White House: Rescind AIG Bonuses
The Treasury will use a $30 billion infusion into AIG to force the company to repay all of the bonuses promised to employees of its Financial Products group, a White House official said.
My suggestion: PAY THESE BONUSES WITH AIG STOCK.
Meanwhile, a Yale Law School student knows how the to stop the AIG bonuses:
Larry Summers claims that nothing can be done about the AIG bonuses. As a former Secretary of the Treasury, he should know better.
Treasury Secretary Tim Geithner should direct the Commissioner of Internal Revenue to challenge the AIG bonuses as unreasonable compensation under the Internal Revenue Code. Finding the AIG bonuses to be unreasonable compensation would render them nondeductible for federal tax purposes, and would strengthen potential shareholder derivative suits to recapture The Great AIG Giveaway.
Section 162(a) of the Internal Revenue Code declares:
“There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including . . . a reasonable allowance for salaries or other compensation for personal services actually rendered.”
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UPDATE: March 16 20093:59pm
NYT: Obama Orders Treasury Chief to Try to Block A.I.G. Bonuses
President Obama vowed to try to stop the faltering insurance giant American International Group from paying out hundreds of millions of dollars in bonuses to executives, as the administration scrambled to avert a populist backlash against banks and Wall Street that could complicate Mr. Obama’s economic recovery agenda.
“In the last six months, A.I.G. has received substantial sums from the U.S. Treasury,” Mr. Obama said. He added that he had asked Treasury Secretary Timothy F. Geithner “to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole.”
In strongly-worded remarks delivered in the White House East Room before small business owners, Mr. Obama called A.I.G. “a corporation that finds itself in financial distress due to recklessness and greed.”
“Under these circumstances, it’s hard to understand how derivative traders at A.I.G. warranted any bonuses at all, much less $165 million in extra pay,” Mr. Obama said. “How do they justify this outrage to the taxpayers who are keeping the company afloat?”
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Hat tip: Real Time Economics
>
Source:
Larry Summers: Stop the AIG Bonuses. Yes You Can.
Aaron Zelinsky, Articles Editor, Yale Law Journal
HuffPo, March 15, 2009 | 10:16 PM (EST)
http://www.huffingtonpost.com/aaron-zelinsky/larry-summers-stop-the-ai_b_175151.html
March 16th, 2009 at 3:18 pm
I’m saddened that there was no mention of public cainings.
March 16th, 2009 at 3:29 pm
Hey this ain’t Singapur and we can chew all the gum we want (too bad it only comes in two flavors: Ruinous Republican Retch and Dirty Democratic Deviance).
March 16th, 2009 at 3:45 pm
Goods works from a good man …..
————————————————————————
http://finance.yahoo.com/news/NY-atty-gen-to-probe-AIG-apf-14652624.html
Excerpt:
NY atty gen to probe AIG bonuses for fraud
NY attorney general to investigate whether AIG bonus payments constituted fraud
ALBANY, N.Y. (AP) — New York Attorney General Andrew Cuomo told American International Group he wanted a list on his desk by the end of the day of employees set to receive millions of dollars in bonuses.
Cuomo said his office will investigate whether the employees were involved in the insurance giant’s near-collapse and whether the $165 million in bonus payments are fraudulent under state law. AIG reported this month that it lost $61.7 billion in the fourth quarter of last year, the largest corporate loss in history.
Cuomo said he would issue subpoenas at 4 p.m. if he didn’t get the names plus information about their work and contracts.
March 16th, 2009 at 3:50 pm
Is this issue a headfake to distract us from the real economic situation? The stock market keeps going up on terrible news from everywhere except bank CEOs and politicians. Maybe if it keeps going up it will keep going up!
March 16th, 2009 at 3:54 pm
Kyle:
It ain’t up so much right now – it just dipped into and back out of the red, after what looked to be a 200+ point day. Just sayin’.
Dead hobo: Cuomo is the only dude out there who is doing his job (I hope he’s not getting a BJ on the side, or it’ll ruin him).
March 16th, 2009 at 3:56 pm
How is it that the CEO of the shareholder controlling 80% of the company is unable to
stop the bonuses.
It is easy to express indignation when the temp of the water starts rising but is he impotent to do anything.
Like Roubini has repeated several times recently, all they are doing is saying Shocked, Shocked and think this is a strategy that will keep everyone from asking the tough questions that are obvious.
It is sad that a president who was elected for improving transparency in Washington is reduced to this. Guess what, the system is so powerful that anybody would be reduced to saying the same thing or acting the same way.
Am I wrong in thinking that all these folks will get away with the chicanery?
March 16th, 2009 at 3:59 pm
FIRE LARRY SUMMERS NOW!
March 16th, 2009 at 4:03 pm
I don’t understand why they couldn’t arrange a prepackaged bankruptcy. During the period that the bankruptcy plan is being devised, the company could refuse to pay bonuses, and far more important, refuse to pay any of the CDS obligations. Of course, until such time as the company actually goes in to chapter 11, the company would be vulnerable to lawsuits for its refusal to pay (the bonuses and the CDS obligations). But so what? Once the company goes into chapter 11, the judge is just going to throw out those lawsuits. The point is that the prepackaged bankruptcy could be done in such a way as to avoid panic (by financial markets, and by holders of insurance contracts).
March 16th, 2009 at 4:06 pm
Why is this happening so publicly? Was the White House truly blindsided by this event? Why don’t they already know about these things?
RE NSA
“The National Security Agency had access to all Americans’ communications — faxes, phone calls, and their computer communications,” Tice claimed. “It didn’t matter whether you were in Kansas, in the middle of the country, and you never made foreign communications at all. They monitored all communications.”
Just don’t get it.
March 16th, 2009 at 4:07 pm
While the corporate media and blogs focus on distractions like the AIG bonus payments the real heist is taking place at the Fed. We are talking about the largest heist in US history buried in the alphabet soup of lending vehicles and Maiden Lane SPVs. Tens of trillion dollars. Makes all the bonus payments not even a rounding error.
If there are any intrepid reporters out there they would be doing all the sleuthing around what Bernanke is up to. This is the guy that get’s a softball interview on 60 Minutes with a lot of puffery. No hard questions about what is on the Fed’s balance sheet and what commitments have they made that obligate taxpayers for generations. And none of the Jon Stewart treatment with clips of his prognostications on “no recession” and “subprime contained” in testimony to Congress that would have shattered his credibility.
Between Alan Greenscam and Bennie, the Fed has been at the epicenter of the looting of the American people at an unimaginable scale.
Where’s Bill Lerach when you need him? (Oh! in the pokey).
