AIG Bonus Mess

[SubGod22]

I noticed the House has passed an unconstitutional bill to tax the bonuses at 90%. Are they really this stupid or are they just playing to the stupid people who vote and think this is a good idea? Obviously this will never really happen as it's illegal on a few different levels but it is quite irritating.

I found it interesting that PBO doesn't suppose the 90% tax on the bonuses as he said on 60 Minutes yesterday.

"Well, I think that as a general proposition, you don't wanna be passing laws that are just targeting a handful of individuals. You wanna pass laws that have some broad applicability. And as a general proposition, I think you certainly don't wanna use the tax code to punish people," the president replied. "I think that you've got an pretty egregious situation here that people are understandably upset about. And so let's see if there are ways of doing this that are both legal, that are constitutional, that upholds our basic principles of fairness, but don't hamper us from getting the banking system back on track."

Am I reading it wrong or is he basically saying he'd be all for taxing the crap out of people in situations like this in the future?

[SubGod22]

Geithner Seeks More Power

[SubGod22]

New Geithner Plan Will Explode Liabilities

Geithner Plan Certain to Fail

[Maggie]

This is worth reading and I think it speaks for itself…

http://www.nytimes.com/2009/03/25/opinion/25desantis.html?_r=1&pagewanted=1

[RoyalShock]

This is worth reading and I think it speaks for itself…

http://www.nytimes.com/2009/03/25/op...1&pagewanted=1

That is a very interesting read. And on one level he's exactly right and shouldn't be bearing the brunt of public backlash for the bonus debacle.

I admit, though, that I don't feel very sorry for people like Jake DeSantis who, with knowledge of how corrupt the leadership of his company/division were, stood by that company/division, and was gullible enough to count on anything they were being told.

If he received a retention payment (bonus) of $750k after taxes, what must his salary have been prior to agreeing to $1? That doesn't sound like just being overpaid, but grossly overpaid. Here is a guy who is head of a department, within a division, within a company. Far enough removed from the CEO that he's never even met the guy. And he had a compensation package well in excess of $1 million.

If the guy wants to talk about being on the right side of ethics and the American taxpayer, he should have left when it became clear what was going on in his division and that the slavery of the American taxpayer was going to pay his "retention".

I do give him credit for donating all of his retention payment to charity. I doubt very many of his associates would even consider doing that.

Perhaps I'm being harsh, but those are the thoughts that were running through my head after reading his resignation letter.

[SubGod22]

I do think you're being a bit harsh Royal but understand what you're saying.




Congress = Mafia? According to a former Mafia Kingpin, "Congress Just Like Us"

[Maggie]

This is worth reading and I think it speaks for itself…

http://www.nytimes.com/2009/03/25/op...1&pagewanted=1

That is a very interesting read. And on one level he's exactly right and shouldn't be bearing the brunt of public backlash for the bonus debacle.

I admit, though, that I don't feel very sorry for people like Jake DeSantis who, with knowledge of how corrupt the leadership of his company/division were, stood by that company/division, and was gullible enough to count on anything they were being told.

If he received a retention payment (bonus) of $750k after taxes, what must his salary have been prior to agreeing to $1? That doesn't sound like just being overpaid, but grossly overpaid. Here is a guy who is head of a department, within a division, within a company. Far enough removed from the CEO that he's never even met the guy. And he had a compensation package well in excess of $1 million.

If the guy wants to talk about being on the right side of ethics and the American taxpayer, he should have left when it became clear what was going on in his division and that the slavery of the American taxpayer was going to pay his "retention".

I do give him credit for donating all of his retention payment to charity. I doubt very many of his associates would even consider doing that.

Perhaps I'm being harsh, but those are the thoughts that were running through my head after reading his resignation letter.

If you read my prior posts on this subject you are aware that I would never presume to defend some of AIG’s corporate decisions. However, I do think you are being a bit harsh. I’ll take on a couple of your points:

On Base Salary and Bonuses:
Obviously, I don’t know what this man’s base salary was before he agreed to sort of work for “free” (which is not entirely true because thought he was getting a bonus). However, knowing AIG, and a fair amount about the pay structure on Wall Street, I doubt his base salary was substantial.

The base salary of most employees who work in this particular industry are relatively low – so they rely heavily on bonuses that are often based upon personal performance and the performance of the particular unit for which they are employed. The structure of these bonuses varies quite a bit; however, it is very common for the majority of the bonus to be paid in deferred company stock over the course of several years. In other words, it is not all paid in cash. If in fact his unit was profitable, and he had a lot to do with that fact, then what he is “paid” can be said to be “reasonable” as it relates to bottom-line of the company. Now that is not to say that many of these yahoos on Wall Street are not “overpaid” for what they do.

