Bonuses For AIG

The BBQ Pit
341

I just want to focus on this part for now, perhaps I’ll return to Volume 1, or go forward to Volume 3 later.

The way you phrase this implies that you posit this sort of honesty as if it were a virtue, something to be admired. And that is deeply, deeply warped. You yourself declare that such honesty is a tactic of business, it is necessary for business to be conducted. It is devoid of moral quality for that reason. I don’t raise the pot limit in order to draw one card to an inside straight flush, but that isn’t because I’m a better person, its because I want to win. Or, more importantly, I don’t want to lose.

A ruthless and merciless person is a moral void, minor personality traits, especially traits assumed strictly for their practical value, are not virtues. They are tactics, nothing more. A ruthless and merciless person is an evil person. You don’t grasp that? Seriously?

“Sure, he’ll sell a blind man a rat’s asshole for a wedding ring, but look how clean he keeps his fingernails!” Dude…WTF?

(Posted before Butt-munchkin started calling me names. Stands as written.)

342

Perhaps even more essentially: many on the left – not Democrats, but true-believer leftists – never did get around to opposing Stalin. He and the USSR enjoyed the sympathies and sometimes outright support of the American Left all the way until the wall fell.

The idea that Stalin was supported as lesser of two evils is claptrap. The left supported him, period.

343

At least I don’t claim to be a Christian and then defend a system based on ruthless competition. Who Would Jesus Rip Off?

344

Winston Churchill. William Tecumsah Sherman.

Anyway, no. I am not afraid of openly ruthless and merciless people. I don’t think they are necessarily evil. They can be good or evil.

I am afraid of people that pretend at mercy and compassion, those for whom it is a tool to be exploited. Those are the evil people.

345

The guy that owned the herd of pigs Jesus sent off a cliff.

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It’s actually not so much about ruthless competition as it is efficiency. That efficiency is why a toilet seat costs you $7 and without it the government pays $250

347

One can only assume that you are using “true-believer leftists” and “American Left” to mean “members of the Stalinist wings of the CPUSA”.

Ah, one would be wrong, apparently, now we of the Democratic left are Stalinists. Nice segue, asshole.

348

Trotsky? Name ring a bell? Have you any idea what you’re talking about?

(Adviso: no case being made for Crazy Leon here, his idea of “permanent revolution” was Home, Home on Derange. Just definitely lefty, definitely anti-Stalin…)

349

You missed the most important point. Cramer and others are about excitement, about the up to the minute swings, about getting in and getting out. That’s not investment - that’s speculation. What we have are not financial institutions, what we have is a casino gone mad.

Investment is sane, stolid, dull. Investment is modest and stable returns over long periods of time. Used to be, a stock was judged according to dividends returned, now it is judged according to what it can be turned over for. Its speculation like Twain wrote about in The Gilded Age, and it is destructive and malignant.

That was what I took away from Stewart, and I think he was dead solid right.

350

Scylla, I have the sense that you’ve been doing good work here for the past couple of days. You’ve presented extraordinary amounts of material, and made a great deal of it nearly understandable to me. I’m not completely confident in my capacity to grasp it all, but, as I say, you’re certainly narrowing the comprehensibility gap.

Thank you for that.

I still don’t understand many things. Just as a f’rinstance, it’s been suggested that buying a CDS was roughly analogous to me buying fire insurance on my neighbor’s house. That is, I could buy an instrument that would pay me the value of a bond that I didn’t own, if the bond were to default. Now, if I did own the bond, and the bond didn’t default, I’d hold the good bond as an asset, and receive dividends on it. My return on the CDS would be zero, but presumably the amount I paid on it would be less than whatever dividends I received, so I’m still ahead on the deal.

But if I don’t hold the bond, I’m paying for the CDS, but what’s in it for me if the bond doesn’t default? ISTM that with this instrument, I can only come out ahead if the bond does default, making it a matter of self interest to encourage the bond to default.

If I don’t believe (and wish) that the bond will tank, why the hell would I buy a CDS on it?

I hope you can spot the fundamental flaw in my assumptions, and will spare a moment to educate me.

