Profile picture for MRice20HD

AIG Bonuses: It's a CONTRACT!

Why is it that Fannie and Freddie Execs. (Barney Franks' puppets) get no flack for taking big bonuses when they are in the same position as AIG?  Don't you think that Congress should have read the bill before passing it (all Dems voted for it)?  Just more incompetent people trying to pass the buck and now they have to get the public riled so that the attention is diverted away from them for spending our money stupidly.  Now they want to impose a special tax rate for AIG bonuses.  Give me a break already.  Too bad Geitner is spending all his time testifying and not paying attention to the economy.  Oh well, I guess we can keep printing money and I can keep my money in Gold a little longer.  Keep up the good work Congress!  
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March 19 2009 - US
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Profile picture for Pasadenan
Who cares if it is a contract?  When they file bankruptsy, those contracts won't mean very much.  And if they fold?  You can't have a contract with a non-existant entity.

What good does it do to have a "lifetime warranty" if the company that offers it is out of business in one year?  Whose lifetime?  The lifetime of the company?


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March 19 2009
Profile picture for Pasadenan
Besides, aren't those "bonuses" based on "performance"?  And if one corrects the books for the actual investments and returns, wasn't the performance negative?  Thus shouldn't the bonuses be null based on the actual contract?

Why is the media even mentioning the contracts?  What good is it for us to know there is a contract if they aren't going to give us copies of the actual contract wording to review?
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March 19 2009
Profile picture for MRice20HD
Because Congress okayed it when money was being doled out.  Congress approved it and it is a binding contract.  I don't agree they should be giving any bonuses based on performance and I surely agree that if the US Taxpayers didn't give them a handout they wouldn't see a paycheck, much less a bonus, but if my company lost money last year it's up to the BOD to decide if I get a bonus or not regardless of my performance or anybody else's.  I'm not exactly sure what AIG bases performance on individually.  I think it's the failure of Congress that has allowed this and now they are "outraged" at the fact they overlooked AIG Bonuses.  They were "outraged" to find out they spent $400,000 on a golf trip.  Eventually, the "outrage" will subside and will be forgotten until they are "outraged" again.  I guess what I'm trying to say is when the treasury owns 80% of AIG, this is what you get.  They don't have a clue of how to handle it.   
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March 19 2009
Profile picture for Lady Chattel
Didn't those Mo-fos have a "contract" to perform their jobs well for the better of the company and since they didn't I suppose those same people caused this turmoil ad they should not get a bonus.  Kudos to congress for F-ing this all up.......but hey, the executives figured they could get away with it, can you blame them for doing it.
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March 19 2009
Profile picture for supercub
"Didn't those Mo-fos have a "contract" to perform their jobs well for the better of the company" 

Yes, I'm sure they did. What they don't tell you is they're getting bonus's for cleaning up the mess they created in the first place.

And why is everyone "outraged"? When you hire the foxes that ate the chickens and then, put them in charge of the hen house, what the hell do you expect?

The new government of change is quickly turning into the biggest circle jerk this country has ever had!
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March 19 2009
Profile picture for mrfnuts
The new government of change is quickly turning into the biggest circle jerk this country has ever had!

lmfao!

I could not have said it better myself.

btw, did Obama slip up in his 'town hall meeting' yesterday?

He actually used the word 'housing bubble', then sputtered and stumbled after he said it -- so much for the great orator.

It really sounded like a gaff, especially when you consider the fact that mainstream media and leadership of both parties never use that term.  It would ruin the propaganda they've been feeding us for months that's being used to justify any and every bailout.


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March 19 2009
Profile picture for MRice20HD

"We want our money back and we want our money back now for the taxpayers," said House Speaker Nancy Pelosi, D-Calif.

The vote was 328-93.

In all, 243 Democrats and 85 Republicans voted "yes" on the bill. It was opposed by six Democrats and 87 Republicans.

The margin of victory came despite sharp Republican attacks calling the legislation a legally questionable ploy to paper over Obama administration missteps.

It sounds like a Circuit City customer after finding out their Ipod Touch didn't work.  Sorry, no returns.

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March 19 2009
Profile picture for MRice20HD
I hope Fannie and Freddie are included in the bill.
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March 19 2009
Profile picture for supercub
I believe he did say THAT WORD.

