39 thoughts on “They Came For AIG Employee Bonuses”
I’m not entirely certain whether the knot in my stomach is from the lack of food intake thus far today, or from this whole fiasco, but I’m willing to bet that it’s the latter.
It also sickens me to read some of the comments I see when I do a search on H.R. 1586, and the sheer glee that some people get from this bill passing the House.
I wish there was a Senate Referendum number for this, so that I could mention it when I write my senators and ask them to vote it down, but a generic “Senate version of H.R. 1586” will have to do for now.
AIG employees became civil servants when they didn’t resign, immediately after the company’s management accepted hundreds of billions of dollars of taxpayers’ money to keep AIG afloat.
I know of no government anywhere where the employees get bonuses for doing their jobs properly. AIG = civil service, ergo no bonuses. You don’t like that idea? Resign, and try working for a living. In that case, you’ll probably do rather poorly; bank employees and real work don’t mix – in fact, they mix almost as badly as government apparatchiks and real work.
AIG employees are lucky not to be hanged. Especially those who actually made the decisions, whose actions are little if any short of treason.
FC, it’s not about AIG. The fact that you think it is proves you haven’t caught a clue.
Better example is Wells Fargo. Wells Fargo’s Las Vegas retreat was when Obama first started squawking about inappropriate use of the TARP funds. The thing is, Wells Fargo tried to refuse TARP funds, but the government demanded they take the funds or risk losing FDIC backing. So they took the funds, and Obama immediately began micro-managing their business.
At the time, I remember progressives saying, but it is only for companies taking TARP funds. That was a very dubious statement even taken at face value. Apparently now, that was all a lie. What this really is functional marxism by capping the amount of money people can earn. The only thing lacking is Obama calling these people, “the bourgeoisie”.
“AIG employees became civil servants when they didn’t resign, immediately after the company’s management accepted hundreds of billions of dollars of taxpayers’ money to keep AIG afloat.
….
AIG employees are lucky not to be hanged.”
You are hilarious. I used to take the bus to work with a woman who was a customer service rep (basically, a receptionist/clerk/help desk person) at the AIG office in the building where I worked. Should she be hanged?
Fletcher, er, Congressman Frank
YOU are lucky not to be hanged.
Unless the AIG employees have had a specific hiring action into federal service, they remain private employees.
Besides, the employees there are fixing what is broken, and are not the ones who broke things.
Unlike you.
“I know of no government anywhere where the employees get bonuses for doing their jobs properly.”
Then you don’t know very much. It happens all the time at the federal, state and local level. One example, football coaches at public universities. In most cases, they are state employees.
I know of no government anywhere where the employees get bonuses for doing their jobs properly.
Our local government approved “retention bonuses” for salaried employees who complained about having to work overtime after the MidWest floods of 2008. And we’re not talking about police, fire, etc. type people, we’re talking about city staff desk-jockeys. Personally, I think every last one of them who complained should have been let go, but that’s just me. Either way, it’s still an example of governments paying bonuses for people doing their jobs.
In any case, I’m sure I’m not the only one thinking this, and I didn’t search the web to see if anyone else has already said it, so I’ll just throw it out there…
Have any of the Hollywood denizens, you know, the ones who threatened to leave the U.S. in 2004 because Bush got re-elected, offered to limit their salaries to $250k, or offered up their own incomes to a 90% tax rate to help their fellow countrymen out of this financial crisis?
No? None of them? Didn’t think so.
After all, I can think of plenty of people in that city whose $250k per MONTH salaries for a movie shoot are much less deserved than the salaries and bonuses being paid to AIG employees.
I’d offer up the same hypothetical about professional sports players making more than $250k per week during the regular season, and the post-season bonuses in their contracts, but very few professional sports players are as outspoken as those in Hollywood about the “shortcomings” of this country.
The Obama administration will call for increased oversight of executive pay at all banks, Wall Street firms and possibly other companies as part of a sweeping plan to overhaul financial regulation, government officials said
John B, the people who you are talking about – the Hollywood stars et al – are not being paid with money that you among others have to give to Uncle Sam (or other country’s equivalent) or go to jail.
As for being wrong about civil servants not getting bonuses – well, OK. I agree with you about it being wrong, however. I am quite sure that there are plenty of people who would love such a job as they have.
Others; well, I thought I was being fairly clear about the people who ought to be (extremely severely) punished; the people responsible for the mess, who (although possibly not in a technical sense until an investigation, which will probably never be carried out, is completed) are guilty of fraud, embezzlement, obtaining money by deception and, yes, treason. “Guilty” is not the same as “proved guilty”. The people responsible ought to be found, investigated, put on trial and, if found guilty, punished. And stripped of their ill-gotten gains, too.
Technically not civil servants? Maybe not – but anyone working for a nationalised industry works for the government. In any case, if those people (the desk staff and so on) were simply doing their jobs – why, in the name of all that’s unholy, are they getting bonuses? Very rarely do people working in any other industry get bonuses on top of agreed salary for simply doing their jobs in an acceptable manner. Even the football coaches mentioned get the bonuses for doing well, not for just bumping along.
The UK had a somewhat similar case near the beginning of this business. Northern Rock, a building society (I believe the nearest equivalent in the US is a savings and loan) based in Northeast England, messed up by using money borrowed from US banks to expand their loans business – no doubt in pursuit of bonuses for those making the decisions. And then it all unravelled, and there was a run on that bank, and Northern Rock was in danger of bankruptcy. And our wonderful government (/sarc off) stepped in with tens of billions of pounds of taxpayers’ money to prop it up. Why? Because NE England happens to be a Labour heartland that the current government didn’t want to lose, and most of the employees of NR lived there.