The fact that he never met his new boss:
Putting aside that Liddy recently agreed to take over AIG at the behest of the government, the fact that this man had never met the CEO is not necessarily a reflection of his status within the company. AIG is an enormous company. It owns and fully occupies two skyscrapers in downtown Manhattan; it occupies the majority of a third in Manhattan and a fourth in Jersey City, New Jersey -- alone. To put it in perspective these are buildings that are between 60 and 80 stories high. And this does not include the various satellite offices all over the United States and the world. When I write that AIG is big – I really mean BIG.

On the ethics of the matter:
Given what I have said about AIG’s size and if you take this man at his word that his unit had nothing to do with the credit default swaps, etc. that caused so much trouble this man probably had enough on his own plate to worry about. He would have been focused on making sure his unit was profitable and a benefit to the company. I can’t speak for CEOs of AIG after Greenburg; however, if this guy fell short of that mark under Greenburg (who I am sure he met as Greenburg was extremely hands on) it would have been his head on a plate. The fact that another unit was in trouble or underperforming would have not necessarily have been on his radar.

On the “slavery of the American taxpayer was going to pay his ‘retention’”:
Not for nothing but these bonuses had to have been factored in when our “leaders” in Washington decided to give additional federal funds to AIG. It is perfectly logical to want to keep good people in the company – those that know the culture and are familiar with its structure. The bonuses themselves are a small fraction of the overall cost and if keeping those individuals around helps get AIG back on its feet and me paid back (which would include the bonus money tendered) then it is a good investment. Besides, qualified professionals around here are not exactly flooding AIG with resumes – good help for AIG is not exactly easy to find.

Finally..
I think the larger point this man was trying to make, and one I have made, is correct: It is not possible for him to work effectively in the current environment. As an involuntary shareholder in AIG, this makes me very concerned.

[RoyalShock]

All good points, Maggie.

On the compensation issue, I still think even his is out of line. When people are pulling down those types of packages in a division (which I assume is the financial reporting entity, not the unit) that is about to drown, something is wrong. It's certainly not his fault, but that of his superiors.

On meeting the boss, I concede. Though my point was more that a guy that is at least 3-4 rungs down on the corporate ladder of such a huge entity getting that kind of dough is mind-boggling when you scale it out and realize how many were getting that and a whole lot more.

On ethics, once the jig was up, his loyalty to an insolvent company that was about to be propped up with taxpayer-guaranteed loans, meant disloyalty to the taxpayers. That's just how I view these things. I will cut him some slack on the ethics charge, since that was really directed to Liddy's handling of the retention payments. On that, he's correct.

By "slavery" I'm talking about the federal income tax, which I believe to be enslaving and unconstitutional. That our leaders are using these funds to keep what should be an insolvent company afloat is more of the same big-government ideology. If AIG has to overpay, with the help of us, to keep or lure good people, that's a sign that it needs major restructuring and liquidating; not multi-billion dollar loans that only Washington (not Washington Mutual) would risk approving.

I can appreciate and sympathize with your position, Maggie, being directly affected by what happens to AIG. But as long as Washington bases their decisions on what's good for a few (the employees of AIG and others directly affected) at the expense of everyone, virtually absolving megacorporations from the accountability of free markets, this country will continue its slide toward something that more closely resembles Marxism than free-market capitalism. When was the last time the federal government let go of anything significant once it got its hands on it?

I guess my big-picture point is that I see the US "going to hell in a handbasket" already. That Wall Street was not allowed to suffer the consequences of horrible risk-taking and questionable business practices yet was subsequently bailed out by those who created the environment to make it possible, only makes it that much more obvious.

[Maggie]

Royal,

You have expressed a thoughtful and reasoned opinion and I respect you for at least thinking about this issue. But think I should clarify a couple of points, in no particular order:

I am not directly affected by AIG’s present situation in the sense that I do not work for AIG and have not for about six or seven years. AIG’s impact on me, putting the larger issue of the economy as a whole aside, is really only reflected in two ways: (1) I work for a competitor of AIG and, therefore, my company has benefited to an extent in that it has been able to secure former clients of AIG at a relatively high rate. Keep in mind, this is in a business area that was, is and presumably continues to be very profitable for AIG; and (2) as a taxpayer, ironically enough, I have a stake in the success or failure of AIG. Needless to say, my confidence in the overall management of AIG (and this is not a reflection on Liddy who by all accounts is a very good, honest and smart businessman) is waning.

