dumped it. This is a distraction. The bonus information came out at the same time as the counterparty disclosures. The accounting for ~180 Billion is ignored. The public documents like the "systemic risk" pdf I linked earlier and the AIG FP disclosures tell more of the real story but those are going unnoticed. The AIG Financial Products unit "set us up the bomb." The 180~ B are just the fees for turning the dial on the Wayback Machine to the point when these swaps collapsed. The players on the other side of these transactions are the global banks. Increasingly those global banks are swinging in the direction of the sovereign wealth funds. CDB, Temasek, and the Investment Authorities of Qatar, Abu Dhabi, Kuwait, etc. I have lived in big cities and I can usually recognize the difference between an insurance salesman and a gangster. However, this has blurred that line. The speculative vehicles that AIG wrote marketed the sale of fire insurance to arsonists. That is what we are paying off. I hope everybody learns that sacred capitalism isn't inherently perfect and benevolent. It only appears that way to the one that is ahead.

 

 

Yeah, the REAL story is who (international agents) is buying up the assets that are being underwritten by the U.S. Treasury. The AIG bonus babies are just the brokers.

[DRHDRH]

I believe these are in fact retention bonuses which makes a bit more sense.

Many of the people are probably basically fired already and the bonuses may be a way to keep then around to close things down.

The fake outrage by politicians is funny though.

I'd like to see several politicians give back their bonuses they got from AIG too.

Weren't these bonuses a matter of public record last year?

[Dessalines]

True, but I'm not so sure it is legal or fair to change the terms and conditions of a financial contract after the fact. Another thing I haven't seen or heard discussed is the nature of bonuses and who gets them. For instance, imagine that you work for a company. You are contracted to work for a lesser wage than the going market rate for a position such as yours, but you agree to a performance bonus that can make you far wealthier than a salary. Let's say that in the division of your company, you perform your job beyond expectations and bring x amount of dollars into the company, thereby entitling you to the bonus. Now let's say that in another division of the company, someone else does something really stupid and it costs the company money. Everything that you made them and then some gets wiped away in one stupid deal after another. Should you be required to relinquish your bonus even though you exceeded your contract goals but someone else was incompetent? Sports teams operate this way, too-individual players sign contracts for performance bonuses even if the team has a losing record. I don't know what the answer is, I'm just asking the questions: is everything as black and white as it appears?

Pretty good post blu but only half the story. The other half is not about the bonuses.

[Dessalines]

Okay, here goes. Yes, we all agree the bonuses are egregious, hateful, evil, whatever, no matter what. Paying huge money for failure grinds so hard against who we are as a people. However, as Bluestrat has pointed out they are contractual and those contracts were negotiated and agreed upon in April of 2008 before any of the hoi poloi, yours truly included, even knew there was a recession. Remember everybody running about the country intoning, "the U.S. economy is sound or strong."? However at 165 million dollars the bonuses are barely a fraction of a 10th of one percent of the real problem that AIG has and represents. Contracts are legal documents. We take pride in saying we are a society of laws and are an example to the world in that regard. It is also a major reason why foreign investors continue to invest in the U.S. dollar for basically no interest. Anyone here notice that the dollar has been up against other currencies? It is and has been for some time now since the downturn. If we begin to abrogate contracts willy nilly, that will stop. Fast.

AIG is basically an insurance company. It does have other lines of business most of which are profitable. However, not profitable enough to offset the actual and potential losses from the unit that created the credit default swaps that insure the derivative securities created by other financial entities such as UBS, Morgan Stanley, Goldman Sachs, Citi and others ad infinitum. The previously mentioned financial entities engaged with AIG to ensure those mortgage backed derivatives to the tune of something like 16 trillion dollars, perhaps more. Not all of those will go bad but we know that many have due to the foreclosure crisis and yet more will in the near future. When these securities go bad, the insured's contact AIG and ask for their money. AIG pays. When Lehman went down, it became obvious to all that at the rate of foreclosure that then obtained, that AIG could not survive without assistance. If they could not survive, neither could the others. If the others could not survive, neither could we. The money provided to AIG has mostly gone to pay credit default swaps, (the form of insurance being discussed), due to aforementioned banks and brokerages, which were functioning as investment banks making request for their insurance payments. Propping up AIG is a major part of what has kept the economy functioning at the pace that it has, which although not good, is not yet a disaster.

Now, if as some here have said, we let AIG go under, what do you think will happen? I would think that within perhaps a month, perhaps less, the entire U.S. economy would collapse, as no bank would have enough money to cover their losses. They would be insolvent. Technically they already are but money is still moving. We would all soon be living under a bridge. Hopefully not the same bridge. It would be very crowded. This process needs to go on, no matter how angry you all are. If AIG goes down, you won't have time to be angry, you'll be too busy looking for food. Those with guns will have the edge there and in other ways. Thomas Hobbes anyone and a state of nature anyone? Guitars? Laughable.