What should have happened – and I am far from being the only one to say this – is that the depositors’ money should have been publicly guaranteed by the Government and the bank allowed to go bankrupt. And possibly the people making the decisions investigated for criminal offenses.
The financial “industry” (only an industry, in reality, in the same way as is the Mafia) is in dire need of much closer regulation, and some of the more exotic financial instruments ought to be outright banned.
Technically not civil servants? Maybe not – but anyone working for a nationalised industry works for the government.
AIG hasn’t been formally nationalized either.
Formally — technically — these words refer to laws, which we still supposedly have over here in America. How does your country’s government operate?
Fletch…, er, Congressman Frank,
The people that organized this situation are no longer AIG employees. The employees that remain are the keys to fixing the problem. Piss them off, and they leave to the counterparties, and AIG (the US Gov’t) has huge losses.
Got it? So take your outrage and put it where you like such things.
> The financial “industry” (only an industry, in reality, in the same way as is the Mafia) is in dire need of much closer regulation
Perhaps FC will tell us exactly how lack of regulation played a role in AIG’s problems.
The careful reader will notice that the UKs regulators were involved as well.
The interesting detail is how AIG’s portfolios and the portfolios that they insured are actually performing. (Hint – the “insolvency” is actually a regulatory act which doesn’t actually make sense.)
The uninteresting detail is that once again FC’s “command of the facts” consists of being wrong on every single point that I checked.
The amazing thing is: AIG started this with a full trillion dollars of assets before the government forced the former CEO out and appointed Liddy. (Prior to buying a stake.)
The first bailouts were loans that looked like they could easily be repaid. But in the intervening period AIG has been slammed at every opportunity. All the slamming has pushed customers away and devalued a fair chunk of their holdings. All for a Financial Products division that was a sideshow to their main business.
Now it is just a case of looting the corpse.
Very rarely do people working in any other industry get bonuses on top of agreed salary for simply doing their jobs in an acceptable manner. Even the football coaches mentioned get the bonuses for doing well, not for just bumping along.
Well, over on this side of the pond, in the land of The Evil Amerikkkan, LOTS of people get bonuses for just plodding along through their job. Folks still get Christmas bonuses on a regular basis, and I received a “Short-Term Incentive” bonus on an annual basis at my last job as part of my compensation package, when “all” I did was sit at a desk fixing other peoples’ code. If you leave your job in the middle of the year, or aren’t around for the entire calendar year leading up to the Bonus period, you don’t get a bonus. If you put in a full year’s work, without complaint, and actually show up every day, you get a token of appreciation for being a loyal employee. If you don’t perform well, you don’t get as much as your co-workers.
Of course, that doesn’t go along with the idea that somehow all of the employees at AIG are corrupt, worthless slobs who don’t even deserve a paycheck, let alone a token of appreciation for showing up for work on a consistent basis, so feel free to completely ignore it.
I’m puzzled as to the problem with AIG bonuses. If we’re going to squander public money in a most inappropriate and reprehensible way, then it’s best to squander it in the most obvious, inappropriate and reprehensible way. Executive bonuses fit that requirement just fine.
Only March; Where will we be in four years?
There is more than a little “those SOBs make too much” in the AIG bonus argument. Nor do I like trying to recover the bonuses via the tax code.
On the other hand, AIG needed federal money to avoid a quick run to the bankrupcty court. Had that happened, the employees’ “bonuses” would have consisted of whatever office supplies they could sneak out with as they left.
In short, since when do we give bonuses to employees who run their company into a ditch? Isn’t that rewarding bad behavior? I know my bonus is contingent on the company as a whole hitting certain performance targets.
As for whether or not these particular employees are indispensible, I truthfully have no idea. I do know that many people who think that their company can’t function without them discover their error the hard way.
Chris, the people who ran the financial product side of AIG into a ditch lost their jobs. The bonuses went to the people who had nothing to do with that, in order to convince them to stay on and help clean up the mess.
Put it this way. It turns out some of the members of a volunteer fire department in your town were arsonists, starting fires to collect money through insurance fraud. The ring has been found out, the citizens formed a vigilante group that strung them up, and which is now monitoring (and partially funding) the FD.
But there are still all these fires burning! Unfortunately, morale at the FD is low, and a lot of good firemen are thinking of quitting and moving to another town. The captain gives a speech Hey I know times are tough, but the town really needs you now — how about if I give anybody who sticks it out until we get these fires put down a $1000 bonus?
So they all get to work. But halfway through their heroic efforts to put out the remaining fires, the Ms. Windbag “If I Only Had a Brain!” Pelosi notices the bonus money and gets vindictive. You bastards! You firefighters turned arsonists got us into this mess, how dare you earn top dollar for helping clean it up?
Er..it wasn’t the same firefighters, honey, although they do look similar in the hat and get-up. It wasn’t the same AIG employees, Chris, although I realize all plutocrats and kulaks all look the same to the People’s Commissar.
Post-script: oh, and in case the response is Gee, I didn’t know that, from either you or Scarecrow Pelosi — that is exactly the problem with central planning and oversight. There’s so very much you don’t know, can’t know, all this important little detail about this or that firm, operation, sector of the economy, et cetera.
Carl Pham – good point, except that you are wrong. When this story first broke back in December, Bloomberg noted that they were “retention” bonuses. In other words, they were paid to the Financial Products people who drove the company into the ditch.
Again – we the taxpayers AKA the owners of AIG may need these folks. But it’s hard to argue that giving them bonuses isn’t in part rewarding bad behavior.
To use your fireman analogy – it’s like we’re giving bonuses to the arsonist firemen so they can remove booby traps.