Thanks again (in advance). Well, half a thanks. I’ll thank you the other half when you’ve helped me unwind this misconception. See what I did there? Like a two-part retention bonus! :smiley:

351

Other people also sacrifice to protect the public’s interests but are not paid million dollar bonuses or even a few hundred thousand. They are Generals and soldiers, researchers and engineers. Maybe Fred performed a great service, but I am not sure why his work is more valuable than other highly educated experts working for the public.

There is no doubt that decent hardworking people earn an honest living on Wall Street. I don’t resent people who earn a good salary or the filthy rich.

For me, this is about a value system that measures social worth with money and a small elite wealthy class that has a sense of entitlement --reflected by the tax funded bonuses for executives at AIG and failed banks. This entitlement is further demonstrated by the aversion and frequent refusal to pay taxes or fund public institutions. There is an indifference towards public needs and almost a disdain for the poor. These are the values I see reflected by public policy and the financial bailout.

352

I really don’t want to make this a partisan issue (it’s waaay too big for that), but I truly can’t stomach the screaming of the Reps right now. Seriously, to hear them talk, AIG should have gone belly up–let the market correct itself. Or, that is to say, to hear them talk say 6 months ago or on Fox (which is bad entertainment and not news at all). That is NOT what they scream now. Now they want bail out and tax the motherfuckers etc (this all reminds me very much of the hysteria surrounding Terri Schiavo). I could believe in integrity if someone, anyone, would just keep true to their party principals. I am NOT excusing Dems here–I just see the hypocrisy of the Reps a bit more clearly. Enough of party politics, moving on.

RE the story of the fish and the pond-- you forgot we then need to feed the third party arbiter. I assume that would be taxes of some sort… :slight_smile:

I know (not well) some guys who work down at the Chicago Board of Trade–their word is indeed their bond etc. But here’s the thing: honest is not the same as honorable. You say only a FEW were “bad”. But I tend to see things the way Jon Stewart laid them out. There is the one market, full of straight up investors etc, and then there is this other room, a back room, where the market is churned and speculation occurs. These may or may not be the same guys or there may be some overlap. I don’t know. None of us knows because we’re all too busy running around like chickens.

I can see where you say this is a witch hunt (which, btw, I read as with/chunt at first!–and thought, now wtf does that mean? heh) of sorts, but here is what I hope:

That we stop the screaming and the frantic legislation and start LOOKING at this problem. Hopefully, Obama’s team is investigating this. I’d like to see Paulson grilled and Bernanke. I’d like to know who was the CEO before Liddy and see him indicted (and his team). But what I’d like most is sane, rational legislation to come out of this, much like the Sherman Anti-Trust etc came out of the rapacious activity of the Gilded Age. These players are no better than those guys, when all is said and done.
I see more now, and I hope I see better, but I cannot agree that these investors are hapless victims entirely. I can see that they are a smaller part in this fiasco, sure, but the machinery of public outcry is in full swing. I hope that more thoughtful reporting comes in the coming months, but don’t look for it on your nightly news.
IMO, the only innocent victims in this are the bystanders–the folks who were told to invest, invest! and now have no pension or 401k. I have to hold accountable not only the banks who pushed this insane way to make money (I’m completely unconvinced that CDS is not a risky investment), but the people who signed on those mortgages. Can a CTA busdriver truly afford a $450k house? Of course not–but in this bubble he was told he could and he believed it. Shame on him and shame on the banker who sold him that mortgage. Shame on the financial guy who pushed for more fodder into the maw of the bubble. Shame on his boss for insisting he make more money for his institution. Shame on the legislators for allowing this nonsense to continue. And who is left holding the bag? The ones who didn’t play this stupid greedy game. Forgive me if I’m not thrilled.