March 16th, 2009 at 4:09 pm
dead hobo @ 3:45
Yeah, Cuomo has an excellent shot at winning the next race for governor of NY.
March 16th, 2009 at 4:16 pm
In a thriving economy, successful executives would / should be given bonuses. Otherwise, they would leave. However, this is not a thriving economy. Where would they go ? Merrill ? Bear? Lehman Brothers ? C’mon, let reality rule the day !
Tear up their contracts – aren’t they null and void when Uncle Sam owns 80% of their stock ? Throw the nimrods overboard and omit their unearned bonuses. What kind of company gives bonuses for work that looses billions of dollars? Rare is the time I side with the government but this is one of them!
March 16th, 2009 at 4:21 pm
enfant terrible Says:
March 16th, 2009 at 3:56 pm
How is it that the CEO of the shareholder controlling 80% of the company is unable to
stop the bonuses.
…….Easy pal….there’s such a thing called laws……We’ve just had a president ignoring them for eight years so we don’t want another…..For better or worse AIG has managers….That’s Liddy….He made these decisions because he’s the legally constituted authority in these matters
And Barry
Meanwhile, a Yale Law School student has an idea as what to do:
….What if the IRS decides to challenge your compensation as unreasonable….that’s ok is it…..
MRegan Says:
March 16th, 2009 at 4:06 pm
Why is this happening so publicly? Was the White House truly blindsided by this event?
…….They haven’t been blindsided……there are just legal restrictions on what they can do about it
………Amazing everyone has a tantrum and laws go out the window…..Liddy is the properly constituted manager of this company…..what are you going to do when he makes a decision you don’t agree with……basically go thru due process
March 16th, 2009 at 4:22 pm
Hmmm. You can smell some outrage today! I don’t expect anything to come of it…for now. Soon enough people will start losing their cool with Mr Cool. This isn’t about Geithner or Summers. It’s all about Obama. Hopefully, he’ll wake up and start listening to Volcker.
March 16th, 2009 at 4:24 pm
I think Kyle may have uncovered some thing about the market, the market will go up on bad news for every one but CEOs and banks. what does that say about the market?
and every ones favorite solution is bankruptcy. never mind how much carnage would happen. and of course nothing bad will happen to said companies. after all no company that has filed for bankruptcy has had nothing go wrong. and no companies failure will cause any harm right? after all the government would not have let them get that important right? its not like we are talking about Microsoft right?
to them and others. or where the money to keep said business running that pesky DIP financing. which seems to have dried up already and never was that much to begin with. or not. remember Lehman’s died last year? that case is still going. any guess how long that will keep going? some time in 2020 maybe? if that soon. just curious what was the largest bankruptcy that didn’t end up with the company in chapter 7 or end up having to be sold to another.
March 16th, 2009 at 4:25 pm
AIG closed up 60% today. I guess someone thinks the fix is in.
March 16th, 2009 at 4:34 pm
Washington to Rescind AIG bonuses with a special facility? What have we come to? Really? Do they think (Washington losers) we are so stupid we don’t know what this means? They are going to print money out of thin (our children’s future) air and give it to AIG so they can give it back to us because AIG is totally worthless. The people who received the bonuses keep the bonuses (many are not us citizens). But, the news flash that the bonuses are Rescind will apparently fool enough people or confuse enough people into believing that the bonuses were given back by the people. Wow. We would have been better off creating brand new State Banks for each state in our country, funding them to engage in business activity in a coordinated effort with the Governor’s, state congress, and the Federal Reserve and allowed the massive calamities, to unwind. Each state bank can never leave its borders for business and will only benefit from enhancing the economy of each state. An example, Iowa’s economic needs are far different than either California’s or Florida’s. Why would you spend taxpayer capital on a housing problem in Iowa when they would have a farming problem? Federal programs are ineffective for each region and/or state of our union. Therefore, the it must be managed at the state level with new capital from a new federally chartered bank for each state. Following a period of time, a public offering to raise capital and issue stock could be considered while keeping the state focus and mandate at all costs.
March 16th, 2009 at 4:34 pm
ottovbvs
I agree. Why to we treat these guys like gods. They should be given new terms. It they don’t like they can walk. Then just move up the next level of guys to fill there positions. Do you mean to tell me that the guys in the level just below the top are that much different in skills.
March 16th, 2009 at 4:35 pm
Otto-
My thoughts were about the theatrics, not the payout per se. I agree with your default option for due process. My reserves of outrage are directed only at those things which trigger my obsessions. Like why isn’t anyone talking about Beaumarchais and what lessons we could learn from his Rodrigue & Hortaliz ploys?
March 16th, 2009 at 4:38 pm
In any corporate takeover, the purchasing entity performs due diligence to ensure they know what the assets and liablilities are. For the first AIG bailout – okay, it was pretty quick and improvised. Second time – maybe unexpected. Third time – WTF?!?! There shouldn’t be any skeletons left in the closets. All of closet contents should be on the floor and laid out for all (within Treasury) to see.
Instead of the next bailout, take the company into receivership and GIVE it to Goldman or BAC. Since apparently they are so damn anxious to get their CDS payouts, they can have all the “assets” and then deal with everybody else instead of having the govt do it.
March 16th, 2009 at 4:38 pm
……You know what I find most interesting about many comments here…….the commenters wouldn’t dream of saying some of this stuff in a meeting with a peer group say because they’d be considered loopy…So why do they say it here…….I put it down to their parents letting them watch too much TV at too young an age…..now they compensate by embracing their inner Santelli or Howard Beale
March 16th, 2009 at 4:40 pm
The NY AG is carrying the battle for the American people here.
He knows that patience is wearing exceedingly thin with these thieves.
AIG FP better hurry up the unwinding in Wilton and London
… or the CDS market might be unwound by force this summer.
“One bonus good, two bonuses BETTER.” said the pigs.
I prefer this one: Down and Out in London and Wilton.
March 16th, 2009 at 4:46 pm
AIG reported a $62 billion 4th quarter loss. They won’t be paying taxes for a long time, so isn’t the tax deductibility of bonuses a moot point?
All this talk of preserving the sanctity of contract law as a reason for paying the bonuses is complete bullshit. Tell the employees who are expecting a bonus they get $0. Period. If they don’t like it, they can take their chances in court and sue.
And tell the ones that do decide to sue they can expect to be audited by the IRS for all years as far back as the law allows.
