AIG Bonuses

[RandomGuy]

The Social Security/Medicare issue provides interesting contrasts with the Bank Bailout crisis as well as the problems that the Auto makers are having.

What's the best way to deal with moral hazard in these situations, where it benefits a person/company to make a guarantee now that they won't have to pay on in the future?

The members of government who made a promise to future generations knew that they'd be long gone when the bill came due.

The members of the automakers who made a promise to union workers knew that they'd be long gone when the bill came due.

The members of the banks who took their money knew they could make enough for life even if it was at the expense of the life-blood of their company.

What is a good way to reduce these sorts of moral hazards, given that humans are in general short-sighted and greedy? Are there good, do ented methods? Are they regulatory in nature or otherwise?

Very good questions that will have to wait. Time to get some work done.

[Crookshanks]

This is a phony outrage - Congress knew about these bonuses last year. These are not production bonuses - they're retention bonuses and they are contractually agreed upon in the year BEFORE they are given out. Also, take a look at the following article - Chris Dodd is an idiot - he's only upset that he's been exposed!
=========================

Amid AIG Furor, Dodd Tries to Undo Bonus Protections He Put In Rich Edson
FOXBusiness

Senator Chris Dodd (D-Conn.) on Monday night floated the idea of taxing American International Group (AIG: 0.9011, 0.121, 15.51%) bonus recipients so the government could recoup some or all of the $450 million the company is paying to employees in its financial products unit. Within hours, the idea spread to both houses of Congress, with lawmakers proposing an AIG bonus tax.

The move represents somewhat of an about-face for the Senator.

While the Senate was constructing the $787 billion stimulus last month, Dodd added an executive-compensation restriction to the bill. That amendment provides an “exception for contractually obligated bonuses agreed on before Feb. 11, 2009” -- which exempts the very AIG bonuses Dodd and others are now seeking to tax.

The amendment made it into the final version of the bill, and is law.

Separately, Sen. Dodd was AIG’s largest single recipient of campaign donations during the 2008 election cycle with $103,100, according to opensecrets.org.

Dodd’s office did not immediately return a request for comment.

One of AIG Financial Products’ largest offices is based in Connecticut.

Dodd Amendment Rules

Crack down on bonuses, retention awards and incentive compensation: Bonuses can only be paid in the form of long-term restricted stock, equal to no greater than 1/3 of total annual compensation, and will vest only when taxpayer funds are repaid. There is an exception for contractually obligated bonuses agreed on before Feb. 11, 2009.
For ins utions that received assistance totaling less than $25 million, the bonus restriction applies to the highest compensated employee; $25 million to $250 million, applies to the top five employees; $250 million to $500 million, applies to the senior executive officers and the next top 10 employees; and more than $500 million applies to the senior executive officers and the next top 20 employees (or such higher number as the Secretary determines is in the public interest).

--------------------------------------------------------------------------------

Name Office Total Contributions

Dodd, Chris (D-CT) Senate $103,100
Obama, Barack (D-IL) Senate $101,332
McCain, John (R-AZ) Senate $59,499
Clinton, Hillary (D-NY) Senate $35,965
Baucus, Max (D-MT) Senate $24,750
Romney, Mitt (R) Pres $20,850
Biden, Joseph R Jr (D-DE) Senate $19,975
Larson, John B (D-CT) House $19,750
Sununu, John E (R-NH) Senate $18,500
Giuliani, Rudolph W (R) Pres $13,200

[The Franchise]

AIG should not be getting any tax money. If anything, the tax money should go to homeowners in foreclosure. If AIG didn't get the bailout money, then they would be bankrupt and these executive would not get their unearned bonuses.

There is nothing in the U.S. Cons ution authoring these bailouts, and on top of that they are bad policy, not in the public's interest. Taxing the middle class, including those in foreclose, and then sending money to millionaires does not help the economy. it only props up crooked people who are financing the campaigns of the very same republicrats who are voting for these bailouts.

+1

[Marcus Bryant]

In any halfway decent country that had any respect for itself, those executives would be long since dead.

This isn't the first time in American history Wall Street richers have regarded themselves as above the law. The last time it happened class warfare became literal.

One building on Wall Street still bears scars from the shrapnel.

Just sayin'.

Have you skipped the step of libertarianism between conservatism and anarchy or have I misunderstood?

[Marcus Bryant]

When I drink I read this.