Look at it this way: the divide between the wealthy and the middle class (and below) has gotten larger and larger in recent decades. This ire and mob mentality is a direct result of that. Add to that the LOSS of retirement money to those who can ill afford it and to try to make a sympathetic case for million+ dollar bonuses will naturally fall on deaf ears. This is payback. Am I sorry that a few guys at AIG are the face of this? For those individuals, yes–but then again, someone has to be the face of this. The anger is real. We need to find the true face and then deal with it. Passing stupid taxes is not the way to do this, asking hard questions is. Sadly, I think our greatness (in terms of character) as a nation is past–we would rather run around like scared children than (to mix metaphors) sit down, face the music and swallow our own bitter medicine. Side note: can you imagine if Bush and the GOP had gotten its way and soc security was privatized? :eek:

I’ll be back (I’m late to work again!) with more questions and more comments. I think there are some missing bits to your “side” of things, Scylla, but I can’t focus on this long enough this morning to think things through. Thanks for staying with me, though.

353

I greatly appreciate your thoughtful and informative posts Scylla - as well as those of others who are far more knowledgeable abut this than I.

One thing that keeps bothering me, tho, Scylla, is your repeated statements that there “is nothing wrong with” these increasingly complex, creative, highly leveraged instruments, your insistance that reliance on them “worked very well,” and you distinction between bubbles and houses of cards.

Yes, these novel, creative, and aggressive approaches kept the money flowing. But how could the people who were creating and trading them think that they had a solid foundation or were sustainable?

A small bubble is not necessarily unstable. Bubbles can arise, then subside, then rise again with no damage to the underlying fabric. But when folks choose to keep increasing the pressure inside of the bubble because they can profit more from the expansion than they will be hurt by the predictable burst, I don’t see how that is horribly different than looting.

What was the thought, that a couple of years down the line some new wunderkind would come up with some new “creative” strategy - another screen of smoke and mirrors - to relieve the stress on the bubble? And I’m not sure these marketeers necessarily were doing society a favor by encouraging people to think that money could be gotten for nothing, and that the final bill would never come due. I’m not sure to exactly what extent these money lenders reflected societal beliefs, or influenced them. Probably some of both. But just because society has unhealthy urgings, I don’t have to be overly concerned with the situartions of those who leapt forward to cater to those desires.

Yes, banks and financial markets are very important and useful. But isn’t it possible that they may have exceeded their desireable place such that they have become almost an end to themselves, rather than servicing and enabling other portions of our economy?

Maybe Fred is having a tough time right now. That’s really too bad. But so are a lot of other folk - including folk who did not have things anywhere near as sweet as Fred had it this past decade or 2. Fred and his ilk reaped the benefits - why ought they not share in the pain? You know, no one forced them to go into their chosen careers.

Here’s a question - how many Freds do you think go into financial careers for a noble purpose or because of the intellectual challenge? Seems to me there are a heck of a lot of noble and challenging career options out there. But not too many offer the opportunity to get quite as rich quite as quickly as the markets . . .

So no, while I’m sure Fred is worrying about how to cover his expenses the same as many of us, I’m not shedding any tears for him. Or at least not any more than all the other poor schmucks who are hurting in this economy. Any gambler oughta know that if you choose to play in a high-stakes game, you have the possibility of taking a big hit. And unless you expose yourself to the possibility of that big hit, you have little chances of grabbing that big pot.

354

I think you’ve hit on the problem that REALLY worries me.

In quality management, we talk about “nonconformances” and “corrective actions.” If a company makes a mistake - say, you accidentally make the custom widget out of regular steel when it should have been made out of stainless - that’s a nonconformance, and the company has to correct it. You could correct it a lot of ways. Scrap the widget and make a new one. Change the wrong one so it’s usable. Give the customer a credit. Everything you do to make sure the wrong widget’s replaced with a right widget is nonconformance control.

Companies are usually good at that. What they often struggle with is corrective action, which is how you make it so that you don’t make the same mistake again. Why was the widget made out of carbon steel and not stainless steel? Was the drawing wrong? Was the guy untrained? Was there carbon steel in the stainless rack? Is the lighting in that part of the shop crappy and you can’t read the word order? Is there too much work and not enough guys to do it so they’re making errors in a rush? Sometimes mistakes just happen, but when they’re systemic - when the whole damn thing breaks down and errors are happening all over - you have to figure out WHY, and fix WHY, so the widgets are made right the first time, not just fix every widget individually. You have to figure that out and do something about it and then go back and see if what you did worked. THAT is how you fix problems.