Uh huh. Chris, did you read the story to which you linked? Where exactly does it say the bonuses went to people responsible for screwing up?
Why don’t you think that one through for a moment, and try assuming that the top leadership of AIG were not raving loons. Why, exactly, would they give retention bonuses — please stay on, guys! — to people who had lost them billions of dollars? Does that sound sane to you? Are you familiar with any businessman who would target employees for retention who had cost the firm billions? I mean, as opposed to having to restrain himself from kicking them in the ass as they cleaned out their desk?
I don’t get it. You seem to think (1) businessmen are cold-hearted lovers of profit, who would gladly pay employees 2 cents and hour and see them freeze in garrets if it were possible, to squeeze out a tiny bit more profit, and (2) businessmen are paternalistic Mafia dons to their employees, and will gladly spread around to “Family” lieutenants and capos any wealth the company has, or falls into, or can steal, even if they recipients are provably idiots who did the ol’ firm great harm.
You know, which is it? Do they overpay or underpay employees, as a rule? Sweat-shop owners or Godfathers? Or do you just pick the stereotype that suits your narrative? Doesn’t it bother you a little that from day to day what you think about the typical practises of businessmen is violently self-contradictory?
The lack of critical thinming on the left has never been on clearer display than over these “bonuses.”
Chris Gerrib and “Fletcher” started out ignorant, and have only progressed to willfully ignorant as the conversation continues.
I wish I had the patience Pham does. I’ve become tired of explaining the same things he has pointed out over and over.
Carl Pham – yes I read the story. The whole point of the AIG bonus argument is that we, the owners of AIG, don’t know who got bonuses. You are assuming that housecleaning was done. Except that these were billed as retention bonuses, which implies that corporate was keeping people on.
We do know that the head of AIG’s FP group was not immediately fired, and after he was fired in December, he was kept on a $1 million a month consulting retainer. We also are told that these bonuses are being paid because pre-bailout contracts require them.
In short, it appears that we have an agency problem. That’s MBA-speak for a situation where employees, who are agents of the shareholders, are getting paid for doing stuff contrary to shareholder interests. In this case, the original shareholders are broke and the employees aren’t. Unfortunately, these agency issues happen a lot, that’s why there is a whole field of study about them in business school.
Regarding whether or not we can do anything about it, let me be more clear. It’s water under the bridge, and using the tax code to “recover” the bonuses is certainly against the spirit if not the letter of the law (not a lawyer). That doesn’t make paying the bonuses right.
If it weren’t so stupid, it’d be funny. All of this bashing of the AIG bonuses for what in reality amounts to less than 0.10% of the money AIG has received from taxpayers. The bonuses total about $165 million while the taxpayer money sent to AIG totals $170,000 million.
In the meantime, we’re getting almost no information about how the other 99.9% of the money (with more to come) is being used. The bonuses are a smokescreen and a trigger for the “30 minute hate”, while also serving the purpose of letting people like Pelosi (who I wouldn’t trust to run a lemonade stand) demand more oversight and control over the private sector.
Larry J – except AIG isn’t “the private sector.” We, AKA the US taxpayer, own AIG.
Carl – what frustrates me about this discussion is the implication that I know nothing about business. I’ve been involved in mergers and acquisitions as a senior manager, and I’ve seen a number of compensation and staffing decisions that did not make financial sense.
I’m not sure it would be appropriate to discuss most of them here, since there were signed confidentiality agreements. However, having seen the president of a troubled company hire an IT manager solely based on her bra size, it’s easy to believe that AIG could be handing out bonuses to undeserving people.
“it’s like we’re giving bonuses to the arsonist firemen so they can remove booby traps.”
Oh, so its like the anti-virus software industry….
Although Carl’s doing a great job answering the Gerrib, I think a critical point was missed:
In short, since when do we give bonuses to employees who run their company into a ditch? Isn’t that rewarding bad behavior?
Apparently that began with the passage of TARP in October, which, fair enough, was signed by Bush and voted in the affirmative by Obama, McCain, and Biden. It was continued in the Stimulus package.
The Gerrib might recall that many of us, who comment here and the host, were against awarding bad businesses with bailout funds. We were also against awarding cabinet positions to tax cheats, but we lost that argument as well.
So now that we rewarded bad behavior, it’s rather foolish to now act like that’s a bad thing or a big deal.
The answer to all this hullabaloo is simple, stop the bailouts and let these companies fail, as they typically would in a free market. When you do that, the government neither ends up owning the company or having to explain why they may or may not be rewarding bad behavious.
It will be interesting to see if the Gerrib is consistent with his arguments as Pelosi/Reid/Obama roll out TARP II.
Leland – there is such a thing as cutting off your nose to spite your face. Letting AIG fail would mean literally millions of Americans would not have insurance, for example.
This “too big to fail” argument is, BTW, an argument for more regulation, if only a cap on the size of the company.
Also, since when do two wrongs make a right? If it’s not okay to reward failed companies with a bailout, why is it okay to reward the employees with bonuses?
Leland – there is such a thing as cutting off your nose to spite your face. Letting AIG fail would mean literally millions of Americans would not have insurance, for example.
How does pissing off all the employees by taking away their contractually obligated bonuses, publicly castigating them, and OBTW exposing them, and their families to death threats, help to ensure the survival of AIG? It seems rather counter-productive to me.
Leland – there is such a thing as cutting off your nose to spite your face. Letting AIG fail would mean literally millions of Americans would not have insurance, for example.
Incorrect. AIG’s insurance business is one of its few bright stars, and would undoubtedly fetch a good price at the bankruptcy sale. The court master would also undoubtedly keep the insurance division in operation through the sale; after all, with no customers the portfolio would be useless. So AIG’s insurance customers will see the name on the bill change, but probably not much else.
