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Old 03-22-2009, 10:29 AM   #21
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I have been listening to the CEO's of AIG and the big banks plead with the congress not to impose the 90% tax on executive retention bonuses...
I personally thought it was a heck of a warning shot across the bow.
Please note that this completely biased point of view is coming from a former govt contracts monitor.
If AIG is going to be on the government dole, they need to understand they are no longer in complete control of their destiny. If AIG doesn't like that, then give the bailout money back and go it alone on their own nickel.
Can't have it both ways...those govt purse strings were attached once they cashed the check. If you sign on the dotted line...
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Old 03-22-2009, 11:09 AM   #22
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Originally Posted by freebird5825 View Post
If AIG is going to be on the government dole, they need to understand they are no longer in complete control of their destiny. If AIG doesn't like that, then give the bailout money back and go it alone on their own nickel.
Freebird, I understand your POV, and actually agree. My issue regards this smokescreen from that bunch in Congress who knew about the bonuses, inserted the language regarding bonuses, or wrote loopholes to protect the bonuses and now are all up in arms preening for the cameras. Then to have the unmitigated gall to ask for a 90% tax on this money in some sort of punitive action. Unacceptable (frankly imo un-American), and I've seen no argument yet that can persuade me otherwise.
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Old 03-22-2009, 11:24 AM   #23
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Freebird, I understand your POV, and actually agree. My issue regards this smokescreen from that bunch in Congress who knew about the bonuses, inserted the language regarding bonuses, or wrote loopholes to protect the bonuses and now are all up in arms preening for the cameras. Then to have the unmitigated gall to ask for a 90% tax on this money in some sort of punitive action. Unacceptable (frankly imo un-American), and I've seen no argument yet that can persuade me otherwise.
And beyond the taxing of the AIG bonuses and the obvious hypocracy thereof, these people now ant to take it further and regulate compensation for all financial services companies (irrespective of whether they have taken bailout money). It is a slippery slope that doesn't end until they have absolute control over compensation of all industries (do you really think they wouldn't want to limit comp for oil company, tobacco, or health care executives). I really wonder what industry--other than trial lawyers and public school teachers--are not on this administration's enemies list.

As Mr Kudlow points out, this seems to be a thinly vieled attempt to take the country back to the hey day of progressive politics where the top rate of taxation reached 94%.


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A bit of history is in order. Following WWI, the Harding-Coolidge-Mellon Republicans returned the country to tax normalcy by reducing Woodrow Wilsonís 75 percent wartime tax to 25 percent -- thus triggering the roaring growth of the 1920s. Then came the Depression, spawned in large part by Herbert Hoover and FDR, who raised the top tax rate to 63 percent, 70 percent, and finally 94 percent.
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Old 03-22-2009, 11:31 AM   #24
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If it's within the context of economics, financial markets, tax policy, fiscal policy, health care or other issues which are of relevance to the Quest for FIRE, by all means, go for it.

I just wanted to make that clear because there is no blanket "prohibition" on discussing political matters (despite what some people seem to think) -- but there is a contextual requirement that it be relevant. I'm not aiming that at you or anyone else in particular, but this seemed like a good place to provide a reminder.
Thanks for that...
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Old 03-22-2009, 11:32 AM   #25
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Freebird, I understand your POV, and actually agree. My issue regards this smokescreen from that bunch in Congress who knew about the bonuses, inserted the language regarding bonuses, or wrote loopholes to protect the bonuses and now are all up in arms preening for the cameras. Then to have the unmitigated gall to ask for a 90% tax on this money in some sort of punitive action. Unacceptable (frankly imo un-American), and I've seen no argument yet that can persuade me otherwise.
I hear ya. It all boils down to what is actually in black and white on the bailout agreement paperwork. It will get sorted out.
Congress is certainly full of grandstanders, no argument there.
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Old 03-22-2009, 11:38 AM   #26
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It is not Washington's duty to regulate bonuses and executive pay, despite the fact that we now all own AIG. If we don't like what they are getting, then we can attend a shareholders meeting, and I will of course have the concession on old eggs and tomahtoes, and vote accordingly.
I think executive compensation and the compensation system for Wall Street scriveners has gotten so far out of hand that the free market and unrestrained capitalism has been dysfunctional in this area. This area needs thoughtful and insightful regulation, if taxpayer funds are involved.

