And this just in…
(From previously referenced* TPM*, links provided within…)
Obama: We’ll Pursue ‘Every Legal Avenue’ to Reclaim AIG Bonuses
Stay tuned for hot lawyer-on-lawyer action…
If AIG was Lehman Brothers and fell like a flying stone to the earth below and burned to a cinder, no one would have received even their agreed salaries, let alone any bonus. This, for all the fallout it would cause, should be allowed to happen to AIG. This is NOT AIG’s money, this is OUR money. If AIG paid a billion in bonuses of their own money, I’d be happy for whoever got all that money. They used MY money, YOUR money and the money of every tax payer and the children of the taxpayers to pay these bonuses and frankly, it simply is not right, legal obligation or not. That’s the reason there’s bankruptcy and that’s the reason they should be in it. I don’t see what the damned problem is. Someone of greater knowledge please fight my ignorance, why could we not have forced AIG into bankruptcy? Why can we not let them and anyone else who isn’t ready to float in these uncertian seas sink like a stone and let the market, if we truly believe in it, run things?
Good analogy. In this case, the obese guy also sank the ship the raft came from.
This problem has been ticking like a time bomb in all sectors of the economy for quite some time now. Executive compensation has become totally disconnected from shareholder value. This is harder to see when the market is rising, but is very obvious now. The only legislative remedy that I’ve heard of so far is the ability of shareholders to vote on a nonbinding resolution on compensation. So, what regulatory remedies seem reasonable to solve this problem, since the market clearly doesn’t. Are there rules in other countries we can adopt?
There would have been no force necessary. They were on the very edge of bankruptcy when we handed them the cash; the bailout was extended just before their grasping hand sunk below the quicksand.
You answered your own question.
The fact is that, despite the rhetoric, very few Americans really believe in allowing the free market to run things. For the most part, people are happy with the general concept of the free market when everything is going well, even in cases where the market isn’t actually free at all.
And the people who believe in the free market least are generally those Republican politicians and corporate CEOs who spend the most time trumpeting free market ideas when it serves their rhetorical and political needs. What they really mean when they do this is that they believe in the free market accumulation of profits, but that they prefer the concept of socialism when it comes to losses.
Seven Financial Serv, execs are slated to get bonuses of over 3 million dollars. The top will get 6.5. We own the damn thing lets broom the thieves and start over.
So I’m not nuts, this is exactly what should have happened. Mrs. Jockey still thinks that a lowly public servant such as myself could not possibly understand the entire consequence of an AIG failure (she’s not claiming to understand either, ftr) or bankruptcy. I say, not only do I understand it, but welcome it. We need to get all the way to the bottom before we can begin the slow climb to the top. A LOT of people are going to be hurt by this, but there’s no other way.
In the time between the Great Depression and WWII in the heart of the industrial revolution, companies, large ones especially (I’m thinking of US Steel) kept their own large storages of ready cash on hand at their own bank and used THAT for payrolls and purchases in the form of checks. They didn’t take loans for payroll, they didn’t take loans to make purchases, credit wasn’t even a consideration until we saw how much further credit could take us (or in the case of the Steel companies, how necessary it was to compete with cheap foreign steel) but it’s like walking on a floating bridge, when the wires give out, there’s nothing to hold on to and everyone on the bridge falls the same. That’s the yin and yang of a free market, I think.
I won’t go that far, but I will say that I’ve come to some new conclusions with respect to regulation of business.
If you liked my “fat guy in a life raft” analogy above, here’s another: regulation of business is like motorcycle helmet laws.
In my first iteration of an ideal world, we wouldn’t have helmet laws. People would be responsible for the decision, and the risk, of not wearing a helmet.
But then that first iteration of idealism runs smack against reality: what happens in real life when someone doesn’t wear a helmet? We don’t let them lie by the side of the road after an accident. We, society, run out in an ambulance and get them to a hospital, and spend thousands of dollars trying to save them… even if they have no insurance.
And truthfully, I don’t want to live in the world where we as a society are heartless enough to walk by the bleeding accident victim and do nothing.