Gerrib is wrong – the AIG folks who got it into trouble are long gone and aren’t the folks who were supposed to get the bonus, even if his position requires otherwise.
Yes, they’re retention bonuses, for people that they kept on. That goesn’t tell us who got retained.
That story also explains what happens if AIG loses competent people. (Surely Gerrib isn’t going argue that competent people will join AIG given the shit-storm that folks like him are throwing.)
As to FC’s outrage about bonuses “for doing one’s job”, it apparently is common in the financial industry for the majority of compensation to be in the bonus. Guess that that does to the pay of folks who leave or get pushed out?
A government that doles out HUNDREDS OF BILLIONS OF DOLLARS IN PATRONAGE has no moral position to criticize AIG giving less than one-one-thousandth of that sum to employees to whom AIG is contractually obligated to reward for their services.
Leland – there is such a thing as cutting off your nose to spite your face. Letting AIG fail would mean literally millions of Americans would not have insurance, for example.
The Gerrib flips and flops in the some thread. As ucfengr suggests; how does pissing off good employees so they leave any less of a “cutting off your nose” as letting the failed financial portion of AIG actually fail? The only benefit is extending the period of uncertainty.
This “too big to fail” argument is, BTW, an argument for more regulation, if only a cap on the size of the company.
Yeah, and it is one reason I’m not making that argument. I’m not a fan of imposing ceilings on good performance.
Also, since when do two wrongs make a right? If it’s not okay to reward failed companies with a bailout, why is it okay to reward the employees with bonuses?
Since when has it been wrong to reward employees with bonuses? Once again, these particular employees met or exceeded their quotas. Companies often give bonuses for good performance.
The other wrong here is passing unconstitutional legislation to create a bill of attainder. If Obama and Democrats didn’t want these bonuses to go out, then they shouldn’t have inserted Dodd’s amendment into the Porkulus bill. So wrong 1, bailing out AIG. Wrong 2, violating the constitution to punish specific AIG employees without due process. And yes, there is nothing right when combining the two.
Nemo – you may be correct, but at the time I recall that the fear was of a run on AIG, in which case nothing would be left for the bankruptcy court to administer. But that’s also water under the bridge – we now own AIG, so how we administer it is a reasonable discussion.
Alan K. Henderson – we own AIG, it’s not a private firm anymore. Giving out bonuses could be seen as another form of patronage. Also, just as a thought experiment – substitute “GM” for AIG. Would it be okay for GM to give out management bonuses from your tax dollars?
Leland – I do have a first name, you know. My issues are:
1) Why do you assume that the employees getting bonuses are “good?” More to the point, I have seen (and been on the receiving end of) a “no bonuses because the company as a whole didn’t hit the numbers.”
Also an issue – where are they going to go? There’s a lot of Wall Street types out looking for jobs at the moment. Consider it the “Glengarry Glen Ross” bonus plan. (2nd place in the sales competition = you still have a job.)
2) Why in the world would you think AIG is an example of “good performance?” They lost billions of dollars, and exist solely because of an extraordinary bailout. Putting limits on “good” performance means that you also limit your downside risk.
I wish there was a Senate Referendum number for this, so that I could mention it when I write my senators and ask them to vote it down, but a generic “Senate version of H.R. 1586″ will have to do for now.
I realised that, since the Republican senator from my state since Senator “Seppuku” Grassley, my letter-writing would be, well, useless.
I still encourage others to write to THEIR senators and urge them to vote against H.R. 1586, though.
1) I assume good employees get bonuses (I’ve been on the receiving end of getting bonuses for both good performance and for retention).
2) I’ve never said AIG is an example of “good performance”. However, I do think AIG can still have employees, who put in a good performance and should be rewarded.
More to the point, I have seen (and been on the receiving end of) a “no bonuses because the company as a whole didn’t hit the numbers.”
Back to the flip flopping? So which is it: Were you a good performing employee in a failing company? Or was your company full of only bad performing employees like you? If the former, I would think one of the reasons the company was performing well was that it didn’t reward good performance in an effort to motivate all employees to do better. If the latter, then that would explain a lot of things about your comments.
So which is it: Were you a good performing employee in a failing company? Or was your company full of only bad performing employees like you?
Considering I got a bonus the year before and every year after, I think we just had a bad year.
> Also an issue – where are they going to go? There’s a lot of Wall Street types out looking for jobs at the moment.
There are “streets” outside the US. And there are plenty of folks gearing up for the fire sale that Obama plans.
I note that Gerrib still hasn’t figured out that “bonus” doesn’t always mean the same thing. In AIG’s case, it’s a back-end payment for services rendered. That’s fairly common and has nothing to do with “did the company do well”.
> Would it be okay for GM to give out management bonuses from your tax dollars?
The relevant question would be closer to “Would it be okay for GM to give out management bonuses to folks who made money?” Does Gerrib really think that the answer is no?
However, let’s assume that every one of Gerrib’s misconceptions is actually true.
The answer to his question is “It depends on what I get for my money.”
In AIG’s case, paying folks as agreed keeps people who know how to unwind AIG at the best possible price. It also keeps them from working somewhere else, using their knowledge to pick AIG clean.
Gerrib seems to think that we’re off if the folks who know how to pick AIG clean work for other companies so they can do so.
In other words, he’s happy with increasing AIG’s losses.
I wonder if he’s that free when it’s just his money or if he’s only doing this because it’s my money too?
I’m not entirely certain whether the knot in my stomach is from the lack of food intake thus far today, or from this whole fiasco, but I’m willing to bet that it’s the latter.
