Congress Passes Bill To Tax AIG Bonuses!

[Parsad]

I'm not sure which is the bigger joke...the whole financial industry debacle or how the political parties operate after such a crisis!  Cheers!

 

http://www.globeinvestor.com/servlet/story/RTGAM.20090319.wAIGtax0319/GIStory/

[Guest ericopoly]

Yeah, I don't like what they are doing here.

 

Nobody at AIG can have a bonus?  What about the managers who aren't screwing things up?

 

Somebody compared this to a classroom where a few kids get an F in math, so the teacher gives the entire class an F.  The classroom is AIG, and the individual students are managers of the subsidiary entities.

[Parsad]

Yup, that's a pretty good analogy.  What I hate about Congress is how after every debacle, they get on this friggin' high horse and hang a few people.  Yet, they never explain how all of them or the regulators missed all of this as well. 

 

- Didn't Congress approve the increased leverage that Fannie Mae and Freddie Mac started using a few years ago? 

- Didn't they also approve the merger of banks and investment companies? 

- They also created the precedent a decade ago by approving the merger of banks and insurance companies...remember Citibank and Travellers merging? 

- Why didn't Congress enact any legislation preventing 100% or 110% mortgage financing back when Angelo Mozillo was sitting on CNBC talking about it?

 

This era's Milken or LTCM will be AIG & Madoff!  Cheers!

[ExpectedValue]

Bonuses should only be given out if the business is profitable. In this case, it clearly is not.

[JAllen]

I wish they were more concerned with the imminent P&C losses from them writing Florida homeowner's policies way/$3,000 cheaper than everyone else among other travesties that wouldn't surprise me.

 

They and the public are up in arms about $150M when it's a ~trillion dollar company and they own 80% of it!  Shouldn't they be more concerned with the ongoing operations (or at least mention them every once in a while?!?!?

 

Why wasn't AIG put into runoff the day after they were initially bailed out?

[ExpectedValue]

I wish they were more concerned with the imminent P&C losses from them writing Florida homeowner's policies way/$3,000 cheaper than everyone else among other travesties that wouldn't surprise me.

 

They and the public are up in arms about $150M when it's a ~trillion dollar company and they own 80% of it!  Shouldn't they be more concerned with the ongoing operations (or at least mention them every once in a while?!?!?

 

Why wasn't AIG put into runoff the day after they were initially bailed out?

 

Why would a tax payer want $160M of their money go to pay bonuses to the group who nearly crashed the financial system? It's their money that's bailing out the company, they should have some say in the matter.

 

[Guest ericopoly]

Bonuses should only be given out if the business is profitable. In this case, it clearly is not.

 

 

So if GenRe had blown up then the managers as See's Candies don't deserve a bonus?

 

[ExpectedValue]

Bonuses should only be given out if the business is profitable. In this case, it clearly is not.

 

 

So if GenRe had blown up then the managers as See's Candies don't deserve a bonus?

 

 

Would Berkshire Hathaway be 80% taxpayer owned? If so, it would be the taxpayer's decisions, as in that case, they are the true owners of the business (not the executives).

 

Executive compensation should be something controlled by shareholders -- read Icahn's speeches on this issue if you feel otherwise.

 

 

[Parsad]

I have no problem with Congress trying to do anything to get the bonuses back.  The U.S. government owns it, and they should treat it like they are the owner.  I have a problem with the moral outrage that they show, in particular the shellacking Liddy took, when he's working for peanuts to turn this thing around after being brought in specifically to do so.  How about each Congressman take a pay cut for missing the boat too, as well as Chris Cox, Alan Greenspan, Hank Paulson, Ben Bernanke, Sheila Bair, etc. I believe the taxpayers pay their salaries as well.  What about Bush & Cheney?  Cheers!

[Uccmal]

I see nothing wrong with what congress is doing in this case.  They are doing their best to correct an earlier oversight.  

 

If AIG had gone bankrupt then all of the bonus receivers would be out of a job, with no severance, no bonus, and no prospect of a job for the foreseeable future in the financial services industry.  Buggers should be grateful to have a 6 figure salary right now.  

 

I for one dont believe that anyone is indispensible to an operation.

 

You can be assurred that the rank and file at AIG have been taking hits to their perks such as free coffee, raises etc.  You can also be sure that all of their workloads have risen due to hiring freezes.  No one in any organization receiving government bailout money should be getting a bonus.  

