Congress Passes Bill To Tax AIG Bonuses!

[Uccmal]

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

 

Yeah well, Seems to me any agency with basic computing skills and people trained in forensic accounting could clean up the mess pretty rapidly.  Just ask Microsoft when the DOJ subpoened all their communications.  Say, what about the FDIC, or the NAIC.  Dont they have those skills that they put to use on a continuous basis?

[Uccmal]

Well, Ben, It is probably time for all governments to stop reacting and start thinking about long term planning.  They have mostly stopped the bleeding, and kept the patient concious.  Now they should be looking at long terms solutions.   

 

The problem is that everyone wants to be seen to be doing something when perhaps the best thing is to do nothing at all for awhile. 

[Zorrofan]

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

 

I love to say to Larry - "lets see, these folks ran the business so well it needs $180 BILLION in government bailouts to stay operating. You call that TALENT?" IMHO the shareholders should demand they go.....

 

my $0.02

 

cheers

Zorro

[Guest ericopoly]

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?

 

 

How are you going to find the best candidates to replace them if you refuse to offer any kind of incentive based pay?

 

I am actually impressed that Barney Frank didn't amend the bill to require executives to punch in and punch out everyday to make sure that taxpayers can see these guys are putting in a 40 hour week.  Not!  They have done a good job of ensuring that nobody will put in more than 40 hours, that's for sure.  I hate work environments like that -- the guy sitting in the next cubicle surfing the web all day gets the same pay as the guy busting his ass.  Welcome to the government... oh wait, it's a shame that Government Employees Insurance Corporation  (GEICO) has already been taken, because it would be so fitting a name for the new AIG.

 

 

 

[Guest ericopoly]

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

 

I love to say to Larry - "lets see, these folks ran the business so well it needs $180 BILLION in government bailouts to stay operating. You call that TALENT?" IMHO the shareholders should demand they go.....

 

my $0.02

 

cheers

Zorro

 

 

What the hell?  Why should we demand Wells Fargo executives be let go?  The bill covers all firms who took more than $5b in capital -- and that's Wells Fargo.

 

 

[Guest ericopoly]

I'd have to say, maybe the Stalin comment was a bit rash -- I think the French Revolution sounds more appropriate.  Let's just drag out all high paid executives and cut their heads off.  This is a populist mob.

[Partner24]

Frankly, yes it might sound a little bit like the French revolution. French people were tired that their royalties was being used to compensate the very few. I'm not saying that it is the case, but we face some huge deficits and us and our children will ultimately have to pay this debt and pay million of bonuses to now federal employees is shocking.

 

Shareholders can decide what they want and just rubber stamping abusing compensation packages if they want, but now some troubled companies have to deal with taxpayers money. If they complain about taxpayers being more sharp about expenses, I have a suggestion for them: why not find private capital to save you instead?

 

You would not have this very long thread if some companies wouldn't have asked for taxpayers money to survive.

 

 

 

 

 

[Guest ericopoly]

You would not have this very long thread if some companies wouldn't have asked for taxpayers money to survive.

 

 

Yes, but they didn't ask. 

 

Wells Fargo should have just said, F**k you, I'm not going to help you (America) out.

 

 

http://albuquerque.bizjournals.com/albuquerque/stories/2009/03/16/daily12.html?ana=yfcpc

 

 

Kovacevich also expanded on earlier news reports that indicated he had initially resisted taking $25 billion in a federal direct-investment under the Troubled Asset Relief Program. He said he opposed the program’s structure requiring Wells and other major banks to take the money, saying that regulators hoped requiring all banks to take the money would lift public perception on the troubled banks to the level of the nation’s healthiest banks. Kovacevich feared the reputation of the nation’s strongest banks would sink.

 

 

[Guest ericopoly]

Kovacevich essentially says that they took the money to help out the country, not the other way around.

 

Now do you guys get it?  Somebody helps you out and you turn around and call them a bastard and that they don't deserve a bonus?

 

I am disgusted.

[Guest ericopoly]

I wish too that the American public better understood that AIG's chief executive works for free.