It also sickens me to read some of the comments I see when I do a search on H.R. 1586, and the sheer glee that some people get from this bill passing the House.
I wish there was a Senate Referendum number for this, so that I could mention it when I write my senators and ask them to vote it down, but a generic “Senate version of H.R. 1586” will have to do for now.
AIG employees became civil servants when they didn’t resign, immediately after the company’s management accepted hundreds of billions of dollars of taxpayers’ money to keep AIG afloat.
I know of no government anywhere where the employees get bonuses for doing their jobs properly. AIG = civil service, ergo no bonuses. You don’t like that idea? Resign, and try working for a living. In that case, you’ll probably do rather poorly; bank employees and real work don’t mix – in fact, they mix almost as badly as government apparatchiks and real work.
AIG employees are lucky not to be hanged. Especially those who actually made the decisions, whose actions are little if any short of treason.
FC, it’s not about AIG. The fact that you think it is proves you haven’t caught a clue.
Better example is Wells Fargo. Wells Fargo’s Las Vegas retreat was when Obama first started squawking about inappropriate use of the TARP funds. The thing is, Wells Fargo tried to refuse TARP funds, but the government demanded they take the funds or risk losing FDIC backing. So they took the funds, and Obama immediately began micro-managing their business.
At the time, I remember progressives saying, but it is only for companies taking TARP funds. That was a very dubious statement even taken at face value. Apparently now, that was all a lie. What this really is functional marxism by capping the amount of money people can earn. The only thing lacking is Obama calling these people, “the bourgeoisie”.
“AIG employees became civil servants when they didn’t resign, immediately after the company’s management accepted hundreds of billions of dollars of taxpayers’ money to keep AIG afloat.
….
AIG employees are lucky not to be hanged.”
You are hilarious. I used to take the bus to work with a woman who was a customer service rep (basically, a receptionist/clerk/help desk person) at the AIG office in the building where I worked. Should she be hanged?
Fletcher, er, Congressman Frank
YOU are lucky not to be hanged.
Unless the AIG employees have had a specific hiring action into federal service, they remain private employees.
Besides, the employees there are fixing what is broken, and are not the ones who broke things.
Unlike you.
“I know of no government anywhere where the employees get bonuses for doing their jobs properly.”
Then you don’t know very much. It happens all the time at the federal, state and local level. One example, football coaches at public universities. In most cases, they are state employees.
I know of no government anywhere where the employees get bonuses for doing their jobs properly.
Our local government approved “retention bonuses” for salaried employees who complained about having to work overtime after the MidWest floods of 2008. And we’re not talking about police, fire, etc. type people, we’re talking about city staff desk-jockeys. Personally, I think every last one of them who complained should have been let go, but that’s just me. Either way, it’s still an example of governments paying bonuses for people doing their jobs.
In any case, I’m sure I’m not the only one thinking this, and I didn’t search the web to see if anyone else has already said it, so I’ll just throw it out there…
Have any of the Hollywood denizens, you know, the ones who threatened to leave the U.S. in 2004 because Bush got re-elected, offered to limit their salaries to $250k, or offered up their own incomes to a 90% tax rate to help their fellow countrymen out of this financial crisis?
No? None of them? Didn’t think so.
After all, I can think of plenty of people in that city whose $250k per MONTH salaries for a movie shoot are much less deserved than the salaries and bonuses being paid to AIG employees.
I’d offer up the same hypothetical about professional sports players making more than $250k per week during the regular season, and the post-season bonuses in their contracts, but very few professional sports players are as outspoken as those in Hollywood about the “shortcomings” of this country.
If only this was mere hysteria. Here is the first paragraph of this New York Times story:
The Obama administration will call for increased oversight of executive pay at all banks, Wall Street firms and possibly other companies as part of a sweeping plan to overhaul financial regulation, government officials said
John B, the people who you are talking about – the Hollywood stars et al – are not being paid with money that you among others have to give to Uncle Sam (or other country’s equivalent) or go to jail.
As for being wrong about civil servants not getting bonuses – well, OK. I agree with you about it being wrong, however. I am quite sure that there are plenty of people who would love such a job as they have.
Others; well, I thought I was being fairly clear about the people who ought to be (extremely severely) punished; the people responsible for the mess, who (although possibly not in a technical sense until an investigation, which will probably never be carried out, is completed) are guilty of fraud, embezzlement, obtaining money by deception and, yes, treason. “Guilty” is not the same as “proved guilty”. The people responsible ought to be found, investigated, put on trial and, if found guilty, punished. And stripped of their ill-gotten gains, too.
Technically not civil servants? Maybe not – but anyone working for a nationalised industry works for the government. In any case, if those people (the desk staff and so on) were simply doing their jobs – why, in the name of all that’s unholy, are they getting bonuses? Very rarely do people working in any other industry get bonuses on top of agreed salary for simply doing their jobs in an acceptable manner. Even the football coaches mentioned get the bonuses for doing well, not for just bumping along.
The UK had a somewhat similar case near the beginning of this business. Northern Rock, a building society (I believe the nearest equivalent in the US is a savings and loan) based in Northeast England, messed up by using money borrowed from US banks to expand their loans business – no doubt in pursuit of bonuses for those making the decisions. And then it all unravelled, and there was a run on that bank, and Northern Rock was in danger of bankruptcy. And our wonderful government (/sarc off) stepped in with tens of billions of pounds of taxpayers’ money to prop it up. Why? Because NE England happens to be a Labour heartland that the current government didn’t want to lose, and most of the employees of NR lived there.