March 16th, 2009 at 4:46 pm
SWMOD52 Says:
March 16th, 2009 at 4:34 pm
…….I don’t disagree with your sentiment apropos De Gaulle “The world is full of indispensable men.” It’s an outrage these guys getting this money…..But this was basically a decision within the purview of the management of AIG…..Geithner or whoever can make representations but at the end of the day that’s just what they are: representations……This is a country of laws….and at the end of the day you just have to go through due process
March 16th, 2009 at 4:47 pm
woodmaster:
That’s a good idea, as long as you’re willing to apportion an appropriate share to each state, based on it’s relative wealth. It gets a little dicey when you get into net payer vs. net recipient states. Should places like North and South Dakota, Idaho, New Mexico, Mississippi, West Virginia, etc., receive equal funding?
March 16th, 2009 at 4:47 pm
……Sorry… De Gaulle…. the cemetaries are full of indispensable men
March 16th, 2009 at 4:48 pm
otto said: “the commenters wouldn’t dream of saying some of this stuff in a meeting with a peer group say because they’d be considered loopy”
But the commenters are solvent, whereas the peer group is in debt and also lost a great deal of its 201K.
This is straight out of Kafka, old chap, I feel like I have turned into an enormous insect every single day.
Consider that we the sceptics, who were originally ostracized for being bearish, now are ostracized for being financially competent and not being “on the team” that blew its retirement stash. Trust me on this, there isn’t one person in a hundred I speak to who saw this coming and avoided the deluge like almost all of us here. This includes “financial professionals” (he he), university professors and professional economists.
This is a real problem, because the “loopy” ones who got it right are still on the outside looking in while most of the people who are running almost everything in this country were actually massive screw-ups.
The Tyranny of the Incompetent will take a long time to unwind.
March 16th, 2009 at 4:48 pm
I guess outrage sells, and rational analysis of facts does not.
Exactly how many % of the total government payments to AIG will be used to pay these so-called bonuses? I mean if the company is contractually obligated to pay it as compensation for work conducted, then it is actually salary no matter how much you call it a bonus.
I am ready to discuss reduction of salary for AIG employees since that is what we required from autoworkers. But let it happen in a level-headed debate about compensation, not some Foux pumped up outrage designed to sell news to idiots.
March 16th, 2009 at 4:49 pm
Perfect example of why bailouts do not work – the bad corporate practices that got firms like AIG into trouble in the first place continue. If the firm is too big to let fail in a bankruptcy, then nationalize it so it can be dismantled in an orderly fashion. As for the bonuses, the government (which now owns 80% of AIG) should use its resources to declare the bonuses excessive – resulting in the non-deductibility of the payments. Anyone who does not voluntarily return the excessive bonus payment should be terminated immediately (without severance), and the management team replaced and put on government service salaries.
March 16th, 2009 at 4:52 pm
Groty Says:
March 16th, 2009 at 4:46 pm
AIG reported a $62 billion 4th quarter loss. They won’t be paying taxes for a long time, so isn’t the tax deductibility of bonuses a moot point?
All this talk of preserving the sanctity of contract law as a reason for paying the bonuses is complete bullshit. Tell the employees who are expecting a bonus they get $0. Period. If they don’t like it, they can take their chances in court and sue.
……It’s not bs whatever you think….denying the bonuses was an option for management but that probably had all kinds of implications internally….remember we’re not talking about a bunch of guys who live paycheck to paycheck…..and do we really want to start threatening people with IRS harassment just because they are trying to enforce a contract……
March 16th, 2009 at 4:53 pm
MRegan Says:
March 16th, 2009 at 4:35 pm
“Like why isn’t anyone talking about Beaumarchais and what lessons we could learn from his Rodrigue & Hortaliz ploys?”
________
To say nothing of the Thister-Thithington gambit.
March 16th, 2009 at 4:55 pm
ab initio @ 4:07
Interesting and creative choice of screen name.
http://en.wikipedia.org/wiki/Ab_initio
March 16th, 2009 at 5:00 pm
@otto, the man w/ the answers for everything, who said this:
…….They haven’t been blindsided……there are just legal restrictions on what they can do about it
………Amazing everyone has a tantrum and laws go out the window…..Liddy is the properly constituted manager of this company…..what are you going to do when he makes a decision you don’t agree with……basically go thru due process
Reply:
There are absolutely no legal restrictions to not paying bonuses. There may be a legal remedy for failure to pay, but there are no legal restrictions. It’s perfectly legal to break a legally binding contract if willing to accept the penalties for doing so. If they refuse to pay, and then get sued, the US can impanel a jury of laid-off Bear Stearns secretaries, or even just ordinary j6p taxpayers, and see how far a lawsuit for bonus payments goes.
Liddy serves at the pleasure of the Treasurer of the United States of America, who is the de facto owner of 80% of the company. We, the taxpayers, are the shareholders of this wretched enterprise, and he (the Treasury Secretary) is our representative. Liddy was hired by the Treasury Secretary, and he can be fired by the Treasury Secretary. That’s what you can do when you own 80% of a company.
As to whether they (the politicians) were blindsided, here’s Larry Summers, et al., yesterday, from Bloomberg:
March 15 (Bloomberg) — Obama administration officials and lawmakers lambasted plans by American International Group Inc., the insurer rescued by the government, to dole out $1 billion in bonuses and retention pay to employees.
Lawrence Summers, director of the White House National Economic Council, called the payments “outrageous” in an interview on ABC’s “This Week” program. AIG is “abusing the system,” Barney Frank, the Massachusetts Democrat who heads the House Financial Services Committee, told “Fox News Sunday.”
http://www.bloomberg.com/apps/news?pid=20601070&sid=a45bBYu51pGc&refer=home
It certainly appears to be grandstanding to me. Yes, it is “outrageous” that this is happening and it is “abusing the system”, but it is completely within their purview to stop it. Please. Defending these people is insane.
Of course, none of this–none of it, would have been an issue had the company gone bankrupt. It was the Bush Administration that saved it from that fate, conclusively showing that the only bipartisan thing that Washington can agree on is the fleecing of the American taxpayer.
March 16th, 2009 at 5:06 pm
otto: I was bearish two years ago, and I am a lot less bearish now. The peer group was bullish two years ago and now is either in complete denial that anything has changed, or else has its head under the pillow and is yelling “Mommy”… why should we trust those people to do anything? The Tyranny of the Incompetent will continue to cause problems in all walks of life because they won’t accept the reality of the change.
I also think there is a difference between people saying that there should be no reflation or attempts to rescue the economy and save/create jobs – that would seem like a dumb thing to say – and people who want to claw back bonuses or prevent further enrichment of the very people whose hubris and greed created a large part of the highly leveraged derivative mountain that now threatens to collapse and bury the world economy. Trust me, they could fire those CDS traders tomorrow and find a group to replace them. This analysis assumes that the AIG FP wankers didn’t deliberately put an “incendiary” device in the works, which may indeed be the case.