 

I for one think the company should have been put into runoff, the same as Lehman Bros, rather than being bailed out.  Then a proper house cleaning could have been done and the pain contained, without this ongoing bullshit, and perpetual begging at the government coffers.  

 

Interview of former senior CDS department person from AIG at ORH:

Q: What is your greatest accomplishment in your former job?

A: Well, We sold so many bad risks that we destroyed a 200 Billion dollar company over a 3 year period.   :P

 

[Uccmal]

I agree that Liddy is getting a bum rap.  I am surprise he didn't just say:

 

F-u, I am doing this to help out the good old USA.  You, either want my help, or you dont. 

 

He should have shunted it back to Congress and said:  You guys bought the company, not me.

 

 

[JAllen]

I wish they were more concerned with the imminent P&C losses from them writing Florida homeowner's policies way/$3,000 cheaper than everyone else among other travesties that wouldn't surprise me.

 

They and the public are up in arms about $150M when it's a ~trillion dollar company and they own 80% of it!  Shouldn't they be more concerned with the ongoing operations (or at least mention them every once in a while?!?!?

 

Why wasn't AIG put into runoff the day after they were initially bailed out?

 

Why would a tax payer want $160M of their money go to pay bonuses to the group who nearly crashed the financial system? It's their money that's bailing out the company, they should have some say in the matter.

 

 

I'm not saying that they deserve bonuses.  I just wished someone might mention the current activities of the business which dwarf the bonuses in importance and provide a much much much larger threat to the wallet of American Taxpayers if the future losses are being increased by AIG writing policies at $.30.

 

 

[Guest ericopoly]

Bonuses should only be given out if the business is profitable. In this case, it clearly is not.

 

 

So if GenRe had blown up then the managers as See's Candies don't deserve a bonus?

 

 

Would Berkshire Hathaway be 80% taxpayer owned? If so, it would be the taxpayer's decisions, as in that case, they are the true owners of the business (not the executives).

 

Executive compensation should be something controlled by shareholders -- read Icahn's speeches on this issue if you feel otherwise.

 

 

 

 

 

Thing is, it's got nothing to do with percentage of ownership.

 

Is Wells Fargo 80% owned by taxpayers?  No, it isn't.  So why does it also apply to them?

 

People seem to forget that this wasn't a bailout of the companies, but rather a bailout of everyone (averting a systemic collapse).  I can see Buffett's point about shipbuilders in WWII -- they made millions in profits from taxpayer dollars, but we needed them to win the war.

 

 

 

The bill would impose a 90 per cent tax on bonuses given to employees with family incomes above $250,000 (U.S.) at American International Group and other companies that have received at least $5-billion in government bailout money.

 

[Uccmal]

I can see Buffett's point about shipbuilders in WWII -- they made millions in profits from taxpayer dollars, but we needed them to win the war.

 

Yes but, you dont need the individuals or AIG to win the war.  You only need to clean the mess up in an orderly fashion. 

 

A better analogy would be the Exxon Valdez, where uncounted volunteers, and some clean up companies (externally provided and payed for by Exxon's insurers), did the dirty work while Exxon staff stood by, or in one case were fired and CHARGED for negligence.

 

Using the analogy of war... perhaps the AIG executives should be charged with Treason instead of getting bonuses.

[ExpectedValue]

"Thing is, it's got nothing to do with percentage of ownership.

 

Is Wells Fargo 80% owned by taxpayers?  No, it isn't.  So why does it also apply to them?"

 

 

They don't have to keep the money that was given to them, they can pay it back and those restrictions would be lifted. If they didn't need the money in the first place, they should be able to pay it back rather promptly.

[Guest ericopoly]

I can see Buffett's point about shipbuilders in WWII -- they made millions in profits from taxpayer dollars, but we needed them to win the war.

 

Yes but, you dont need the individuals or AIG to win the war.  You only need to clean the mess up in an orderly fashion. 

 

A better analogy would be the Exxon Valdez, where uncounted volunteers, and some clean up companies (externally provided and payed for by Exxon's insurers), did the dirty work while Exxon staff stood by, or in one case were fired and CHARGED for negligence.

 

Using the analogy of war... perhaps the AIG executives should be charged with Treason instead of getting bonuses.

 

 

This sounds more like the Stalin method of war -- just shoot all the officers in a great purge.