"The problem was, companies like AIG, they'd sell, like, 50 policies without having the money to cover the possibility that they were all go belly up. So they were way overleveraged, overextended, just as the banks were way overleveraged and overextended. In some cases, they'd take a dollar worth of assets and they'd loan or use 30 dollars off that one dollar just to make bigger and bigger bets out in the financial system. These started getting into trillions of dollars. And as long as nobody was checking to see if anybody was going to be able to pay back these mortgages and as long as housing prices were appreciating, and this housing bubble was continuing, everybody was making a lot of money. So nobody wanted to check. And there was no serious regulation to say hold on, stop a minute, you guys are getting way overextended. You're putting the entire financial system at risk."

I'm sure he was wishing then that he had a teleporter!!!

Another revealing statement earlier in his town hall blather;

"We don't have direct authority -- the White House does not have direct authority over these regulators. These regulators are supposed to be somewhat independent from politics.

It seems to me, there have been a parade to the microphone by Obama and his ilk in congress berating Bush for NOT regulating these banks etc, and the loudest of course is Barney Frank...

"Problems? What problems, I don't see any problems with Fanie and Fred."

And the jerking goes on, and on.
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March 19 2009
Profile picture for BMFPitt

It should be (and is) absolutely forbidden for Congress to break a valid and legal contract.

But it should also be absolutely forbidden for Congress to have bailed them out in the first place, and the contracts would have been worthless anyway, so they can all die in a fire for all I care.

Good to see Obama accidentally admit that the bubble was the problem.  Now if he'd only stop trying to reinflate it.

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March 19 2009
Profile picture for MRice20HD
But it should also be absolutely forbidden for Congress to have bailed them out in the first place, and the contracts would have been worthless anyway, so they can all die in a fire for all I care.

Which brings us to the fact that Congress screwed up, again.  It seems to be an ongoing thing with them when Obama sends a thrill up their leg.
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March 19 2009
Profile picture for BMFPitt
You do realize that AIG was bailed out months before the election, right?
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March 19 2009
Besides, aren't those "bonuses" based on "performance"?  And if one corrects the books for the actual investments and returns, wasn't the performance negative?  Thus shouldn't the bonuses be null based on the actual contract?

No. They are retention bonuses, not performance. Everyone at aig knows their job is ending, and have no motive to stay at the company, and want to invest their time into finding a new job. The purpose of the bonus is to keep them focused on doing what benefits the company while they are there, and to stay there until their compay is split apart and sold in pieces. Without the bonuses, they leave.

These people getting the bonuses are the ones needed to fix the problem. If you have a contract to pay bonuses, and you dont, your other employees will see that you dont pay as agreed, and will bail on the company, completing the blow up of aig, and losing everything we have already put in.

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March 19 2009
Profile picture for Pasadenan
In that case, we should let them all leave; with all the people laid off in the financial sector I'm sure there would be thousands of applications to replace them, with people that will do the job 10 times as well for 1/10 of the cost.

We just need to make sure they don't hire any of those "loan officers" that have demonstrated they can't do simple math problems.

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March 19 2009
Profile picture for Pasadenan
Besides, if it is as you say that they will be looking for a new position, why should they be paid to look for the position on company time?
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March 19 2009
Profile picture for Mr Caveat
its not a "performance bonus" its a "retention bonus" because we cant have all the execs jumping ship... there are "soo many" better gigs out there... not mentioning that the 3rd highest sector for unemployment happens to be banking/financials...so obviously now is the time to start looking for work... i know i want to.

next, the companies that are in conservatorship, ie fannie, freddie, AIG, all the failed FDIC banks that are not sold... whatever else... these banks are FAILED, ie the contracts were with a company that is living off of gift money from the tax payers... they are not in a position to offer retention bonuses

last, you dont deserve the bonus... period. you suck at your job.

same goes for the banks that havent failed, but we have less sayso over their operations vs the nationalized ones
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March 20 2009
There are too many inherent dangers with the congressional knee jerk reaction to the pay, bonuses and excessive taxation. I'm not happy about the bonuses but I am more angry at congress and the administration for allowing it to get where it is and blaming everybody else. No wonder our confidence level is so low. If congress and the adinistration wanted to do something, they'd vote a straight 10% pay cut for themselves. Why not a little performance adjustment for congress. I mean they wrote the bill. They didn't read it, but they wrote it.
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March 20 2009
Profile picture for Lady Chattel
Congress doesn't write bills.....the lobbyists do, not quite the shocker when you look at it in that light.   When they let go of the reigns on the industry and let them run amuck this is what you got, I agree with you jkonstant: if they had all done their jobs from the get-go this would be a non issue.  And why give a crap about retaining the same people who brought this on and with so many layoffs I doubt anyone will be eager to jump ship even from a sinking one. 