March 16th, 2009 at 5:08 pm
Bankruptcy is one proceeding where contracts can easily be broken. Big business has used this tactic for years to screw unions and suppliers.
Resolution of a bank by the FDIC can also be used to break any inconvenient contracts involving the big bad banks.
This is another example of why the FDIC needs to seize the banks and AIG needs to be put through bankruptcy.
March 16th, 2009 at 5:12 pm
Personally, I don’t really give a sh*t about the bonuses. If they want to pay $200M in bonuses, why does that matter, given that we’re getting shafted to the tune of $160 BILLION anyway.
Obama’s attitude is that he can throw as much money as he wants at banks and insurance companies, and the people will go along as long as the employees of the companies don’t get bonuses.
For me, it’s the other way around. Go ahead and give them the damn bonuses, but don’t give them anything else.
March 16th, 2009 at 5:13 pm
There is a simple solution – tax all income over a certain amount, say, $1M.yr at 75% for the next 5 years. Why pick on AIG and let equally guilty parties skate by?
March 16th, 2009 at 5:15 pm
leftback Says: March 16th, 2009 at 4:48 pm
to that, no kidding.
and, to this: leftback Says: March 16th, 2009 at 5:06 pm
w/o doubt.
March 16th, 2009 at 5:20 pm
DL,
nice point, way to keep the Forest in focus..
http://www.geus.dk/departments/quaternary-marine-geol/research-themes/env-cli-res-gr-forest-def-uk.htm
http://www.thefreedictionary.com/forest
March 16th, 2009 at 5:20 pm
What a quaint notion…due process. For the law to require “due process” there must be a property interest that is being impaired by the operation of government. Now, the time to have screamed “due process” was before AIG was nationalized. It was then that its shareholders and stakeholders had some expectation of a property interest to be protected from the heavy hand of government. But then did they really? If the alternative to takeover is bankruptcy, then there is no real property interest to protect, unless there it is expected there would have been some residual value left after liquidation.
Not likely.
Abrogation of contracts by private market participants, even if the private market participant is a government entity, does not generally support a claim for due process. It is simply an abrogation of a contract, to be treated just the same as if a private employer had breached a contract with an employee, and is actionable or not on the merits of the contract. Very few employment contracts are.
March 16th, 2009 at 5:21 pm
Otto-
If one allows the peer group to determine the parameters of one’s commentary, the result is people thinking that having Karen Hughes as a goodwill ambassador is lauded as a good idea.
Here’s a story:
In early 2001 I begged my in country executive vp and my report in Houston to get ready for a big problem at the company’s main hydro plant, Cañon del Pato- real plant, real company, real events. I brought it up meetings and spoke with many of my peers, feedback was- ‘Mickey doesn’t want to hear it’ and ‘tás loco, compadre’. April 2001, 135 and 68.5 lines bumped together, blew all the 20 year-old relays and set a transformer on fire. Knocking a major plant offline from the COES and blacking out the city of Huaraz, Callejon de Huaylas and Callejon de Conchucos. Two days before the event, I had force fed him an emergency communications plan- despite the fact that he had spent three months pooh-poohing the notion. At least we communicated effectively that we fubared everything. Results- bad. One result if you like ‘real world’ stuff- mining operations in the area lost their trust and current FY results are about 120+ million soles under the revenue for 2001.
I understand your impatience with the meanderings but sometimes if you listen close…
March 16th, 2009 at 5:23 pm
Mike in Nola @ 5:08
I agree about putting AIG through bankruptcy, but that’s besides the point.
My comment concerns the following:
“Big business has used this tactic [“bankruptcy”] for years to screw unions”.
I’m inferring that you are raising a moral issue here. But there is another side to it. For example, if the UAW goes on strike and demands unrealistic wages and benefits from management (as they have in past decades), how exactly should management respond? And what would the stockholders want management to do?
March 16th, 2009 at 5:24 pm
leftback Says:
March 16th, 2009 at 5:06 pm
otto: I was bearish two years ago, and I am a lot less bearish now
…..my position exactly….I’d never have given these guys bonuses in a million years….but it was the CEO’s decision…..most of the folks here don’t get this….when you become a CEO of a public company you are invested with certain powers and obligations…..you have to sign a bunch of papers saying this….what you say may be right about these traders although that wouldn’t deprive them retrospectively of legal rights to sue to recover contractual payments….None of it matters….at the end of the day the decision was Liddy’s
March 16th, 2009 at 5:27 pm
@ Curmudgeon: Thanks for the sanity and insights.
Also not seeing the IRS angle here. Max losses will be carried forward against future profits — which is moot anyway because this puppy (AIG) is the zombie entity to end zombie entities. At best it’s being propped up temporarily to feed the poor, poor starving banks via bailout pass-thru and at worst it’s government-sanctioned money laundering of stolen taxpayer dollars on an epic scale.
March 16th, 2009 at 5:30 pm
MA-
I don’t care if you are skewering me or not. The riposte was mathsterful.
March 16th, 2009 at 5:34 pm
MRegan:
all in good fun – thanks for the sense of humor!
March 16th, 2009 at 5:41 pm
Otto-
um yes demonstrandum. you see loopy -um I vaguely recall hearing my father refer to me as loopy- vaguely cuz I was watching Johnny Soko and his flying robot at the time, with the sound way up, and um hell…nevermind.
March 16th, 2009 at 5:45 pm
I step way to the gym for a little sweatin’ to the oldies for just 90 minutes and a brawl breaks out. No worries everyone. FASB promoting changes to mark-to-market, according to CR. We’re well on our way to recovery. Nevermind those 600,000+ j0b losses per month. A mere distraction. The market is headed to the moon, I tell you!
March 16th, 2009 at 5:48 pm
DL Says:
March 16th, 2009 at 5:23 pm
And what would the stockholders want management to do?
_______
The stockholders don’t care who gets screwed – until it’s their turn, then they pitch a fit.
Contrary to popular belief, stockholders don’t make a company or an economy run. Well-paid (dedicated), consuming, rank-and-file employees do. Management would do better to stop focusing on the shareholder, and start paying more attention to the consumer.
March 16th, 2009 at 5:49 pm
Is there no way to use the Credit Suisse plan (http://www.iht.com/articles/2008/12/21/business/views22.php) for the bonuses? I know their relationship to the bad paper is very different, but it’s at least worth exploring…maybe if they pay a “claim” and then take ownership of the bad paper, pay the bonuses with it at face * 15% or something.