What should have happened – and I am far from being the only one to say this – is that the depositors’ money should have been publicly guaranteed by the Government and the bank allowed to go bankrupt. And possibly the people making the decisions investigated for criminal offenses.
The financial “industry” (only an industry, in reality, in the same way as is the Mafia) is in dire need of much closer regulation, and some of the more exotic financial instruments ought to be outright banned.
AIG hasn’t been formally nationalized either.
Formally — technically — these words refer to laws, which we still supposedly have over here in America. How does your country’s government operate?
Fletch…, er, Congressman Frank,
The people that organized this situation are no longer AIG employees. The employees that remain are the keys to fixing the problem. Piss them off, and they leave to the counterparties, and AIG (the US Gov’t) has huge losses.
Got it? So take your outrage and put it where you like such things.
> The financial “industry” (only an industry, in reality, in the same way as is the Mafia) is in dire need of much closer regulation
Perhaps FC will tell us exactly how lack of regulation played a role in AIG’s problems.
I’ll give him a hint – AIG didn’t have significant non-regulated parts. ( http://files.ots.treas.gov/87171.pdf and also http://dealbook.blogs.nytimes.com/2009/03/05/as-regulator-watched-aig-unit-piled-on-risk/ )
The careful reader will notice that the UKs regulators were involved as well.
The interesting detail is how AIG’s portfolios and the portfolios that they insured are actually performing. (Hint – the “insolvency” is actually a regulatory act which doesn’t actually make sense.)
The uninteresting detail is that once again FC’s “command of the facts” consists of being wrong on every single point that I checked.
The amazing thing is: AIG started this with a full trillion dollars of assets before the government forced the former CEO out and appointed Liddy. (Prior to buying a stake.)
The first bailouts were loans that looked like they could easily be repaid. But in the intervening period AIG has been slammed at every opportunity. All the slamming has pushed customers away and devalued a fair chunk of their holdings. All for a Financial Products division that was a sideshow to their main business.
Now it is just a case of looting the corpse.
Very rarely do people working in any other industry get bonuses on top of agreed salary for simply doing their jobs in an acceptable manner. Even the football coaches mentioned get the bonuses for doing well, not for just bumping along.
Well, over on this side of the pond, in the land of The Evil Amerikkkan, LOTS of people get bonuses for just plodding along through their job. Folks still get Christmas bonuses on a regular basis, and I received a “Short-Term Incentive” bonus on an annual basis at my last job as part of my compensation package, when “all” I did was sit at a desk fixing other peoples’ code. If you leave your job in the middle of the year, or aren’t around for the entire calendar year leading up to the Bonus period, you don’t get a bonus. If you put in a full year’s work, without complaint, and actually show up every day, you get a token of appreciation for being a loyal employee. If you don’t perform well, you don’t get as much as your co-workers.
Of course, that doesn’t go along with the idea that somehow all of the employees at AIG are corrupt, worthless slobs who don’t even deserve a paycheck, let alone a token of appreciation for showing up for work on a consistent basis, so feel free to completely ignore it.
I’m puzzled as to the problem with AIG bonuses. If we’re going to squander public money in a most inappropriate and reprehensible way, then it’s best to squander it in the most obvious, inappropriate and reprehensible way. Executive bonuses fit that requirement just fine.
Only March; Where will we be in four years?
There is more than a little “those SOBs make too much” in the AIG bonus argument. Nor do I like trying to recover the bonuses via the tax code.
On the other hand, AIG needed federal money to avoid a quick run to the bankrupcty court. Had that happened, the employees’ “bonuses” would have consisted of whatever office supplies they could sneak out with as they left.
In short, since when do we give bonuses to employees who run their company into a ditch? Isn’t that rewarding bad behavior? I know my bonus is contingent on the company as a whole hitting certain performance targets.
As for whether or not these particular employees are indispensible, I truthfully have no idea. I do know that many people who think that their company can’t function without them discover their error the hard way.
Chris, the people who ran the financial product side of AIG into a ditch lost their jobs. The bonuses went to the people who had nothing to do with that, in order to convince them to stay on and help clean up the mess.
Put it this way. It turns out some of the members of a volunteer fire department in your town were arsonists, starting fires to collect money through insurance fraud. The ring has been found out, the citizens formed a vigilante group that strung them up, and which is now monitoring (and partially funding) the FD.
But there are still all these fires burning! Unfortunately, morale at the FD is low, and a lot of good firemen are thinking of quitting and moving to another town. The captain gives a speech Hey I know times are tough, but the town really needs you now — how about if I give anybody who sticks it out until we get these fires put down a $1000 bonus?
So they all get to work. But halfway through their heroic efforts to put out the remaining fires, the Ms. Windbag “If I Only Had a Brain!” Pelosi notices the bonus money and gets vindictive. You bastards! You firefighters turned arsonists got us into this mess, how dare you earn top dollar for helping clean it up?
Er..it wasn’t the same firefighters, honey, although they do look similar in the hat and get-up. It wasn’t the same AIG employees, Chris, although I realize all plutocrats and kulaks all look the same to the People’s Commissar.
Post-script: oh, and in case the response is Gee, I didn’t know that, from either you or Scarecrow Pelosi — that is exactly the problem with central planning and oversight. There’s so very much you don’t know, can’t know, all this important little detail about this or that firm, operation, sector of the economy, et cetera.
Carl Pham – good point, except that you are wrong. When this story first broke back in December, Bloomberg noted that they were “retention” bonuses. In other words, they were paid to the Financial Products people who drove the company into the ditch.
Again – we the taxpayers AKA the owners of AIG may need these folks. But it’s hard to argue that giving them bonuses isn’t in part rewarding bad behavior.