 

My method of war is to fire the ones responsible for the disaster but continue to offer incentive/retention bonuses to the executives that are outperforming.  Merit based pay, in other words.

[Guest ericopoly]

"Thing is, it's got nothing to do with percentage of ownership.

 

Is Wells Fargo 80% owned by taxpayers?  No, it isn't.  So why does it also apply to them?"

 

 

They don't have to keep the money that was given to them, they can pay it back and those restrictions would be lifted. If they didn't need the money in the first place, they should be able to pay it back rather promptly.

 

 

 

I don't think I would want to do business with anyone that can add restrictions to a deal months after it was struck.

 

Would you treat me that way if I had taken a personal loan from you?  Is that your ethics?

[ericd1]

I find it difficult to believe the derivatives were so specialized that "managing them" was required. Another firm, or new employees could have been "managed" the run-off.  The Fed could have hired Buffett, he has experience doing just that!

 

Am I missing something?

 

 

[ExpectedValue]

"Thing is, it's got nothing to do with percentage of ownership.

 

Is Wells Fargo 80% owned by taxpayers?  No, it isn't.  So why does it also apply to them?"

 

 

They don't have to keep the money that was given to them, they can pay it back and those restrictions would be lifted. If they didn't need the money in the first place, they should be able to pay it back rather promptly.

 

 

 

I don't think I would want to do business with anyone that can add restrictions to a deal months after it was struck.

 

Would you treat me that way if I had taken a personal loan from you?  Is that your ethics?

 

Banks depend on confidence. If confidence dries up they're in no position to bargain.

[Guest ericopoly]

They don't have to keep the money that was given to them, they can pay it back and those restrictions would be lifted. If they didn't need the money in the first place, they should be able to pay it back rather promptly.

 

The whole point of giving a company like Wells Fargo money was to encourage them to lend.  They claim to have increased their lending by about $80b because of the new TARP capital.

 

So, you say they can just give it back right?  How?  Are they going to force their customers who borrowed money to return it to them?

 

This is outrageous.  A deal is a deal.

 

[Guest ericopoly]

"Thing is, it's got nothing to do with percentage of ownership.

 

Is Wells Fargo 80% owned by taxpayers?  No, it isn't.  So why does it also apply to them?"

 

 

They don't have to keep the money that was given to them, they can pay it back and those restrictions would be lifted. If they didn't need the money in the first place, they should be able to pay it back rather promptly.

 

 

 

I don't think I would want to do business with anyone that can add restrictions to a deal months after it was struck.

 

Would you treat me that way if I had taken a personal loan from you?  Is that your ethics?

 

Banks depend on confidence. If confidence dries up they're in no position to bargain.

 

 

So people are confident today now that this bill has passed?  Who is more confident?  Barney Frank's re-election manager?

 

[ExpectedValue]

http://www.grabup.com/uploads/e56e5da069cf8d180061b1a0cc3e936a.png?direct

 

judging from the TED spread, yes, there is more confidence.

[Guest ericopoly]

http://www.grabup.com/uploads/e56e5da069cf8d180061b1a0cc3e936a.png?direct

 

judging from the TED spread, yes, there is more confidence.

 

 

I can see the TED spread narrowed right after the big bailouts.

 

It didn't spike upwards as a result of AIG's bonuses.

 

So what is your point?

 

 

 

[Guest dealraker]

I love watching Larry Kudlow say, "They are going to run all that talent off and who then will run the business?"

 

Exactly what "talent" is this manic/depressive man talking about?

 

 

[benhacker]

I'm with Eric 100% on this.

 

Are the bonuses to AIGFP personal crazy?  Yes.  Should they be refunded or have been stopped... I'd definately lean to 'yes'.

 

Does this Bill cause more than $180m in collateral damage. YES.  Think about this, they enacted legislation in the tax code to address a very tiny issue.

 

Seems insane.  If we want to change the landscape of banking forever, that's fine, but you are going to have to acknoledge that some little stuff is going to slip through teh cracks.  $180m is little stuff, there are bigger fish to fry.

 

In the end, I think this won't do horrible things, but the principle is getting scary, the government is making pretty fast reactionary moves to respond to perceived public opinion and this is really not the way a government should be run.

 

I hope we can get out of this funk soon so our country doesn't go down the drain... tired of seeing so much irrationality at all levels. :(

 

Ben