What I’m hearing is a lot of nonconformance control and no corrective action. President Obama, everyone who works for him, every talking head and most of the people on this board, no offense to anyone, are talking very big about how hard to slam the barn door now that all the horses have run away. What I’m interested in is the sober, long-range plans that will prevent this from happening again. And I’m just not hearing that conversation.

355

And this just in…

**A.I.G. Sues U.S. for Return of $306 Million in Tax Payments **

http://www.nytimes.com/2009/03/20/business/20aig.html?_r=1&hp

(Offered in stunned disbelief, without comment…)

356

A brief history of AIG FP and its various shenanigans is offered here, at TPM’s Muckraker site…

http://tpmmuckraker.talkingpointsmemo.com/2009/03/the_rise_and_fall_of_aigs_financial_products_unit.php

I offer it mostly as informative, freely recognizing that TPM is left of center. (Which can be ascertained by the fact that Barney Frank’s complete and irrefutable guilt is nowhere mentioned…) Therefore, corrections and/or disagreements are invited.

Of special note, the following excerpt…

(Emphasis added)

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This sort of thing just raises ANOTHER question, which is whether these companies that are “Too big to fail” are now so big that they’re too big to effectively do business. I mean, talk about your left hand not knowing what the right’s doing. What about AIG as a whole suggests that it’s not going to continue fucking up? Is just giving them money actually going to solve any problems?

Of course, it could also be that they’re evil. Chrysler has told the Canadian government they want billions in free money or else they’ll go belly up. Meanwhile, Chrysler’s ***a billion dollars ***in arrears in Canada on their taxes. That takes pretty gigantic balls, I have got to tell you.

358

Living in the belly of the Financial beast, I am glad you are a believer. How do you feel about naked short selling? These people are sucking money out of the system ,while providing no services or nor creating a product. They do not even have to own the stocks they sell. It is another street abomination.
American Capitalism is a war without guns. The interests of the extremely wealthy and powerful are diametrically opposed to the interests of the poor. They are also a danger to the economy and the stability of the nation itself. We have been attempting to regulate them for a century because we have to. Monopoly breakups, trust busting, stopping the Hunt Bros from capturing the silver market, etc etc. have gone on endlessly. The pendulum swung too far and all the power was in the hands of the big shot financial pros. The risk to the American Financial system was not even a factor in their equations. Greed is good. They made fortunes. Now we all pay, everyone in the industrial world will pay. Paulson will take his nearly billion dollar fortune and live quite well. All the financial pros have had tons of money to protect themselves. The rest of us will suffer due to their unmitigated avarice.

359

We are fucked IMHO and I believe it is actually a good thing. Our government is a corrupt entity that needs an overhaul and needs to crash just as our financial system need to crash. Completey. It will happen and is unwinding as we speak no matter how many holes they try to plug. Greed, Corruption, Self arrogrance, indulgence, All about me type of society is what has contributed to this.

Perhaps, people will come to realize what is important some day, and not how much money you have, or can make, or who you can sue, but how you can help yourself and others, not materially but with invisibile qualities many have lost

For now, its business as usual.

360

I know and agree, but it’s hard to focus on solutions when the U.S. government is a media circus. Thus far, the bailout has lacked transparency in an effort to hide fraud or the depth of the problem. I am leaning fraud.

Information has to be pieced together like a puzzle from news sites and economic blogs to try and figure out what is happening. I read in Reuters today that the UN is urging countries to move away from the dollar and plans to meet next week to suggest an alternative. Other countries are intensifying the drum beat, including China and Russia. There is a riff between the U.S. and Europe. Meanwhile, the nuthouse in Washington must be too busy dispensing booty to care.

Why hasn’t the President addressed the nation in prime time to explain exactly what has happened and what to expect. Of course, it doesn’t help that he is undermined at every turn.

I don’t know what to think. It’s hard to solve a problem when you feel powerless.