March 16th, 2009 at 5:53 pm
“And yep that’s about right…..Liddy can do just about damn well what he pleases…”
I’m not sure where you learned corporate governance, but just so you don’t fuck up reality for others–the CEO is a manager, ostensibly working for the shareholders (in this case, 80% of which are the US Treasury) and overseen by the board of directors. He answers to the board of directors, not the other way around. The board answers to the shareholders, through elections every so often, or at any time a majority of shareholders want to call one (that’d be the US Treasury). Even if that’s not often how it works in practice, that’s the formal line of authority. And formal lines of authority do matter when nut-cutting time arrives, which, if Mr. Liddy takes your view of his powers, is likely to be quite soon.
March 16th, 2009 at 6:21 pm
Off Topic:
can you guys comment on Doug Kass’s article about the bottom being in:
http://www.thestreet.com/story/10472521/1/kass-it-aint-heavy-its-a-bottom.html
I used to think he was a respectable market guy (not a shill) but if i am not wrong couple of months back he was buying financials….i wonder if he is like jim cramer now (always trying to make a call….which if became right, he can claim victory as being the smartest guy around…).
or maybe i am totally ignorent about Doug Kass’s real profile??
i mean if the bottom is even near….i can put all my cash to work by selling puts (40% below current levels…and still make a killing)
March 16th, 2009 at 6:27 pm
Liddy is not a “manager”. he’s a caretaker, which is to say he’s taking care of Goldman Sachs. as a former member of the Goldman Sachs Bd of Ds he was placed in this AIG position under Paulson to facilitate 100c payments to Goldman out of taxpayer funds. when the taxpayer spigot runs out he’ll find something better to do with his time
March 16th, 2009 at 6:30 pm
ab initio:
I’m with you on this one. http://fhwang.net/2009/03/16/Full-of-sound-and-fury-signifying-0-000019
“This is like having a friend who finds out that her boyfriend has a baby with some other woman, doesn’t actually have a job, and has been stealing the money she’s been trying to save for the both of them, and then her biggest complaint is how he doesn’t ever buy her flowers. Goddamit, girl. Dump the fucker already.”
March 16th, 2009 at 6:36 pm
EXCELLENT suggestion..
Or we could just PAY THEM WITH CAKE
March 16th, 2009 at 6:45 pm
@otto: Why do you have to be so haughty, disrespectful, and utterly dismissive of everyone who disagrees with you on ANY point? Honestly, I really hope you’re right about everything you say (you seem pretty damn sure of your own brilliance) because I don’t want this country to fall into GD II, but if you’re wrong please don’t disappear from this blog entirely like I think you will. You owe it many of us daft ones here to take your flogging like man.
March 16th, 2009 at 6:46 pm
This NOT about bonuses, folks; it’s about the democracy we though we had.
This from Reich at the Huffington Post:
Apart from AIG’s sophistry is a much larger point. This sordid story of government helplessness in the face of massive taxpayer commitments illustrates better than anything to date why the government should take over any institution that’s “too big to fail” and which has cost taxpayers dearly. Such institutions are no longer within the capitalist system because they are no longer accountable to the market. So to whom should they be accountable? When taxpayers have put up, and essentially own, a large portion of their assets, AIG and other behemoths should be accountable to taxpayers. When our very own Secretary of the Treasury cannot make stick his decision that AIG’s bonuses should not be paid, only one conclusion can be drawn: AIG is accountable to no one. Our democracy is seriously broken.
Well, YEAH! When did it get broke, huh? Try the late 19th century when the supreme supine court twisted the 14th amendment into a corporate pretzel so the people who stole behind the corporate firewall would never be held accountable. This ain’t ovah, folks.
March 16th, 2009 at 7:02 pm
BR: My suggestion: PAY THESE BONUSES WITH AIG STOCK.
Barry, you are a genius!
RITHOLTZ FOR PRESIDENT IN 2012!
(assuming there is still a country worth being president of by 2012)
March 16th, 2009 at 7:08 pm
You owe it many of us daft ones here to take your flogging like man.
I don’t know for sure, Mannwich, but otto sounds like a sharp tongued, huffy woman so she might rejecy the flogging unless, of course, she is a feminist. Then she’d “take it like a WOMAN”. Time will tell.
March 16th, 2009 at 7:11 pm
Another interesting perspective on the AIG debacle (by a competent party with actual experience in this sort of mess) can be found over at nakedcapitalism.com:
http://www.nakedcapitalism.com/2009/03/wiliam-black-savages-treasurys-conduct.html
March 16th, 2009 at 7:13 pm
I hear you, otto. My feelings haven’t been hurt, so no worries there. I enjoy a little intense banter, but perhaps some of what goes on in the “real world” should be discussed and changed at least a little (I would argue A LOT but that’s just me with my head in the clouds). We realize that you’re “educated”, have lived in “four countries” (or whatever), and identify mostly with elites, but I would venture to guess that many of us (myself included) aren’t the dimwitted, one-dimensional, uneducated idiots that you seem to think we are. That’s all I’m saying. I think that for many here the outrage you are seeing is pretty damn justifiable. I also fully realize that we have to be realistic about things that happen in the “real world” but that doesn’t mean those things are “right” and shouldn’t be objected to on blogs like this one.
March 16th, 2009 at 7:16 pm
Solution,
Add up the net worth of the top 400 executives in all the corporations that have recieved bail out money. These noble souls then “invest” 90% of their net worth in corporation stock and leave it there until said corporation pays every penny it got in bail-out money back to the government with interest. Put your money where your mouth is, executive bozos. It’s called capitalism. You guys really aren’t part of the American Politburo, right?
March 16th, 2009 at 7:33 pm
No doubt Mannwich, there have been a few here over the years. Wish I could remember them all. The ones in denial over housing being a bubble, oil to $200.00 …etc,etc despite any fundamentals. Always ostentatious as hell!
I still think it’s BR getting our goats and raising post #’s.
Well said AGG!
I agree that these bailouts, especially AIG, are shadow opp treasury laundering. Who knows where this money will end up. Benny even admits to these options in his papers on Japan and GD1.
My question Otto, what fuels recovery with no bubbles to fall back on. You have a wicked revision to the mean, biflation, negative savings rate, stagnant wages, and no industry? Please don’t say infrastructure and green technology. Propping up the bubble is bullshit by the way. It’s only going to make the pain worse. Cut these zombies jugulars and be done with it. Trust me, the world will still be here, just with few less millionaires.
March 16th, 2009 at 7:49 pm
This is yet another example of how our system rewards cheaters, failures, as long as they appears to be highly-educated-and-skilled-narcissists.
March 16th, 2009 at 7:57 pm
What I liked best was Liddy’s defense of the bonuses, which I paraphrase; they are necessary to attract and keep the best and the brightest. Well, if those assclowns are America’s best and brightest we’re in a lot more trouble than even I realized.