To use your fireman analogy – it’s like we’re giving bonuses to the arsonist firemen so they can remove booby traps.
Uh huh. Chris, did you read the story to which you linked? Where exactly does it say the bonuses went to people responsible for screwing up?
Why don’t you think that one through for a moment, and try assuming that the top leadership of AIG were not raving loons. Why, exactly, would they give retention bonuses — please stay on, guys! — to people who had lost them billions of dollars? Does that sound sane to you? Are you familiar with any businessman who would target employees for retention who had cost the firm billions? I mean, as opposed to having to restrain himself from kicking them in the ass as they cleaned out their desk?
I don’t get it. You seem to think (1) businessmen are cold-hearted lovers of profit, who would gladly pay employees 2 cents and hour and see them freeze in garrets if it were possible, to squeeze out a tiny bit more profit, and (2) businessmen are paternalistic Mafia dons to their employees, and will gladly spread around to “Family” lieutenants and capos any wealth the company has, or falls into, or can steal, even if they recipients are provably idiots who did the ol’ firm great harm.
You know, which is it? Do they overpay or underpay employees, as a rule? Sweat-shop owners or Godfathers? Or do you just pick the stereotype that suits your narrative? Doesn’t it bother you a little that from day to day what you think about the typical practises of businessmen is violently self-contradictory?
The lack of critical thinming on the left has never been on clearer display than over these “bonuses.”
Chris Gerrib and “Fletcher” started out ignorant, and have only progressed to willfully ignorant as the conversation continues.
I wish I had the patience Pham does. I’ve become tired of explaining the same things he has pointed out over and over.
Carl Pham – yes I read the story. The whole point of the AIG bonus argument is that we, the owners of AIG, don’t know who got bonuses. You are assuming that housecleaning was done. Except that these were billed as retention bonuses, which implies that corporate was keeping people on.
We do know that the head of AIG’s FP group was not immediately fired, and after he was fired in December, he was kept on a $1 million a month consulting retainer. We also are told that these bonuses are being paid because pre-bailout contracts require them.
In short, it appears that we have an agency problem. That’s MBA-speak for a situation where employees, who are agents of the shareholders, are getting paid for doing stuff contrary to shareholder interests. In this case, the original shareholders are broke and the employees aren’t. Unfortunately, these agency issues happen a lot, that’s why there is a whole field of study about them in business school.
Regarding whether or not we can do anything about it, let me be more clear. It’s water under the bridge, and using the tax code to “recover” the bonuses is certainly against the spirit if not the letter of the law (not a lawyer). That doesn’t make paying the bonuses right.
If it weren’t so stupid, it’d be funny. All of this bashing of the AIG bonuses for what in reality amounts to less than 0.10% of the money AIG has received from taxpayers. The bonuses total about $165 million while the taxpayer money sent to AIG totals $170,000 million.
In the meantime, we’re getting almost no information about how the other 99.9% of the money (with more to come) is being used. The bonuses are a smokescreen and a trigger for the “30 minute hate”, while also serving the purpose of letting people like Pelosi (who I wouldn’t trust to run a lemonade stand) demand more oversight and control over the private sector.
Larry J – except AIG isn’t “the private sector.” We, AKA the US taxpayer, own AIG.
Carl – what frustrates me about this discussion is the implication that I know nothing about business. I’ve been involved in mergers and acquisitions as a senior manager, and I’ve seen a number of compensation and staffing decisions that did not make financial sense.
I’m not sure it would be appropriate to discuss most of them here, since there were signed confidentiality agreements. However, having seen the president of a troubled company hire an IT manager solely based on her bra size, it’s easy to believe that AIG could be handing out bonuses to undeserving people.
“it’s like we’re giving bonuses to the arsonist firemen so they can remove booby traps.”
Oh, so its like the anti-virus software industry….
Although Carl’s doing a great job answering the Gerrib, I think a critical point was missed:
In short, since when do we give bonuses to employees who run their company into a ditch? Isn’t that rewarding bad behavior?
Apparently that began with the passage of TARP in October, which, fair enough, was signed by Bush and voted in the affirmative by Obama, McCain, and Biden. It was continued in the Stimulus package.
The Gerrib might recall that many of us, who comment here and the host, were against awarding bad businesses with bailout funds. We were also against awarding cabinet positions to tax cheats, but we lost that argument as well.
So now that we rewarded bad behavior, it’s rather foolish to now act like that’s a bad thing or a big deal.
The answer to all this hullabaloo is simple, stop the bailouts and let these companies fail, as they typically would in a free market. When you do that, the government neither ends up owning the company or having to explain why they may or may not be rewarding bad behavious.
It will be interesting to see if the Gerrib is consistent with his arguments as Pelosi/Reid/Obama roll out TARP II.
Leland – there is such a thing as cutting off your nose to spite your face. Letting AIG fail would mean literally millions of Americans would not have insurance, for example.
This “too big to fail” argument is, BTW, an argument for more regulation, if only a cap on the size of the company.
Also, since when do two wrongs make a right? If it’s not okay to reward failed companies with a bailout, why is it okay to reward the employees with bonuses?
Leland – there is such a thing as cutting off your nose to spite your face. Letting AIG fail would mean literally millions of Americans would not have insurance, for example.
How does pissing off all the employees by taking away their contractually obligated bonuses, publicly castigating them, and OBTW exposing them, and their families to death threats, help to ensure the survival of AIG? It seems rather counter-productive to me.
Leland – there is such a thing as cutting off your nose to spite your face. Letting AIG fail would mean literally millions of Americans would not have insurance, for example.