Washington and some of its financial regulators have been attempting to regulate one distorted aspect of executive compensation for the last few years: "golden parachutes" in government-sponsored enterprises like Fannie and Freddie, and these arrangements essentially get wiped out for banking executives in "failing depository institutions" where the taxpayer is indirectly on the hook.
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Old 03-22-2009, 11:53 AM   #27
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I think executive compensation and the compensation system for Wall Street scriveners has gotten so far out of hand that the free market and unrestrained capitalism has been dysfunctional in this area. This area needs thoughtful and insightful regulation, if taxpayer funds are involved.

Washington and some of its financial regulators have been attempting to regulate one distorted aspect of executive compensation for the last few years: "golden parachutes" in government-sponsored enterprises like Fannie and Freddie, and these arrangements essentially get wiped out for banking executives in "failing depository institutions" where the taxpayer is indirectly on the hook.
I think compensation for athletes, TV personalities, and hollywood actors and actresses has gotten out of hand; shouldn't the government do something about that?
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Old 03-22-2009, 12:22 PM   #28
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And beyond the taxing of the AIG bonuses and the obvious hypocracy thereof, these people now ant to take it further and regulate compensation for all financial services companies (irrespective of whether they have taken bailout money).
There is a good (or at least necessary) reason for doing this which is a bit counter intuitive. What I think you will see is that this extension of regulation is an attempt to quell the populist rage without undermining Treasury's attempt to fix the economy. In this way, it might actually be kind of smart given the current "off with their heads" political environment.

If you remember a few months ago when TARP was originally rolled out, the government WANTED banks to take the money. Some were even required to take the money. Paulson and crew went out of their way to make sure the program was attractive to banks and that it didn't have punitive strings attached . . . which is why compensation restrictions were stripped out and watered down.

Why did they do this? Because the financial system needed capital and the government wanted to help. Typically you don't help someone and kick them in the shin at the same time.

Now the government is rolling out other programs, including TALF and Geithner's new proposal to buy "toxic" assets, that rely on private participation. So just like TARP, the government is trying to make it attractive to participate. If, instead, they pass a bill that specifically punishes TARP participants, who will sign up for the new programs? No one! So they don't want to cut off their nose to spite their face.

But at the same time, they can't simply ignore the populist outrage over bonuses even though it focuses on matters that are relatively trivial when compared with what is actually at stake. So they have to do something.