March 16th, 2009 at 7:59 pm
My question is what kind of performance goals did these AIG people have to meet in order to be eligible for
their bonus?
March 16th, 2009 at 8:18 pm
I think it should be noted that young buck does well by pointing this out..
Aaron Zelinsky, Articles Editor, Yale Law Journal
obviously, he shows that skepticism+applied spirit of inquiry makes for an intelligent equation, and positive results..
skep·ti·cism also scep·ti·cism (skpt-szm)
n.
1. A doubting or questioning attitude or state of mind; dubiety. See Synonyms at uncertainty.
2. Philosophy
a. The ancient school of Pyrrho of Elis that stressed the uncertainty of our beliefs in order to oppose dogmatism.
b. The doctrine that absolute knowledge is impossible, either in a particular domain or in general.
c. A methodology based on an assumption of doubt with the aim of acquiring approximate or relative certainty.
3. Doubt or disbelief of religious tenets.
let’s go w/ 1. & 2a.
http://www.thefreedictionary.com/skepticism
March 16th, 2009 at 8:30 pm
Sen. Chris Dodd is proposing a special tax code provision that taxes these bonuses at a 98% rate:
As public and political outrage grows over $165 million AIG paid as bonuses to executives while taking billions in taxpayer dollars, an idea is germinating in Congress. If you cannot get the money back, tax the bonuses.
“It’s an idea very much at the embryonic stage,” said Senate Banking Committee Chairman Chris Dodd, D-CT, “You can write a tax provision targeted specifically at 98% of the taxable proceeds.”
Dodd said that “doesn’t violate the terms of the contracts,” referring to legally-binding agreements that appear to preclude government action.
Senate Finance Committee Chairman Max Baucus, D-MT, says his staff is reviewing such a proposal. He called it a “worthy” idea but said he needs to know more about how it would work.
Dodd says this is something that “could happen fast. We could write this tomorrow.”
http://www.foxnews.com/politics/2009/03/16/tax-aig-executive-bonuses-dodd-says/
March 16th, 2009 at 8:38 pm
Otto@ 4:46 – “It’s an outrage these guys getting this money…..But this was basically a decision within the purview of the management of AIG…..Geithner or whoever can make representations but at the end of the day that’s just what they are: representations……This is a country of laws….and at the end of the day you just have to go through due process.”
You are awfully busy today trying to contain this explosion and wave two flags: 1)this is a country of laws, 2)at the end of the day you just have to go through due process. Oh, I get it. The taxpayers are subject to our county’s laws but the scum of Wall Street aren’t. If you had worked in a corporation where the CEO had a backbone, you would be aware of the power such an individual has. It doesn’t require a committee or Congressional investigation to do something or stop anything he doesn’t want to occur. Your ilk doesn’t get it or maybe some of your bosses do & that’s why you are so busy today.
As has been recommended by others who do get it on this blog:
1) Fire Summers & Geithner now. Replace all former GS employees currently on the US payroll.
2) Appoint Roubini & Volcker to replace them if they are willing. If not, the country would be better off with vacant offices until competent replacements who truly support O’s vision of change can be hired.
3) Plug the leaks of our tax dollars through the Fed & call all bailout loans.
4) No more bailouts other than DIP financing for prepacked bankruptcies of the too big to fail.
March 16th, 2009 at 8:39 pm
Hey there,
According to Summers there was nothing they could do “country of laws” and all that. seems (i haven’t seen this link yet) that those outside the Econoblogs have noticed and complained too.
http://www.salon.com/opinion/greenwald/2009/03/16/aig/index.html
March 16th, 2009 at 8:40 pm
Whwn we’re talking Trillions, anything so small and so public is clearly political theatre to distract from the big picture (If you will excuse me BR)
First of all these were performance bonuses, then when that clearly wasn’t going to fly, they became retention bonuses.
It seems to me that the most important question not being asked is why would you even WANT to retain the same as*holes who have destroyed the Company? And where would they go anyway? In case AIG hasn’t noticed, nobody is hiring right now and I would suggest that in particular nobody is hiring senior staff from this unit of AIG?
If, however, retention is the object, don’t even pay them in stock but in stock options which vest after 3 years.
March 16th, 2009 at 8:49 pm
“The Treasury will use a $30 billion infusion into AIG to force the company to repay all of the bonuses promised to employees of its Financial Products group, a White House official said.”
This is a political magic trick, the same one used in the UK with RBS. Here’ how it works:
AIG agree to repay bonuses to prevent the $30 billion being stalled. But the bonus payments already went out on Friday and can’t be recouped.
The money to return to the government comes from AIG, not the bonus recipients, and therefore creates a cost which in turn comes from the government which potentially plugs the hole in the books by handing the money back.
The sleight of hand is that everyone is so fixated on the name AIG as the villain, that they don’t see that AIG is largely nationalized and therefore themselves, whereas ‘bonus recipient’ is the real target.
The outcome is exactly the same as doing nothing but people’s anger is hopefully quelled.
March 16th, 2009 at 8:51 pm
The power to tax is the power to destroy, and in this situation destruction is appropriate!
I can see a roomfull of eager young attorneys from Cuomo’s office going through corporate policies and bonus contracts looking for flaws – ” this one wasn’t notarized”, “this one is backdated”.
March 16th, 2009 at 8:55 pm
Well the Yale Law School guy figured it out. Problem solved!
March 16th, 2009 at 9:18 pm
LOL!!!! what goes on in the real world. are there sugar plum fairies dancing around in everyone’s head? i suppose the globe is sucking on grape flavored lollipops as well. social moods have changed dramatically attitudes have changed towards credit and debt.. conflict internally and externally is a high probability, risk is higher than ever. keep drinking the punch kool aid.
March 16th, 2009 at 9:26 pm
Touche’ to Zenster, Ken H, Mannwich, and AGG.
March 16th, 2009 at 9:40 pm
I’ll say it again – the easiest way to get the bonuses back is to threaten to publish the names and addresses of every bonus recipient on the front page of USA Today. Cuomo’s request for names was the real power play.
Think about it – if you were one of these a-holes who just banked $5 million on Friday, would you want word to get out?
March 16th, 2009 at 10:05 pm
AIG has been bailed out by the taxpayer to the tune of $150BB with the possibility that there’s $300BB more to go (see NYT article by Nocera). At $150MM, these bonusses are 0.1% of that amount. Obama, Geithner and Cuomo can all try to score political points getting them back, but in the grand scheme of things, it’s meaningless. How about getting angry about that other 99.9%?
These unregulated CDS contracts should never have been written in the first place. Surely some lawyer can go for the gusto and file a class-action lawsuit on behalf of the US taxpayer.