The conditions that obtain now are the same that were present at the inception of the great depression, bank insolvency, leading to factory closings and other negative economic impacts. In 1929 - 1933 the government & the Federal Reserve, created in 1907, did nothing or they did the wrong things, like trying to balance the budget, or passing the Smoot Hawley tariff.. We have seen nothing like what happened in 1929 - 1933 until now. However, this time, the government and the federal reserve have taken every action they could to prevent this from becoming an even larger downturn than it is and they aren't done yet. They've been active and creative both the Bush and Obama administrations. If we as the citizens of the nation allow our anger over 165 million dollars in undeserved bonuses rule our judgement instead of our intellect, and allow that to give political to those who are simply partisans cover or cause politicians to act out of fear, then we will have only ourselves to blame. It's up to you. BTW, this is the short version. Good luck kids.

[FoxTick]

Well, we own it, don't we? I propose that the bonus money be distributed equally to anyone who has more than 100 posts on SSS.

Well, there goes MY bailout

[js1]

Okay, here goes.

 

 

Bonuses based on being a successful company.

Company set to fail. No bonuses.

Company rescued with public money because too big to fail. Bonuses for all!

 

The money is coming from people who have lost their savings, their jobs, their security, their homes.

 

Desalines - not picking a fight here, your facts are correct. From a legal and economic perspective, yes. From a moral perspective, there are no arguments that can square this.

 

js

[danika]

The money provided to AIG has mostly gone to pay credit default swaps, (the form of insurance being discussed), due to aforementioned banks and brokerages, which were functioning as investment banks making request for their insurance payments.

 

 

I might even agree that the government should underwrite AIG's existing CDS's "for the greater good", but what does that have to do with paying bonuses to these crooks that got us into this mess in the first place? AIG needs to retain these guys to do what - sell more toxic CDS's? How much of this additional 30 billion that AIG says it needs is going to pay CDS's that were written AFTER the s--t hit the fan? The government should guarantee the existing CDS's and shut this unit down.

[Brokepick]

 

... Should you be required to relinquish your bonus even though you exceeded your contract goals but someone else was incompetent? ...

 

 

I agree, but contracts that award "no fault" bonuses such as these are themselves the product of some fairly incompetent management at some level. Whether the financial woes of AIG were brought about by the incompetence of senior management, or the incompetence of subordinates, the senior management is (or should be) responsible for it.

[blue2blue]

I like to use some subtle flanging instead.

[UstadKhanAli]

Well, there goes MY bailout

I think you're in if you count Musicplayer.com.

Gotcher back man.

[UstadKhanAli]

I like to use some subtle flanging instead.

Ah hah, nuttin' gets past you, does it?

[chipmcdonald]

I don't see how you can give someone money and then tell them later what they can and can't do with it. I

 

 

You can when it's a national crisis and the money came from taxpayers and it was to bail you out.

[Lucky #9]

While I'm all for stringing up ever single boardmember, of every single corporation, that created this financial mess.. (lets face it, this was economic terrorism...as devastating as any 9/11..if not much more so) ...and they should be treated as terrorists for all intents and purposes.

 

 

Economic Terrorism.

 

I think that hits the nail on the head, with no further clarification necessary.

 

Gordon Gekko (did I spell the character's name correctly?) said it best for these EcoTerrorists:

 

------------------- GREED IS GOOD -------------------

 

It is good alright, for the most filthy rich survivors that created this monster. They are the few left standing that still have the money and clout to buy up all of the failing systems/banks/etc. that could not survive this debacle created by greed.

 

When the economy starts its upswing, it will be these filthy rich whose mantra of "Greed Is Good" who will have the last laugh as their fortunes leap further into the stratosphere as their holdings and more importantly, control, escalate. Power will be further isolated into the hands of the very, very few who can control the outcomes of anything they so desire: including industries, countries, wars, etc.

[Anderton]

I think you're in if you count Musicplayer.com. Gotcher back man.

Foxtick has seniority. Besides, it's posts on SSS, which goes back quite a while

I just got a call from Tim Geitner, and the checks are going out to SSS members next week.

[UstadKhanAli]

Foxtick has seniority. Besides, it's posts on SSS, which goes back quite a while

Yup. SSS was on musicplayer.com, Lynn's site, and AOL.

Put all those together, and some of us have 30,000+ post counts!!!!!

I just got a call from Tim Geitner, and the checks are going out to SSS members next week.

Groovy!!! So great!!!

[amplayer]

I just got a call from Tim Geitner, and he said no checks are in order because he's worried he may be fired soon.