[Marcus Bryant]

Anyways, the font of our current troubles is that nobody wants to reign in their appe es.

[boutons_]

News Release

How to Stop AIG's Bonuses

March 16, 2009

Four leading analysts on finance Monday issued a statement outlining how to stop the AIG bonuses:

"AIG's decision to pay out at least $165 million in bonuses takes the bank bailout program's abuse of the public trust to a whole new level.

"This act simply cannot be allowed to stand. The only question is how to stop it.

"'Sanc y of contracts' has for some time been TARP's equivalent of Harry Potter's magic wand, the thing you waved to make difficulties disappear. AIG clearly takes the Treasury, the Federal Reserve, and the Obama administration for fools, who can be counted on to roll over yet again at the first whisper of the magic words. There is no reason for agents of the people of the United States, whose money AIG plays with, to be so sheep-like.

"Remember that this is a firm that is 79.9 percent owned by the United States government. It is therefore quite possible to abort this outrage, by decisive exercise of public authority. Within existing law, there is more than one way to do it. But a direct solution is readily at hand:

Firstly, the U.S. trustees in charge of the firm must immediately instruct the corporate treasurer to make no payments of any bonuses. They also need to order him to issue stop-payment orders on any checks that fly out the door at the last minute, as with Merrill Lynch.

Then the trustees need to split off the derivatives unit from the rest of the firm and separately incorporate it. This step leaves AIG's other businesses free to operate as usual. If the recipients of the bonuses refuse to waive them, then the derivatives unit should at once be thrown into bankruptcy, terminating all obligations to pay them.

Right now, press reports suggest that the firm's top management waited until the last minute to inform the government of what was happening. AIG CEO Edward Liddy, accordingly, should be asked to resign at once, for the sake of public confidence and to send a clear signal that gaming the system is unacceptable. It is also past time for an investigation of the validity of AIG's past accounting and securities disclosures and its executive compensation program by the Office of Thrift Supervision, the Securities and Exchange Commission, and the FBI.

"This leaves open the question of how to deal with all other obligations of the derivatives unit, including the notorious credit default swaps. We, like most independent analysts, are mystified by the determination of the Federal Reserve and Treasury to keep paying these off at 100 percent of their face value. But that's an issue for tomorrow. Today the task is to stop a grotesque abuse before it is too late. The path we outline here would do it, without throwing markets into turmoil. Nothing less than public confidence in the United States government as a whole is now at stake."

Interviews are available with the analysts who issued the statement:


WILLIAM K. BLACK
Black is associate professor of economics and law at the University of Missouri, Kansas City. He was a senior regulator during the savings and loan scandal and blew the whistle on prominent politicians, including House Speaker Wright and the five U.S. senators who became famous as the “Keating Five.” He was the lead staffer on the successful reregulation of the S&L industry and directed the investigations that led to convictions in many of the worst S&L frauds.


THOMAS FERGUSON
Ferguson is professor of political science at the University of Massachusetts, Boston and the author of Golden Rule: The Investment Theory of Party Compe ion and the Logic of Money-Driven Political Systems.


ROBERT JOHNSON
Johnson was formerly a managing director at Soros Funds Management and chief economist of the Senate Banking Committee. Part I of Ferguson and Johnson’s “Too Big To Bail: The 'Paulson Put,' Presidential Politics, and the Global Financial Meltdown," appears in the next issue of the International Journal of Political Economy.


WALKER TODD
Todd worked for many years in the Federal Reserve System. He was a legal officer of the Federal Reserve Bank of New York and a legal and research officer at the Cleveland Federal Reserve Bank. He is the author of many studies of bank failure, reform of the Fed's discount window, open market operations, and the Reconstruction Finance Corporation of the 1930s.

Also, see "The Sanc y of AIG's Contracts" by Glenn Greenwald.

For more information, contact at the Ins ute for Public Accuracy:
Sam Husseini, (202) 347-0020; or David Zupan, (541) 484-9167

[Yonivore]

So, now you've got the White House calling it the "Dodd Amendment" in an attempt to deflect attention from the fact Obama (nor his aides) read the Spendulus Bill before signing it. Democrats throwing each other under the bus.

This administration is a joke and, it'd be funny if he weren't so incompetent.

[Cant_Be_Faded]

I'd rather Barack become dictator than anyone remotely like yonivore becoming president ever again.