March 16th, 2009 at 10:10 pm
And the Madoff developments are theatre also. Is there anyone out there who doesn’t believe the family have Millions (Billions?) stashed away in quiet little accounts in the Caymans etc?
March 16th, 2009 at 10:10 pm
And the Madoff developments are theatre also. Is there anyone out there who doesn’t believe the family have Millions (Billions?) stashed away in quiet little accounts in the Caymans etc? Should be more than enough to replace the family silver and the Steinway.
March 16th, 2009 at 10:12 pm
AIG’s Financial Products division was in England. Presumably not all these people are US taxpayers and therefore a tax levy is irrelevant.
March 16th, 2009 at 10:46 pm
Phili,
Really think Kenny Lay is dead?
Diva,
Shadow shell game. Money will probably end up in bond holders hands in China. Which they in turn will invest back in the US. While inflation and skyrocketing interest rates eat up J6P.
March 16th, 2009 at 10:57 pm
Better idea. How about we takes the SOBs out, flog them publicly in times square, then lock them in for 150 years likes Madoff, all in the same prison as that maggot and make sure they all have exposure to the general inmate population. THEN we confiscate their personal assets, not only of them but to each Exec who profited through the orchestration of this fraud that has brought the financial system to the brink.
March 17th, 2009 at 12:33 am
Just tell them the bonus comes with a pink slip and ask them if they still want it.
March 17th, 2009 at 12:55 am
The larger point to me is that even IF(!) the company is legally bound to pay out the bonuses, the employees are not legally bound to accept them. Obama needs to personalize the conflict and say that if these guys had even the slightest sense of justice, fairness, or any shred of integrity left, then they would refuse to accept the bonuses. And if they still line up to collect, then humiliate each and every one of the bastards until they can’t stand the sight of another dollar.
March 17th, 2009 at 2:00 am
I don’t understand this AIG thing.
They are saying that they are contractually obligated to pay these huge bonuses to their employees.
American International Group is an insurance company for Christ sake!
Why is it that they can always find a way weasel out of paying off an insurance claim, but can’t find a way out of paying these bonuses?
The North Coast Curmudgeon
March 17th, 2009 at 2:34 am
how is it that mr. president is up in arms over AIG bonuses yet there doesn’t seem much outrage that billions of taxpayer dollars have been funnelled to glodman stack etc. boy this administration just exudes confidence.
March 17th, 2009 at 6:44 am
So AIG cares about income tax deductions? LOL.
Dozens of political and academic commenters on the AIG bonuses at Politico and wsj.com are showing how ignorant most Americans are about contracts, business and economics.
From President Obama and members of Congress on up, Americans are joining the the mob that wants to lynch AIG executives, directors and employes as well as the insurer’s counter parties on Wall Street and abroad.
After reading dozens of comments, it’s clear that:
1. AIG has done a terrible job of reporting the types of employes who have earned bonuses and what they did to earn those bonuses or commissions.
2. Few commenters understand or are willing to admit they know why bonuses and commissions are paid.
3. There is little respect for contract law.
4. Politicians are covering their backs and being disingenuous.
5. AIG is the prime example of why the automakers should be forced into bankruptcy so that they can legally renegotiate all contracts.
6. Economic and business ignorance reaches into the highest levels of politics and society.
7. Mobs rule, even in 2009 America.
March 17th, 2009 at 7:45 am
Tell me sonething – if the US Congress can pass a law to change one woman’s fate (Terry Schivo), then why don’t they just pass a new tax code that says all bonus from AIG are taxed at a 100% rate? That would get the money back, wouldn’t it?
March 17th, 2009 at 8:21 am
doug86 Says:
March 17th, 2009 at 7:45 am
Tell me sonething – if the US Congress can pass a law to change one woman’s fate (Terry Schivo),
……The Schiavo law was one of the most egregious examples of the misuse of Congressional powers of recent times…..and it was promptly rejected by the courts…..
March 17th, 2009 at 8:31 am
This whole thing is just more fuel on the fire of public distrust of our corportate on govermnent leaders. To the public it ALL stinks. How smart are guys who give people contracts that pay even when the company is destroyed. And how strong of a leader are you when you realize you have made a bad decision and simply roll over. It’s just more evidence that corportate america at the highest levels is just a giant circle jerk.
If these guys running AIG are a fraction as tough as they pretend to be they should of said sorry, we are not paying the bonus, see you in court. A very public court.
March 17th, 2009 at 8:34 am
businessword.com Says:
March 17th, 2009 at 6:44 am
……I largely agree with you……although not about bankruptcy for the auto makers…..but this decision was entirely within the purview of Liddy who obviously knows all the operational and legal ramifications unlike just about everyone else….for those who say fire him I’m sure he’d be happy since he’s working for a dollar a year…In reality the govt’s ability to intervene is strictly circumscribed…..and all this talk of setting the IRS on these people is very shortsighted…..what it does highlight is the impracticality of the govt getting involved in running businesses….sure everyone can vent their outrage but at the end of the day one is left with realities of this situation which aren’t really susceptible outraged morality.
March 17th, 2009 at 8:44 am
I read a WSJ editorital that bleated about the AIG bonus contract being valid, and complaints are, essentially foolish. This editorial is an excellent example of why that paper is rapidly becoming a complete waste of time and money.
You have to go back to the origin of the contract and examine it from that angle to see if it is a valid, but bad, contract or is it fraud.
For example, were the offeror and offeree, basically, the same person, causing the offeror to breech a fiduciary duty to the principal? Some might see this as plundering.
What is the definition of ‘retention bonus’ and why was that language used instead of any other?
What were the known conditions of the portfolio at that time and what could those people being ‘retained’ have known?
Why were conditions put into derivative contracts that gave customers the option to declare default if their favorite manager left the company?
Was this an arm’s length transaction or fraud?
Taking the contract as a whole, how does controlling state law impact on the transaction?
I’m amazed at the stupidity of those who just look at the paper and say “A bad deal is still a deal. Case Closed”. What the hell is wrong with them?
March 17th, 2009 at 8:55 am
Re the AIG contract,
Even if found to be illegal, it may be difficult to get back the cash that went out on Sunday. I don’t see it as a cost – benefit problem though. If recovery is certain, they must be taught a lesson and an example must be set.
I’m really interested in seeing the thieves who allowed AIG to be plundered by these bonuses to do a perp walk and deal with the possibility of hard time. I want this prosecution regardless of any other that is pending.
March 17th, 2009 at 9:04 am
“I’m amazed at the stupidity of those who just look at the paper and say “A bad deal is still a deal. Case Closed”. What the hell is wrong with them?”