With regard to compensation: I am not surprised that you are shocked at what some of these people get paid who are seemly very far down the corporate ladder. And, like I previously wrote, I believe that many of these individuals are overpaid (for variety of reasons). I am not willing to say this man’s compensation is “excessive” because I don’t know what value he brings to AIG – and keep in mind he contends that his unit had nothing to do with this mess, which is very possible. However, and I think you will agree – this type of compensation package, after the government through its taxpayers has provided such extensive financial support is highly inappropriate, to state it diplomatically. But I don’t blame this man or Liddy for that – I blame Congress and the Executive Branch. They had the leverage to deal with this issue, and in my judgment the obligation to deal with this issue, before they “loaned” AIG the money. The subsequent retroactive punishment and, indeed extortion, of these individuals by (like you point out) the very same people partially responsible for this mess (who are really seeking to divert attention from their own culpability) is disturbing to say the least.

I missed your point about federal income tax, although I shouldn’t have. In any event, I am not going to get into a discussion with you about constitutionality of the federal income tax – that is a much, much larger issue. Which technically, you may be correct about.

As you probably already know, I agree with you regarding the recent liberal use of taxpayer funds to prop up insolvent businesses. Government involvement in private companies is a very bad idea. Part of me thinks they should have just let AIG go bankrupt, carve up the company and sell its profitable units. But it appears to me bigger issues were at play here - -and those issues have not been honestly presented to the American people.

Given everything taking place, especially the recent actions of our new President and Congress, I have concluded that they are attempting to steer the United States away from a free market system – the implications of which I don’t think the American public seems to fully appreciate.

[RoyalShock]

I can pretty much agree with everything you just said.

I guess the former employee's letter just put a number of things in perspective for me. I don't blame him for this mess. And while he wasn't looking for sympathy I can see where a lot of people who read that might sympathize with him. I don't for the reasons I stated.

For some reason I thought you still had some direct financial tie, like stock holdings, to AIG. I apologize for making that association.

[Maggie]

Thankfully, I don’t have a “direct” financial stake in AIG other than my tax dollars – which is scary enough.

I understand where you are coming from and I respect your position. However, I feel there is another side to this story that gets lost in all the rhetoric. There appears to be some disconnect between what happens on Wall Street and, I hate to use the term, Main Street. And this leads to knee jerk reactions and an abuse of populist sentiment by our politicians – which, in turn will lead to bad policy.

Don’t get me wrong – I don’t feel sympathy for this now former employee of AIG personally or professionally (actually it sort of irked me that he mentioned working for $1 as if it was a sacrifice while at the same time he expected a large bonus – break out the violins). However, at least this fellow seems to have had the foresight to save a little money and live, from what I could gather, relatively within his means – which is far more than I can say about a great many people in my neck of the woods. What most, and yes I can generalize in this case, of these people on Wall Street fail to realize is that a lot more people are a lot worse off then they are – for reasons beyond their control. Wall Street people can cry about losing their jobs but for the most part they only have themselves to blame for the poor financial situation in which they now find themselves. I don’t think many of them have any clue what personal responsibility means.

I guess I get frustrated when it is deemed necessary to spend my tax dollars to prop up a private company and I don’t see anyone in government taking actual responsibility for the long term health of the “investment”. If the situation was so dire that it necessitated this action (a decision which I question) – then do it right. Let Liddy and the rest of them do their jobs and then get the heck out.

Furthermore, stop using it as a pretext for an additional expansion of the federal government’s power. The last thing this Country needs is the corrupt half-wits in Congress trying to make business decisions for private companies. Talk about letting the fox into the hen house.

[SubGod22]

Beck Hammers Connecticut AG: 'You are an insult to George Washington'

[Maggie]

A new gem from Congress…the Pay for Performance Act of 2009:

http://www.washingtonexaminer.com/politics/Beyond-AIG-A-Bill-to-let-Big-Government-Set-Your-Salary-42158597.html

I found this quote to be particularly “amusing”..

Rep. Alan Grayson, the Florida Democrat who wrote the bill, told me its basic message is "you should not get rich off public money, and you should not get rich off of abject failure."

Unless, of course, you are a member of the House Financial Services Committee.

[SubGod22]

A new gem from Congress…the Pay for Performance Act of 2009:

http://www.washingtonexaminer.com/politics/Beyond-AIG-A-Bill-to-let-Big-Government-Set-Your-Salary-42158597.html

I found this quote to be particularly “amusing”..

Rep. Alan Grayson, the Florida Democrat who wrote the bill, told me its basic message is "you should not get rich off public money, and you should not get rich off of abject failure."

Unless, of course, you are a member of the House Financial Services Committee.

:yes:

[SubGod22]

Like AIG, Congress Gives Bonuses in Tough Times. Not that this should really surprise anyone...