[jack sommerset]

i'd rather barack become dictator than anyone remotely like yonivore becoming president ever again.

weak


fail

[ChumpDumper]

Bush never plagiarized other people's articles to make himself look smarter.

[MaNuMaNiAc]

So, now you've got the White House calling it the "Dodd Amendment" in an attempt to deflect attention from the fact Obama (nor his aides) read the Spendulus Bill before signing it. Democrats throwing each other under the bus.

This administration is a joke and, it'd be funny if he weren't so incompetent.

...

http://www.spurstalk.com/forums/show...4&postcount=48

zero ing shame, don't you? I was half expecting a meltdown similar to Buddy Holly's after that post, but you've done it before, and obviously hasn't stopped you from still posting as if you're still relevant

The administration is a joke?? what about you? you plagiarizing

[cool hand]

well.......AIG is paying back the bonuses..............end of story...lets move on.


Repugs lose again.

[coyotes_geek]

well.......AIG is paying back the bonuses..............end of story...lets move on.


Repugs lose again.

Please. The employees get to keep the money and all Geitner is doing is deducting the bonus money out of the next round of bailout money. And AIG can always get more bailout money. This is just a lame attempt by Geitner to save face. It's the equivalent of trying to punish a teenager by telling them you're going to take away 100 text messages a month from their unlimited texting plan.

[smeagol]

This administration is a joke and, it'd be funny if he weren't so incompetent.

What about the last one? Wasn't that one a ing joke?

[MannyIsGod]

I wish someone from AIG would just come out and tell the government to shut the up. They need to stop acting like they made some kind of philanthropic move by saving AIG. They did it only because it was nessecary to save all of us, and in the long run the 135 million in bonus money isn't even to shake your act considering the context of the entire situation.

I'm really annoyed with all the political grandstanding to this point. I was annoyed on day one, but now that this is everywhere I'm really annoyed.

[DarrinS]

I wish someone from AIG would just come out and tell the government to shut the up. They need to stop acting like they made some kind of philanthropic move by saving AIG. They did it only because it was nessecary to save all of us, and in the long run the 135 million in bonus money isn't even to shake your act considering the context of the entire situation.

I'm really annoyed with all the political grandstanding to this point. I was annoyed on day one, but now that this is everywhere I'm really annoyed.

Damn, Manny. I actually agree with you.

[coyotes_geek]

I wish someone from AIG would just come out and tell the government to shut the up. They need to stop acting like they made some kind of philanthropic move by saving AIG. They did it only because it was nessecary to save all of us, and in the long run the 135 million in bonus money isn't even to shake your act considering the context of the entire situation.

I'm really annoyed with all the political grandstanding to this point. I was annoyed on day one, but now that this is everywhere I'm really annoyed.

Well said.

True, there are a bunch of bags at AIG. But they are bags who our government willingly made business partners to taxpayers. And frankly the harsh truth of the matter is that if we taxpayers want to hold on to any hope whatsoever that we might actually get our money back out of this deal then we need to realize that we're dependent upon those bags to fix this mess. I'm sure they'll be more motivated than ever to look out for our best interests now that we've made a public spectacle of them.

[coyotes_geek]

Yes, it has given us control. We are in the middle of exercising that control.

The money used to fund the losses are going to the holders of the deriviatives contracts, whoever they are, and yes, that includes foreign banks, and companies.

It is accountable to us, just as any management is accountable to us. We can and probably will, fire a few people.

Remember that the bonuses were allocated last january or so, well before the losses and bailouts. We weren't in control, and they weren't in trouble at this time last year.

You CAN bet that going forward some, if not all, of these asshats WILL lose their jobs, and WILL find it almost impossible to get jobs someplace else doing the same thing they were doing.

The most probable outcome is to break up the company into the sound parts ( the stable, profitable insurance companies), sell them, and for the investment arm, we will simply wind that down.

AIG will pretty much cease to exist, and the government/shareholders will get money from the sale of those subsidiaries.

Apparently the only control we have is the ability to drag their CEO in front of congress and ridicule him. We effectively own the company, yet all we can do is try to exert some external political pressure. That's not control. Who the buys 80% of a company and doesn't even have one seat on the board of directors?

[Crookshanks]

FURY, DC HYPOCRITES
March 18, 2009

ALL the world's a stage, wrote Shakespeare, and in the world of Washington, the curtains have opened on the most elaborate farce of the year.

