OT: the other side of the AIG coin

[Climb01742]

here's an eye-opening piece from one of the AIG employees who received a bonus. if his story is true -- and i have no reason to doubt it -- he and his colleagues seemed to be owed an apology from an awful lot of people, myself included. my anger at these bonuses appears misplaced. again, if the perspective in this letter is accurate, a lot of people on the public stage were fools, or worse, lately.

http://www.nytimes.com/2009/03/25/op...santis.html?em

[jhcakilmer]

If true, this is just another casualty of the "let the market take care of itself" system. Without the proper regulation and oversight, this is a perfect example of what happens, and who gets hurt.

"Casualty of incompetence"

[Hardlyrob]

It wouldn't surprise me a bit if this letter is true.

Congress and the press are really good at braying about "injustice", but when someone really looks at the entire picture, it is rarely what hits the headlines. Neither are good at dealing with complexity, because it doesn't suit their goals.

As someone in the Regan administration famously said (can't think of who right now) "Where do I go to get my reputation back?"

Rob

[93legendti]

Here's what Ed Koch wrote:

...The public saw with their own eyes Senator Chris Dodd, chairman of the Senate Committee on Banking, Housing and Urban Affairs, state during a television interview that he had nothing to do with writing language in pending legislation that authorized the payment of bonuses to AIG employees. Dodd was fingered by the staff of the office of the Secretary of the Treasury as in fact being the person who wrote the enabling language allowing the bonus payments, with their urging.

To make matters worse, we then learned that the amount of the bonus payments was underestimated - it has now grown from $165 million to $218 million. Furthermore, an increasing number of employees - now up to 400 - were found to have received those payments.

The American public, unbelievably docile up to this moment, exploded with anger directed at AIG employees for taking the bonuses and at the Congress and the President for enabling the bonuses to be paid. Then everyone ran for cover, with members of Congress who voted for the legislation and the president who signed the legislation vowing they would undo what had happened, denouncing AIG and the employees who received the bonuses and demanding the money be returned. The House membership threatened that if the AIG employees failed to return the bonuses, they would be subject to a 90 percent confiscatory tax...

If President Nixon (or Pres. Bush), his administration and a compliant Congress had done what this President and this Congress have done -use the United States tax code to punish employees of a company seen as having engaged in legal conduct that they disagreed with - the press and respected government observers would have denounced Nixon (and Bush)and called for the removal in the next election of every involved member of Congress...

http://cgis.jpost.com/Blogs/koch/ent...d_imprisonment

It is outrageous that the privacy of these AIG employees was violated and they face mobs protesting outside their homes--all in the name of diverting attention from the colossal incompetence of the Congress, Sec. Geitner and the President. This is Chicago Politics practiced on a national scale.

The buck may have stopped with Pres. Truman, but this President passes the buck to those most politically expedient to tar, feather, skewer and ride out of town on a rail - all in the name of rescuing precious poll numbers.

To make matters worse, now Sec. Geitner wants to seize the "crisis" as an opportunity to limit executive pay for companies who did not even take TARP funds...This is one of the worst moments in the history of our democracy.

Finally, the EU is telling the President to stop acting like a socialist. Oh the irony:
EU presidency: US stimulus is 'the road to hell'
By AOIFE WHITE, AP Business Writer
Wed Mar 25, 3:38 pm ET
BRUSSELS – The head of the European Union slammed President Barack Obama's plan to spend nearly $2 trillion to push the U.S. economy out of recession as "the road to hell" that EU governments must avoid...

http://news.yahoo.com/s/ap/20090325/...lkAwRsA1dTMQ--

[johnnymossville]

The phony shock and "stunned" outrage towards these AIG people by the govt. and administration, (the same ones who wrote the policy) and the fanning of hate in the general public based on petty class warfare is so banana republic it's scary how fast they are dragging this once great country down. To top it off, they are just getting started. Now that the pitchforks are out, Did O return his $100+k AIG Bonus yet?

We live in interesting times.

[goonster]

Originally Posted by 93legendti

the EU is telling the President to stop acting like a socialist.

The "EU" isn't telling the US anything. That's the Czech PM, who happens to hold the revolving EU presidency this year, but is also a dead man walking because he just lost a vote of confidence by his own parliament. Topolanek is embroiled in a pitched battle with the Czech socialist party, so his comments should be viewed in that light.

Anyway, the rest of the article you cited is filled with comments of other EU leaders distancing themselves from Topolanek's remarks. Did you read those?

edit: Topolanek may be right in his assessment, or not, but his remarks do not represent the consensus view of EU leadership. He is also, I think, premature in crowing about the "successes of the EU". They have huge financial and economic problems of their own, and the EU partnership itself is pretty shaky at the moment.

[Sandy]

Originally Posted by jhcakilmer

If true, than this is just another causualty of the "let the market take care of itself" system. Without the proper regulation and oversight, this is a perfect example of what happens, and who gets hurt.

I would have no doubt that the letter is true.

I think it was more of AFTER there was no "proper regulation and oversight", the regulation was not proper and the sight was over the top, especially relative to the Kings and Queens involved in the first place. The poor pawns get hurt as the Kings and Queens tried to cover their own butts.