………..It happens every day…….I’ve been on right and wrong end of them…..haven’t most people
March 17th, 2009 at 9:32 am
So, where was this administration back in January when it was discovered that massive bonuses would be paid to the AIG unit in Europe?
Tells me this adm is reactive rather than proactive.
Different adm, same story.
March 17th, 2009 at 9:41 am
by the way, on bonuses during a restructure. These should be structred as golden handcuffs–if the employees stay long enough and perform well enough, then they get the bonus down the road.
A retention bonus. Not a gift.
The money should even but somehow guaranteed so there is a comfort level for employees.
Excluded from the plan would be the folks that were part of the problem. And with the govt owning 80% we shoudl not lket the stupid things occur.
Whether he likes it or not, Prez Obama is the commander in chief of the turnaround. And the same for the rest of the administration. The ball is in their court and its not being volleyed effectively.
So, are we in crisis mode or is our economy fundamentally sound. Can’t have it both ways and it does not change weekly.
If I was hiring a turnaround specialist for my business I would want one who knows what he is doing. Same for the Doctor I hire when I am having surgery.
March 17th, 2009 at 9:55 am
As a number of people have picked up on, this whole “sanctity of contracts” meme is broad in its rhetoric but very selective in its application.
AIG cannot meet all of its contractual obligations without government assistance. That’s what being insolvent means: you can’t pay your bills. Bills = contracts.
Many contracts contain insolvency/bankruptcy contingency clauses. Rare indeed the compensation agreement that contains no wiggle room or hedges by the employer.
The U.S. government is 80% shareholder in a company that is incurring massive, unprecedented additional debt in order to pay creditors. Any shareholder in his/her right mind would cry foul to protect what little he/she might recover through liquidation or Chapter 11. If AIG was leveraged 30:1 in 2007-08, where the hell is it now??? Clearly this is money that no one ever expects will be repaid.
These are not ordinary times. Lincoln suspended habeas corpus. Truman nationalized the steel mills. That’s where we are at. The extent of the right to contract and the interpretation of contractual terms is defined by the state. We’re in the constitutional twilight zone of Executive Power responding to national/global emergency.
Sanctity of contracts my ass.
March 17th, 2009 at 10:22 am
The sad part is some of these bonuses are actually classified as retention pay. Why would anyone in their right mind want to retain them? If I was their CEO I’d have fired the whole lot of them, and replaced them with just out of school grads, and I wouldn’t give them any severance pay, if they had a problem with that I’d tell them to take it up with the lawyers.
We don’t need any pay to retain them, just put them in jail where they belong.
March 17th, 2009 at 10:26 am
“Under these circumstances, it’s hard to understand how derivative traders at A.I.G. warranted any bonuses at all, much less $165 million in extra pay,” Mr. Obama said. “How do they justify this outrage to the taxpayers who are keeping the company afloat?”
Barry, you obviously copied this down wrong…I fixed it for you, though. No, don’t thank me…
Mr. Obama said, “How do I justify this outrage to the taxpayers of my keeping this company afloat with their money?”……
March 17th, 2009 at 10:49 am
@ businessword Oh come off it!
“2. Few commenters understand or are willing to admit they know why bonuses and commissions are paid.”
Their paid because they’re greedy little sniveling snots who feel that since they’re handling your money and a lot of it they should get a small percentage, which amounts to a lot of money because they work at a big company.
“5. AIG is the prime example of why the automakers should be forced into bankruptcy so that they can legally renegotiate all contracts.”
This has nothing to do with the auto companies, your pointing your finger at them just illuminates your bias. Why don’t you pick on an industry your own size?
March 17th, 2009 at 12:18 pm
Solution to AIG bonus takers whose contracts (Unlike UAW workers) cannot abrogated or renegoiated; “Here is your bonus check and to go with it here is your termination notice; this is a package deal you mayeither take both of them together or neither one of them, now choose!”
March 17th, 2009 at 12:45 pm
….Santelli sign’s off on the bonuses
SANTELLI: Now, think about it this way. Maybe I’m missing something. But the outrage seems to be about M’s, millions of dollars, right? $165 million, OK?
But I would think that it should be looked at as a pretty big positive, because when you go from the M, maybe you should try to go to the B’s, which is the billions of dollars, and maybe that’s going to even enlighten it for the T, trillions of dollars. You know, $165 million is like worrying about 16.5 cents, while $165 maybe necessitates a little more outrage. What do you guys think?
BECKY QUICK: Hey, Rick, I think the real idea here is just the idea of rewarding bad behavior, which is something you’ve spoken out against in the past.
SANTELLI: No, I guess what I’m saying is it’s an order of magnitude. Don’t you think this dynamic that the average guy reading his newspaper is really starting to be in tune with this?
And I think bonuses really strike a cord as to the dynamic you’re talking about. But there’s many degrees of intensity if one really wants to shine the light on the money that’s being scrutinized. You know, there’s Ms, Bs and Ts. I just want to know what people think.
March 17th, 2009 at 1:46 pm
To say that the Treasury secretary is powerless stop AIG from paying bonuses is utter nonsense, unless you assume AIG used its $173 billion in bailout dough to buy its own aircraft carriers and nuclear submarines, such that it can dictate its own terms to the sovereign because it has become more powerful thereby.
Enough of this nonsense. We now know AIG was used to bailout various other financial institutions, away from the public’s prying eyes. It was effectively a money-launderer for Goldman Sachs, et al, so it wouldn’t look like they needed a bailout. This bonus baloney seems designed to divert attention from fact of the money laundering. If the politicians were really outraged, they could fix the bonus problem easy enough. But they can’t fix the reality of municipalities, investment banks, and commercial banks needing massive amounts of dough to survive as presently configured, nor the reality that they are likely to need massive amounts more. It seems AIG might have paid the bonuses to divert attention from money laundering, and to shut people up that are on the inside and could have blown the whistle to all this nonsense.
If AIG had been allowed to bankrupt, and its counterparties been forced to line up in bankruptcy court hoping for some recovery, there is a very real chance that this financial system slide into oblivion would be nearly over by now. Instead, AIG and its counterparties’ losses have been collectivized, weakening the system even further, and lessening the chances of recovery any time soon. Like all government market interventions, the rescue of AIG to save the financial system seems to have accomplished the exact opposite of its intent.
March 17th, 2009 at 1:48 pm
I guess Santelli only worries about rewarding bad behavior by little people.
I some of these AIG people wrote in a default on CDS papers if they themselves left the companyu, that has to be fraud.
March 17th, 2009 at 5:49 pm
Curmudgeon,
Bingo!
et al. LOL . Probably some to shut Wen up!
A matter of contract law, what a load!