 

No, not really.  He makes $1 per year salary, and no bonus.

 

Even a panhandler makes more than AIG's CEO.

 

That wasn't the headline I saw though.  It doesn't hype, it doesn't outrage, it doesn't sell.

 

[scorpioncapital]

Is it just me or has the reaction to the AIG bonuses resulted in AIG giving back MORE than the actual bonus?

 

- AIG employees to pay back the bonuses.

- Congress to tax 90% of the bonuses.

- Geithner to deduct it from the $30 billion loan installment

 

Are they getting back 2-3x the bonus amount???

[Guest ericopoly]

Is it just me or has the reaction to the AIG bonuses resulted in AIG giving back MORE than the actual bonus?

 

- AIG employees to pay back the bonuses.

- Congress to tax 90% of the bonuses.

- Geithner to deduct it from the $30 billion loan installment

 

Are they getting back 2-3x the bonus amount???

 

 

That's right, they are trying to punish AIG by making them repay some bailout money (the size of the bonuses) and also withholding some bailout money (again, the size of the bonuses) that they have yet to give AIG.

 

Do you realize how stupid that is? 

 

Punish AIG?

 

Umm... let's really stick it to the people who own AIG right?

 

Umm... wait, no that's the taxpayer.  Oh... I get it, let's really make those 20% minority shareholders pay!!

 

I have a vision of a monk walking along flogging himself in penance -- the monk is the government, the owner of AIG exactly a punishment on himself.

 

It can't get any more bizarre, can it?  Why punish the American public for the bonuses?  What did they do?  And how is it punishment just to repay bailout money back to yourself? 

 

This is about as strange as a shareholder lawsuit (owners suing themselves).

 

Perhaps Buffett should give them a lesson on thinking like owners, now that they hold 80% of the common stock.

 

[Packer16]

Has anyone noticed that a less publicized but much larger payment to AIG's CDS counterparties of hundreds of billions of dollars which then flow to Hedge Funds (speculative CDS buyers)?  This was in yesterday's WSJ.  So you have taxpayer paying off AIG's bad bets to hedge funds (speculative CDS buyers) with no negotiation with CDS purchasers with the CDS being paid off at par.  Once this settles in the bonus issue is going to be a sideshow. 

 

Packer

[ExpectedValue]

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?

 

 

My point is that before the TARP, the confidence behind our banking system was shaken - to the point where they were very susceptible to bear raids. We had Bear Stearns, we had Lehman Brothers, and it's likely that we would have had more. In order to stem that off, we had to lend these companies money because their business models DEPEND upon confidence.

 

This is not your usual value investor situation where you can ignore the lack of confidence and have faith that these companies could thrive without confidence.

 

So Wells Fargo can call these additional restraints asinine and you may think that they're unethical, but that's the price that they are going to have to pay for the confidence that comes with US taxpayers backing them. Because without it, they might not be able to operate. That's the price that comes with being a Bank and having to make sure that every day the public is confident about you.

 

Don't like it? Don't invest in those types of companies.

[Guest ericopoly]

So Wells Fargo can call these additional restraints asinine and you may think that they're unethical, but that's the price that they are going to have to pay for the confidence that comes with US taxpayers backing them. Because without it, they might not be able to operate.

 

You spin this as though the banks might not be able to operate without the capital, so therefore they can kiss your ass.  First off, Wells Fargo didn't need the capital -- but with it they were able to expand their lending and quite possibly contribute to TariqAli still having a job today, depending on who you work for.

 

Do you have a rough idea of how many companies would not be able to operate without banks to lend to them?  Don't they all depend on the confidence of the banking system?  So by your logic the government has the right to heavily tax their executive pay too, to repay the taxpayers for the bailout of the financial system.

 

That's a chain reaction of companies falling like dominoes that was averted with this TARP capital -- so they all owe the taxpayers something.  They were all bailed out, not just the banks.