Incorrect. AIG’s insurance business is one of its few bright stars, and would undoubtedly fetch a good price at the bankruptcy sale. The court master would also undoubtedly keep the insurance division in operation through the sale; after all, with no customers the portfolio would be useless. So AIG’s insurance customers will see the name on the bill change, but probably not much else.
Gerrib is wrong – the AIG folks who got it into trouble are long gone and aren’t the folks who were supposed to get the bonus, even if his position requires otherwise.
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/18/AR2009031804104.html?sid=ST2009031801503
Yes, they’re retention bonuses, for people that they kept on. That goesn’t tell us who got retained.
That story also explains what happens if AIG loses competent people. (Surely Gerrib isn’t going argue that competent people will join AIG given the shit-storm that folks like him are throwing.)
As to FC’s outrage about bonuses “for doing one’s job”, it apparently is common in the financial industry for the majority of compensation to be in the bonus. Guess that that does to the pay of folks who leave or get pushed out?
A government that doles out HUNDREDS OF BILLIONS OF DOLLARS IN PATRONAGE has no moral position to criticize AIG giving less than one-one-thousandth of that sum to employees to whom AIG is contractually obligated to reward for their services.
Leland – there is such a thing as cutting off your nose to spite your face. Letting AIG fail would mean literally millions of Americans would not have insurance, for example.
The Gerrib flips and flops in the some thread. As ucfengr suggests; how does pissing off good employees so they leave any less of a “cutting off your nose” as letting the failed financial portion of AIG actually fail? The only benefit is extending the period of uncertainty.
This “too big to fail” argument is, BTW, an argument for more regulation, if only a cap on the size of the company.
Yeah, and it is one reason I’m not making that argument. I’m not a fan of imposing ceilings on good performance.
Also, since when do two wrongs make a right? If it’s not okay to reward failed companies with a bailout, why is it okay to reward the employees with bonuses?
Since when has it been wrong to reward employees with bonuses? Once again, these particular employees met or exceeded their quotas. Companies often give bonuses for good performance.
The other wrong here is passing unconstitutional legislation to create a bill of attainder. If Obama and Democrats didn’t want these bonuses to go out, then they shouldn’t have inserted Dodd’s amendment into the Porkulus bill. So wrong 1, bailing out AIG. Wrong 2, violating the constitution to punish specific AIG employees without due process. And yes, there is nothing right when combining the two.
Nemo – you may be correct, but at the time I recall that the fear was of a run on AIG, in which case nothing would be left for the bankruptcy court to administer. But that’s also water under the bridge – we now own AIG, so how we administer it is a reasonable discussion.
Alan K. Henderson – we own AIG, it’s not a private firm anymore. Giving out bonuses could be seen as another form of patronage. Also, just as a thought experiment – substitute “GM” for AIG. Would it be okay for GM to give out management bonuses from your tax dollars?
Leland – I do have a first name, you know. My issues are:
1) Why do you assume that the employees getting bonuses are “good?” More to the point, I have seen (and been on the receiving end of) a “no bonuses because the company as a whole didn’t hit the numbers.”
Also an issue – where are they going to go? There’s a lot of Wall Street types out looking for jobs at the moment. Consider it the “Glengarry Glen Ross” bonus plan. (2nd place in the sales competition = you still have a job.)
2) Why in the world would you think AIG is an example of “good performance?” They lost billions of dollars, and exist solely because of an extraordinary bailout. Putting limits on “good” performance means that you also limit your downside risk.
I wish there was a Senate Referendum number for this, so that I could mention it when I write my senators and ask them to vote it down, but a generic “Senate version of H.R. 1586″ will have to do for now.
I realised that, since the Republican senator from my state since Senator “Seppuku” Grassley, my letter-writing would be, well, useless.
I still encourage others to write to THEIR senators and urge them to vote against H.R. 1586, though.
1) I assume good employees get bonuses (I’ve been on the receiving end of getting bonuses for both good performance and for retention).
2) I’ve never said AIG is an example of “good performance”. However, I do think AIG can still have employees, who put in a good performance and should be rewarded.
More to the point, I have seen (and been on the receiving end of) a “no bonuses because the company as a whole didn’t hit the numbers.”
Back to the flip flopping? So which is it: Were you a good performing employee in a failing company? Or was your company full of only bad performing employees like you? If the former, I would think one of the reasons the company was performing well was that it didn’t reward good performance in an effort to motivate all employees to do better. If the latter, then that would explain a lot of things about your comments.
So which is it: Were you a good performing employee in a failing company? Or was your company full of only bad performing employees like you?
Considering I got a bonus the year before and every year after, I think we just had a bad year.
> Also an issue – where are they going to go? There’s a lot of Wall Street types out looking for jobs at the moment.
There are “streets” outside the US. And there are plenty of folks gearing up for the fire sale that Obama plans.
I note that Gerrib still hasn’t figured out that “bonus” doesn’t always mean the same thing. In AIG’s case, it’s a back-end payment for services rendered. That’s fairly common and has nothing to do with “did the company do well”.
> Would it be okay for GM to give out management bonuses from your tax dollars?
The relevant question would be closer to “Would it be okay for GM to give out management bonuses to folks who made money?” Does Gerrib really think that the answer is no?
However, let’s assume that every one of Gerrib’s misconceptions is actually true.
The answer to his question is “It depends on what I get for my money.”
In AIG’s case, paying folks as agreed keeps people who know how to unwind AIG at the best possible price. It also keeps them from working somewhere else, using their knowledge to pick AIG clean.
Gerrib seems to think that we’re off if the folks who know how to pick AIG clean work for other companies so they can do so.
In other words, he’s happy with increasing AIG’s losses.
I wonder if he’s that free when it’s just his money or if he’s only doing this because it’s my money too?