I doubt any of them are making only a mere 5 zeros that they desperately need those bonuses to keep afloat, it is to pay for the house in the Hamptons.  No need for the American taxpayer to pay for that. 
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March 20 2009
Profile picture for MRice20HD
You do realize that AIG was bailed out months before the election, right?

You do realize they have been given more money since and Congress has been there the whole time.
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March 20 2009
In that case, we should let them all leave; with all the people laid off in the financial sector I'm sure there would be thousands of applications to replace them, with people that will do the job 10 times as well for 1/10 of the cost.

My assumption is that you are right. I would think that the job could be done much better and cheaper than currently, and we should let them all leave, and there would be thousands to replace them, but I dont know a thing about that sector nor the twisted math they used.

But  Edward Liddy, who was placed by the government as CEO after the bailout to wind down aig in a organized fashion to prevent a complete failure of our system does know about this, and being that he agreed to take $1 salary, and has a great background with these sort of companies makes me believe him when he says they are needed. This default swap bs was very creative, and bringing someone else in would take months just to figure out where they are, let alone start working on the problem.
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March 20 2009
I doubt any of them are making only a mere 5 zeros that they desperately need those bonuses to keep afloat, it is to pay for the house in the Hamptons.  No need for the American taxpayer to pay for that. 

We dont need to pay for their house in the Hamptons, but we do need to pay for their services. If they are worth a million to help us get our billions back, they should get it. Even Eduard Liddy said that the bonuses werent written well, but taking them away after agreeing to them is illegal and wrong. If they went bankrupt, the execs wouldnt have gotten the bonuses, but wouldnt have had to perform on their contracts either.

In the end, what someone is paid should be based on what they are worth. The real failure is that the ceo before Liddy didnt get rid of these idiots, before they lost money. But if they are reducing the liabilities considerably right now, they are worth the couple mil.
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March 20 2009
Besides, if it is as you say that they will be looking for a new position, why should they be paid to look for the position on company time?

That is the point. If you pay them a retention bonus to focus on their current job, they wont look for another. If they dont accomplish anything, they dont get the bonus.
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March 20 2009
 these banks are FAILED, ie the contracts were with a company that is living off of gift money from the tax payers... they are not in a position to offer retention bonuses

its not gift money. Its investment money. The fed got stock for aig. Though it was a poor investment, it is still an investment, and the company needs to be treated like all the others. If we have a problem, we change out the ceo. It is up to the ceo to decide what is best. Otherwise, let Liddy step aside, and Barney Frank can have his turn. (im sure Barney would run from that thought)
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March 20 2009
Profile picture for Pasadenan
Why are they going to work harder?  It is not their company.  You already stated the bonus have nothing to do with performance.  They will get their $15k per hour regardless of what they are doing when on the company clock.  I can't see that it makes a bit of difference to any of them, especially if all they want is the money.
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March 20 2009
Profile picture for mrfnuts
My assumption is that you are right. I would think that the job couldbe done much better and cheaper than currently, and we should let themall leave, and there would be thousands to replace them, but I dontknow a thing about that sector nor the twisted math they used.

If as you admit, you do not know a thing about these, then why the assumption that they are the ones needed for the job?  And for that matter why the assumption that they needed to be bailed out?  And why the assumption that these derivatives are the lynch pen our our economy?

Look, there are respected economists out there who have an entirely different opinion on this matter that is contrary to what the lapdog media is parroting from the politicians who are parroting what their lobbyists (which have the most to gain) have said.

Contrary to the propaganda, you do realize that that there is a market for these toxic assets don't you?  Just not at the prices the welfare recipients in suits want.

You ever heard of 'junk bonds' ?  They were popular a while back.  You know why people bought 'junk' ?

For the yield.  You know why the yield was so attractive?  Because the prices of the bonds were cheap.  (i.e. a face value $1000 bond paying 10% interest, but instead of being sold at $1000 is sold at $500, thus, a yield of 20%.  Factor in the default rate of 20%, and the return is still 16%).