Welcome, taxpayers, to the Kabuki Theater of AIG Outrage - where DC's histrionic enablers of taxpayer-funded corporate bailouts compete for Best Performance of Hypocritical Indignation.

Over the weekend, cloaked in their finest populist costumes, the Beltway's hair-sprayed and powdered politicians and White House aides took to the airwaves to inveigh against $165 million in employee-retention payments made by the government-backed insurance giant.

The checks were mailed Friday, but the March 15 bonus deadline had been on the Capitol Hill radar screen since December.

But it wasn't until last week that the hapless court jester of the Obama administration, Treasury Secretary Timothy Geithner, scrambled to rein in the payments.

AIG Chief Executive Edward Liddy basically told him to buzz off.

Geithner, the primary architect of the original $85 billion AIG bailout last fall, "reluctantly" approved the bonuses.

And now his outraged boss has ordered him to scour every legal nook and cranny possible to get the money back.

Spare me President Obama's finger-wag. He's "outraged?" Meh.

Two weeks ago, Team Obama forked over another $30 billion for the basket-case company after it reported $61.7 billion in fourth-quarter losses.

That's on top of the first $85 billion round and the second $38 billion round under George W. Bush - both of which Obama supported. (Obama, by the way, collected more than $101,000 in AIG campaign contributions.)

Don't talk to me about how the Obama administration opposes rewarding failure. And don't talk to me about all the politicians stampeding to tax AIG's bonuses.

Democratic Sen. Chris Dodd of Connecticut, the corporate crony who is the largest recipient of AIG donations, is now leading the charge to tax the retention payments in order to recoup the $450 million the company is paying to employees in its financial-products unit.

But Dodd, it turns out, was for protecting AIG's bonuses before he was against them.

Fox Business reporter Rich Edson pointed out that during the Senate porkulus negotiations last month, Dodd successfully inserted a teeny-tiny amendment that provided for an "exception for contractually obligated bonuses agreed on before Feb. 11, 2009," which exempts the very AIG bonuses Dodd and others are seeking to tax.

Pay no attention to what his left hand was doing. Dodd's right fist is pounding mightily, mightily for the sake of the taxpayers. The hypocritical indignation on the Hill is bipartisan.

On his Twitter page last night, Sen. John McCain huffed, "If we hadn't bailed out AIG = no bonuses for greedy execs."

Well, if the GOP presidential candidate had held fast to his opposition to such doomed corporate bailouts in the first place, maybe bailout-a-palooza wouldn't have spiraled into the gazillion-dollar mess it inevitably became.

If Washington's newfound opponents of rewarding failure want to do taxpayers a favor, how about giving back their automatic pay raises? How about returning all their AIG donations?

How about taking back all the bailout money to all the failed enterprises, from Fannie Mae and Freddie Mac to AIG, the automakers and the big banks? Barry? Harry? Nancy? John? Chris? Bueller? Bueller?

Exit stage left. The curtain falls.

Mic e Malkin is author of "Unhinged: Exposing Liberals Gone Wild."

[MannyIsGod]

Ok, fair enough with the article since I can't disagree with most of it. But McCain should add a bit more to his twitter page. I suggest this.

"If we hadn't bailed out AIG = no bonuses for greedy exects BECAUSE THERE WOULD BE NO WORLD FINANCIAL SYSTEM AS WE KNOW IT"

That works about well. There's nothing else like attacking fake political moves with fake political moves.

[ChumpDumper]

A lot of it depends upon who specifically is getting these bonuses. AIG is a big company, and many of its components were performing well and had nothing to do with the meltdown. Those guys who got the company and the everyone else into the current financial crisis, though -- why were they even retained long enough to receive a bonus?

Can you imagine that performance review?

"Well, on the plus side you have perfect attendance the past two quarters and you won the limbo contest at our last corporate retreat. On the minus side you ruined this company and threw the economy of the entire world into a deep recession that will probably get worse in the near future. Here's a check for a few million for staying on. Thanks for everything you do."

[Crookshanks]

A lot of it depends upon who specifically is getting these bonuses.

I heard this morning that over 40 people who got these bonuses are no longer even employed by AIG. Considering these were "Retention" bonuses - that seems rather idiotic!

[MannyIsGod]

Oh, and making AIG pay back the bonuses is laughable considering that by this point WE ARE AIG since we ing own it. I just hate this entire dog and pony show.

[Cant_Be_Faded]

I'm waiting for a yonivore post that is 99% from an article he did not reference . . . .