 

Buffett is right.  This is Pearl Harbor and it isn't time to blame the Navy senior officers, we need to get busy winning the war.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[ExpectedValue]

You spin this as though the banks might not be able to operate without the capital, so therefore they can kiss your ass.  First off, Wells Fargo didn't need the capital -- but with it they were able to expand their lending and quite possibly contribute to TariqAli still having a job today, depending on who you work for.

 

If Wells Fargo didn't need the capital they would have given it back. They wanted to keep it so that they could be better capitalized and possibly lend out to make some more money (nothing wrong with that, that's what a bank is supposed to do). However, if lending really did come to a standstill there would  have been some kind of government program created to put loans out there. Nobody should be thanking Wells Fargo for its lending and thinking that their jobs were saved by it. Their jobs were saved by the American taxpayer's money flooding into banks.

 

Since they (Wells Fargo and other banks) essentially owe their ability to operate due to the taxpayers, they should be OK with taxpayers having some influence over things like compensation.

 

Also, keep in mind that this bill still has to pass in the senate and it's likely that it will be watered down or modified. It's not even a law yet. The fact that this bill focuses on bonuses means that banks may simply have to adjust base-salaries upwards to make up for the reduced bonuses. I doubt this is going to turn into the "Stalinist" / French Revolution scenes that some of you seem to be evoking.

[Uccmal]

Well said Tariq, 

 

Eric, You do know how this works... Roughly speaking:

- last week the press got hold of the bonus story

- Congessmen, Senators etc. got hundreds of thousands of E-mails from a bailout exhausted public, many of whom undoubtably have had their pay frozen, or lost their jobs.

- they reacted - There was no choice!

- They crafted a bill that does minimal economic damage to the individuals involved - a handful might actually still get the untaxed bonus.

 

The public is clearly burnt out from seeing the huge numbers they are going to be paying down for years, expecially with AIG.  I lost count, but that company has been given at least its peak market cap in money so far - More money then they have ever earned in their 100 or 200 years of existence.  So no bonuses - you still get a 250,000 dollar family salary.

 

Populist yes, Symbolic yes, Fair - probably not - but then its not going to be fair when the taxes of all Americans go sky high to pay down this all down - Believe me, as a Canadian, I know how paying back a deficit works. 

 

This sends a very clear message to anyone receiving bailout government money whether they wanted it or not.  IMO that is a good thing. 

 

 

[Zorrofan]

What the hell?  Why should we demand Wells Fargo executives be let go?  The bill covers all firms who took more than $5b in capital -- and that's Wells Fargo.

 

Eric, if Wells Fargo executives cost the company $180 Billion then yes let them go. Otherwise we are using tax dollars to reward poor performance! Why should the executives that ran AIG get huge bonuses when the company needs a taxpayer funded bailout? To call it a reward to retain talent is laughable.

 

cheers

Zorro

[Guest ericopoly]

You spin this as though the banks might not be able to operate without the capital, so therefore they can kiss your ass.  First off, Wells Fargo didn't need the capital -- but with it they were able to expand their lending and quite possibly contribute to TariqAli still having a job today, depending on who you work for.

 

If Wells Fargo didn't need the capital they would have given it back.

 

I heard Barney Frank say that and had to laugh.

 

Suppose you are running a bank and I ask you to take some TARP money in order to stimulate lending.  So you take it, and you lend it out, in good faith.

 

 

Then I later say, well I can pretty much tell you to hop on one foot and if you don't like it then just give the money back. 

 

Clever.

[Guest ericopoly]

What the hell?  Why should we demand Wells Fargo executives be let go?  The bill covers all firms who took more than $5b in capital -- and that's Wells Fargo.

 

Eric, if Wells Fargo executives cost the company $180 Billion then yes let them go. Otherwise we are using tax dollars to reward poor performance!

 

cheers

Zorro

 

They didn't cost their company $180 billion, they stayed away from the exotic finanicial stuff, so why do you want to punish them?

 

That's what I don't understand.  You are out to hang Wells Fargo executives, and your supportive reasoning is that AIG lost $170b.