At any rate... EVERYTHING has a market if the price is right.  Price is what helps make supply and demand meet.  Government intervention is preventing the PRICE DISCOVERY process, and until it is allowed to occur, there will NEVER be a market for these toxic assets
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March 21 2009
The debate on the merits of bonuese, bailouts, etc can go on and on, but the reality is congress is to blame. These are the folks we elect in our districts and continue to re-elect because we listen to their rhetoric and believe their finger pointing. We need to take some responsibility and toss out the incumbents on based on their national records and policies. As long as Americans vote along party lines, racial lines, religious lines, environmental lines or any other single minded line the incumbents will be left running the show. Unfortunately we don't think bigger picture. Now all these folks get to go back home and blame treasury for the AIG mess and we'll believe them because they voted for the punishment tax. It is a bad tax with unfair broader effects that also sets a dangerous precedence. Meanwhile while we're all glued to the news and blogs everybody misses the Fed borrowing from the treasury. Or was it the other way around? I just don't know anymore. Money we don't have, that is going to be printed and cause inflationary pressures. We are not alone in this. We are going to be competing with the rest of the world for loans and you can be sure the few remaining lender nations will be getting better terms for their money and up, up, up go the interest rates.
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March 21 2009
Profile picture for sunnyview
I think the government needed to ask some more questions before they gave AIG the money. AIG obviously was "too big to fail" but they have no respect for the government or for good business practice. It makes me angry to think that as a citizen I get to pay for that.
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March 21 2009
I agree, but the the bonus system is common practice in the corporate world in large part to the corporate tax benefits of paying people this way. This is again another reason that congress is to blame. All congress really needs to do is change the way it does business within it's own rank and file but it cannot when many individuals receive both direct and indirect benefits from the corporations and Americans ignore their behavior. Don't blame the corporations or their lobbyists when the government and we the consituents allow them to reamain entrenched in the corruption. Why does nobody scream about Obama's campaign receiving more than $100K from  AIG at a time that AIG was falling apart and yes, McCain received in excess of $50K. We were so desperate for change that we threw out the wrong people. We left too many sitting leaders, chairpersons and their committee cronies who got us here and are likely to patch our real problems rather than properly secure proper change. A very simple solution that would solve our long term problems would be to cut spending, better control waste, lose the earmarks, and fund new projects and programs with real money rather than speculative accounting methods. Just look at the unbelieveable difference between the CBO and OMB numbers for the Obama budget proposal.
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March 21 2009
Profile picture for mrfnuts
...AIG obviously was "too big to fail" ...

Why do you believe that to be so?

...but they have no respect for the government or for good business practice...

Then perhaps they should fail, no?

This excuse about 'too big to fail' warps the business model.  No longer is it about being profitable, winning customers and avoiding unnecessary risk, it becomes a business model of recklessly expanding so that they can be awarded the title 'too big to fail', and then be guaranteed 'profits' (I use that term loosely) from the taxpayer.

We would be fine if AIG failed, just a few folks would take a nice little hit
Goldman
JP Morgan Chase
and a whole bunch of other counter parties (not even American) that are trying their damnedest to remain anonymous. 

Make no mistake, AIG is being bailed out because those on the other side of the contract stand to be 'not so big to fail' anymore if AIG fails.  Honestly, it's not a bad thing.  It makes way for smaller companies to get a little larger.

Read up on: Creative Destruction -- it is a good thing, you just have to see the bigger picture to realize it.

Meanwhile while we're all glued to the news and blogs everybody missesthe Fed borrowing from the treasury. Or was it the other way around?

Not all of us missed that one...and it was actually the Treasury borrowing from the FED, as usual, but, what makes this case special is the FED bought the notes outright, $300 billion worth, and without the offsetting debit entry on the books -- this my friends is the 'quantitative easing' we hear about, which is AKA 'running the printing presses'.

I also find it troubling that the treasury pays interest on these bonds that are paid for by money that is created out of thin air...as should you.

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March 21 2009
Profile picture for AAPL

I agree with Titan on most of his statements.  If we think back years ago to the whole United Way outrage on salaries...  if you want to run a fortune 500 company you have to pay the scale and fringes.. By taking away the ability of these companies to pay bonuses you have just removed much of their ability to recruit the talent required to turn things around.  I'm not by any means saying the system isn't flawed but when the gov. steps in and ties a companies hands they might as well lock the doors while their at it.

There are good reasons you don't have 100k a year people running these companies albeit some of the reasons are what got them into this mess BUT the thought in the back of my mind is that the entire charade was designed  from the beginning with a fair amount of predictability as to the ultimate outcome.

Now if you'll all excuse me while I go short sell all the companies that received over 5B in TARP funds.

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March 21 2009
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Be A Good Neighbor

Zillow Advice depends on each member to keep it a safe, fun, and positive place. If you see abuse, flag it. More on our Good Neighbor Policy.