Sandy

[bigman]

I also believe the resignation letter to be accurate. The question remains how does an entity have the capacity and brashness to enter into these agreements given their overall financial health without some serious clauses that could decrease the amount of bonus? What would have happened if uncle sam never gave AIG a dollar?

The bonuses are not the issue, the bailout is.

[RPS]

Originally Posted by Climb01742

if his story is true -- and i have no reason to doubt it -- he and his colleagues seemed to be owed an apology from an awful lot of people, myself included.

Something seems out of context with this letter. I'd like to know the real purpose and intent.

[don'TreadOnMe]

"As someone who has an enormous sense of entitlement, a taste for the finer things in life, and is morally bankrupt, I'm starting to think I picked the wrong profession.

The reason his contract should no longer be honored is because the company he worked for is bankrupt.
The only reason why A.I.G. has any money to spend on bonuses - or even on paper clips - is because we the taxpayer gave that money to them. We didn't contract to pay him any g*dd*mned bonus.

It's also interesting that the man was paid three quarters of a million dollars to, essentially, trade things back and forth. (it looks like they're also trying to sell the company, so I imagine he had plenty to do with getting it ready for sale -- this is more pointed at the general case of these very high salaries.)

There's some economic utility in this kind of trading, but mostly, he and AIG are just extracting value out of the economy. And the economy has gotten so messed up that trading, instead of production, pays on the order of 20 times the average wage.

That $700K he was paid is a claim on real goods and services, and I doubt very much that he's providing even close to that kind of utility to the system as a whole. As far as I can see, most of what they do is simply taking from other people; for every dollar they win, the system as a whole loses. Again, there is some value there, because commodity traders help constrain volatility (buying low and selling high means that they help move their chosen commodity back toward true economic value), but that kind of compensation seems wildly excessive to me.

It's the nature of capitalism that things get out of adjustment, but there's a difference between ordinary maladjustment and downright dysfunction. The modern Wall Street is largely based on fiction, and they can use that fiction to take vast amounts of wealth from the world.

I'm not saying that janitors should be paid $700k; I am saying that when speculation pays better than real investment, real investment doesn't happen. Many of the brightest people go where the money is, and if that area is wealth-subtractive, we all suffer."

[LegendRider]

Bills now winding their way through Congress would tax between 70% and 90% of bonuses paid to any executive earning in excess of $250,000, if he or she is employed by a business that received more than $5 billion from U.S. bailout funds. With popular outcry at a fever pitch, too few Democrats and only some Republicans are prepared to stand up to this juggernaut.

But would the courts uphold this legislation? The AIG bonuses were made pursuant to valid contracts entered into before the receipt of the bailout money. They were ratified in the legislation that provided for the bailout, and efforts to find loopholes in these contracts have proved unavailing.

Thus any sensible system of limited government should consider the proposed bills unconstitutional. Special taxes on some forms of income (but not others) and retroactive taxes put in place after business transactions are complete both merit strong condemnation. The bills in Congress are rife with both elements.

Full article here:
http://online.wsj.com/article/SB123802257323941925.html

[gone]

Originally Posted by LegendRider

But would the courts uphold this legislation? The AIG bonuses were made pursuant to valid contracts entered into before the receipt of the bailout money.

There is an interesting dichotomy between the perceived sanctity of the AIG contracts versus the contracts the UAW had with the automotives which have pretty much been scrapped.

[1centaur]

Originally Posted by ghsmith54

There is an interesting dichotomy between the perceived sanctity of the AIG contracts versus the contracts the UAW had with the automotives which have pretty much been scrapped.

The UAW is being asked to renegotiate. AIG workers could have been asked the same thing but were not. Same party on the other side. Government is not talking about changing the UAW contract itself or taxing 90% of anything above "fair" compensation.

Tobias asked: "If the payment is a fixed amount for sticking around, why are they called a bonus at all? Wouldn't that be regular compensation paid out once a year? There has to be more to it than is being stated by both sides."

Retention payments are often negotiated when somebody new buys into a company where people are the key assets, such as in the investment business. They have by convention been called bonuses because they are in addition to regular salary and because the term sounds appealing to those getting them (the bonus being typically the main goal for the year of investment people), but they are not performance based, other than the performance of being there. Most retention bonus plans last longer than a year for obvious reasons. 2-3 years is typical. Many AIG commentators have confused retention bonuses with performance bonuses, some intentionally I am sure.

[Tobias]

Originally Posted by LegendRider

The AIG bonuses were made pursuant to valid contracts entered into before the receipt of the bailout money.

Does anyone know what these contracts actually state, or what they are based on? If the payment is a fixed amount for sticking around, why are they called a bonus at all? Wouldn't that be regular compensation paid out once a year? There has to be more to it than is being stated by both sides.

[Ray]

Originally Posted by Tobias

There has to be more to it than is being stated by both sides.

Or less. There's an understandably huge amount of anger and frustration on the part of the average citizen who doesn't begin to understand this stuff but knows it doesn't pass the stink test (even if it may be necessary). Something like this is a very easy thing to understand on a surface level so the press grabs it, everyone gets righteously pissed about it, and the politicians respond to that populist rage. Its never the real issues that people get hung on, its the ancillary stuff like the cover-up, perjury, etc. Because EVERYONE understands that.

The bonuses, THESE bonuses in particular, have got to be the least important part of the AIG story, but they're easy to understand and get pissed about.

-Ray