 

 

[Zorrofan]

No, you are misunderstanding me. I have nothing against Wells Fargo. AIG executives did cost their company $180 billion. Thats why I don't support them getting bonuses. What I said was that IF Wells Fargo execs had done the same thing then I would hold them to the same standard. My whole point was/is that I am against tax dollars paying bonuses for what I consider poor performance.

[Guest ericopoly]

What the hell?  Why should we demand Wells Fargo executives be let go?  The bill covers all firms who took more than $5b in capital -- and that's Wells Fargo.

 

Why should the executives that ran AIG get huge bonuses when the company needs a taxpayer funded bailout? To call it a reward to retain talent is laughable.

 

cheers

Zorro

 

 

Who are the executives that run AIG?  Let's start with the CEO -- his salary is $1.  He doesn't take a bonus.  The buck stops with him.

 

Now, have you ever worked at a big company?  I did.

 

At Microsoft there were divisions with sub-par level of talent.  And then there were strong divisions.  Now, let's say we give them all bonuses and you look at the performance of one division and say, "To retain sub-par level of talent is laughable".

 

That's fine, but there are still strong people at the company -- they don't all work in the division that blew up.

 

It's laughable that they are all considered weak employees.  Do you really believe that?  Seriously?

[Guest ericopoly]

No, you are misunderstanding me. I have nothing against Wells Fargo. AIG executives did cost their company $180 billion. Thats why I don't support them getting bonuses. What I said was that IF Wells Fargo execs had done the same thing then I would hold them to the same standard. My whole point was/is that I am against tax dollars paying bonuses for what I consider poor performance.

 

 

The bill to tax the bonuses IS NOT an anti-AIG bill.

 

It is a bill that treats every executive the same way at EVERY company that took at least $5 billion in TARP money.

 

Wells Fargo took $25 billion.

 

So if you support the bill you are kicking sand at Wells Fargo.

 

That's why I'm so damned mad.

[omagh]

Al,

 

You'll like this tidbit...lots of footdragging in shutting down AIG's FP unit.

http://www.businessweek.com/investing/wall_street_news_blog/archives/2009/03/aig_means_busin.html?chan=top+news_top+news+index+-+temp_news+%2B+analysis

 

Cheers,

-O

 

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.

[T-bone1]

If Wells Fargo didn't need the capital they would have given it back. They wanted to keep it so that they could be better capitalized and possibly lend out to make some more money (nothing wrong with that, that's what a bank is supposed to do). However, if lending really did come to a standstill there would  have been some kind of government program created to put loans out there. Nobody should be thanking Wells Fargo for its lending and thinking that their jobs were saved by it. Their jobs were saved by the American taxpayer's money flooding into banks.

 

Since they (Wells Fargo and other banks) essentially owe their ability to operate due to the taxpayers, they should be OK with taxpayers having some influence over things like compensation.

 

But Wells Fargo doesn't "owe their ability to operate" to the taxpayers. Yes they took TARP money, but they didn't need it or neccesarily want it. You say the government could just create a "program to put loans out there" . . . thats exactly what this is. They give $25 Billion to Wells, and Wells makes loans with it. This makes sense because Wells is a bank and is in the business of making loans! This is exactly the government program you mention.

 

Do you think a better government program would be to have a bunch of incompetant cronies dispense the loans rather than a proffessional bank? Isn't that part of the reason we are in this mess? How exactly do you propose the government make loans in a more effecient manner than coercing Wells to take the money and make the loans?

 

I understand that this is all a little silly . . . congress is grandstanding and it is unlikely a bill will ever be made law (it is still illegal in this country to punitively tax a small group). So this won't actually hurt a company like Wells, but I am a little offended by the suggestion that they deserve their share of the backlash for taking TARP money they didn't want.

 

Liddy is working for $1 a year - less than Buffett makes - so everyone should get off his back.

Wells is taking TARP and lending it because the FED told them it was for the good of the country - they shouldn't be blamed or insulted for this.

 

If anyone has issue with the above two facts, I would be happy to argue them (i.e. arguments that Wells would have entually needed the money or Liddy will be paid on the back end), but please don't act like the pathetic US congress and make grandstanding generalizations like "you took TARP, now you have to pay"

 

end of rant.