Therefore, it’s a given that we will pay for your injuries. And therefore, we have the right to insist that you protect yourself and wear a helmet.
So, too, in this case. My ideal model is: let the business fail. But we can’t – we won’t, and we shouldn’t – do that. So since the reality is we are going to bail out a business of that size that fails, then we have the right to regulate that business to protect ourselves ahead of time.
Will suing them make the money appear? Will that create the money?
AIG doesn’t have their money. They have our money. When AIG makes some money, they should pay the bonuses.
As I see it, and please correct me if I am wrong, there are a lot of hands that need the money we gave to AIG. Can someone tell me why AIG Executives should be at the front of the line?
And can anyone define ‘X’ for me? What did these people do that triggered the bonus? If the money is coming out of OUR pocket, we should be able to know the particulars. If all these goals are being met, how is the division insolvent? Or is it somehow worded “If your behind still warms the chair on November 15, you will get an additional 2 million”?
Yes, yes, and YES.
The hard fact is, we can not afford to let AIG collapse. So we have to bail them out. In return for this bailout, “we” can attach a requirement for more (or at least some) oversight. Some oversight, in return for billions of bailout dollars sounds like a pretty generous and reasonable deal.
Merely a guess, but I’d imagine we’re talking about things like, “Bring in two thousand new mortgage insurance clients,” or “…invets in two thousand more mortage-backed financial instruments.” When the goal was written, it looked great – of course two thousand more mortgage-related financials meant more profit! But now, having those toxic assets is a disaster.
I have no idea, other than speculation, if that’s true, but it certainly seems like what’s gone wrong.
Absolutely.
And more to the point: we can legitimately attach similar oversight to other companies. At the very least, we can say: “You want unfettered, no-regulation existence? Fine: you can’t grow bigger than THIS.” And if they want to get bigger, then they have to accept regulation. That way, no one gets “too big to fail” without being regulated.
Of course any company is so big and so emeshed in the economy that they cannot be allowed to fail, then there is an argument ot be made that they are simply to big, period.
It’s interesting how close to the mark Adam Smith was:
OK, I know this is bad Dope etiquette, but financial minutiae gives me a lethal case of the who cares, so I’m not gonna read this whole thread. So please tell me if this has been brought up and I’ll back out quietly:
–How is a bonus, contractually agreed on beforehand to be paid NO MATTER WHAT THE PERFORMANCE, how is that a bonus?
–Wasn’t there some way the taxpayer bailout could’ve been made contingent on invalidating that particular contractual obligation?
–Where do I sign up to volunteer as hangman?
Its just a word meaning “gimmee!”
Sure, but we underestimated the cosmic vastness of their chutzpah.
An online sign-up was begun, but the servers were crushed by the response level.
We forced auto unions ,who had legal and binding contracts, to renegotiate them. Why can’t we force AIG to redo theirs, if they really have them? The country is in fiscal pain that we all are feeling. The guys who are responsible are floating away again.
Auto execs got creamed for having a corporate jet.
Bank of America had 9
JP Morgan 4
AIG 7
Citi Group 8
Morgan Stanley 4
What a crock of spoiled ,entitled brats.
You left out the most important point…
AND you are not a member of a union.
If you were an employee whose contract was negotiated by a union, you’d be completely expected to allow others to break your contract and to give you a sizable pay cut. What is more, you should have know that you were earning more than people doing similar jobs at other companies and that you are the reason AIG failed.
And another country heard from:
A reader of TPM chimes in with a dire warning about something called a “cross-default”. We are given to understand that failure to pay the bonuses will result in this creature being unleased, with the consequence of financial apocalypse.
http://www.talkingpointsmemo.com/archives/2009/03/timebomb_1.php
I haven’t the foggiest notion what he’s talking about here, and, once again, regret the absence of socialist MBA’s on the Boards.
Anybody?
Bricker, it’s times like this, out of all the times I’ve wanted to pound your head against a brick (ha!) wall to make you GET it, that I respect you.
Whenever I’ve had a contracted bonus, there’s always been a statement in the small print of the contract that payment of the bonus is subject to the performance of the company. Or something along those lines.