What, I believe, they are trying to do is convert the narrowly focused punitive tax proposals into a broader (and most likely more flexible) set of regulations. If TARP participants aren't singled out, the damage to Treasury's existing and future programs is reduced. While at the same time government can announce a plan that "does something" about "outrageous" Wall Street compensation.
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Old 03-22-2009, 01:05 PM   #30
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I think compensation for athletes, TV personalities, and hollywood actors and actresses has gotten out of hand; shouldn't the government do something about that?
Are they getting a bailout? If so, then yes.
That aside though, these bonuses are NOT performance bonuses. They are bonuses to people to stay with the company even though they are working to eliminate their own job.
Agreement or disagreement over this should have surfaced back when the retention bonuses were first conceived of.
The politicians are grand standing, and the public is unaware of the facts. Seems about par for the course
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Old 03-22-2009, 01:38 PM   #31
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Are they getting a bailout? If so, then yes.
That aside though, these bonuses are NOT performance bonuses. They are bonuses to people to stay with the company even though they are working to eliminate their own job.
Agreement or disagreement over this should have surfaced back when the retention bonuses were first conceived of.
The politicians are grand standing, and the public is unaware of the facts. Seems about par for the course
Agreed. However, the new proposals apparently will apply to all banks and financial services companies irrespective of whether they received TARP money. I am looking forward to a compensation cap for NBC and CNBC personalities as the result of GE receiving TARP money (although I won't hold my breath).
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Old 03-22-2009, 04:46 PM   #32
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I think compensation for athletes, TV personalities, and hollywood actors and actresses has gotten out of hand; shouldn't the government do something about that?
Yep, if these others are getting a handout from the Government -- are they?
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Old 03-22-2009, 04:52 PM   #33
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Agreed. However, the new proposals apparently will apply to all banks and financial services companies irrespective of whether they received TARP money. I am looking forward to a compensation cap for NBC and CNBC personalities as the result of GE receiving TARP money (although I won't hold my breath).
Kindly direct me to these proposals -- that's interesting news to me. Never mind, I found a recent NY Times article about this. But the Fed, SEC, and other regulators probably have existing authority to regulate compensation matters at Bank Holding Companies, Hedge Funds, and banks -- they probably already do that for perverse compensation arrangements like golden parachutes.
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Old 03-22-2009, 05:31 PM   #34
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Thanks for that...
You know, of course, there are plenty of other places to go for off-topic politics. If you'd rather make thinly veiled complaints about the closing of the Soap Box, have fun.
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Old 03-22-2009, 06:57 PM   #35
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You know, of course, there are plenty of other places to go for off-topic politics. If you'd rather make thinly veiled complaints about the closing of the Soap Box, have fun.
Not complaining, just enjoying the game...
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Old 03-23-2009, 10:33 AM   #36
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Kindly direct me to these proposals -- that's interesting news to me. Never mind, I found a recent NY Times article about this. But the Fed, SEC, and other regulators probably have existing authority to regulate compensation matters at Bank Holding Companies, Hedge Funds, and banks -- they probably already do that for perverse compensation arrangements like golden parachutes.
And this in a nutshell is the problem with govt interference in private business in the first place. Define "perverse compensation".... define "rich".. Most people including myself have a hard time doing that. Why? Because these are subjective terms with no actual meaning. To someone who makes 30k/ year I am rich. To someone who makes 30 million/year, I am poor. Who is right or wrong?

Once the govt start tageting people that are "too rich" (whatever that term means), they can set their "rich" bar anywhere they want to. What happens if you find yourself on the wrong side of that bar some day. I am sure there are many here in the forum that already do. If you get over a certain threshold and the govt taxes all of your assets away who in their right mind would work past that limit? And in doing so, does that increase or decrease the productivity of the US? It is almost like saying that in the US you are only allowed to be successful up to a certain point. Why bother trying if the sky is NOT the limit?

What most people still refuse to see is what these "rich" folks had to do to get their "rich" status in the first place. Read the forbes 100 richest people in the world and the thing that will stand out is how few of them inherited their money. The rest made it themselves. And what we see today is their success. But that success did not come overnight. NO! It took years of hard work, sleepless nights, 100hr work weeks, months away from their families, and the list goes on. But people tend to ignore all of the hard work that went into it, believing that they somehow arrived at their fortunes accidently. As though they were just walking down the street one day and divine intervention scooped them up and made them wealthy. Just not true.
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Old 03-23-2009, 11:37 AM   #37
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And this in a nutshell is the problem with govt interference in private business in the first place. Define "perverse compensation".... define "rich".. Most people including myself have a hard time doing that. Why? Because these are subjective terms with no actual meaning. To someone who makes 30k/ year I am rich. To someone who makes 30 million/year, I am poor. Who is right or wrong?

Once the govt start tageting people that are "too rich" (whatever that term means), they can set their "rich" bar anywhere they want to. What happens if you find yourself on the wrong side of that bar some day. I am sure there are many here in the forum that already do. If you get over a certain threshold and the govt taxes all of your assets away who in their right mind would work past that limit? And in doing so, does that increase or decrease the productivity of the US? It is almost like saying that in the US you are only allowed to be successful up to a certain point. Why bother trying if the sky is NOT the limit?

What most people still refuse to see is what these "rich" folks had to do to get their "rich" status in the first place. Read the forbes 100 richest people in the world and the thing that will stand out is how few of them inherited their money. The rest made it themselves. And what we see today is their success. But that success did not come overnight. NO! It took years of hard work, sleepless nights, 100hr work weeks, months away from their families, and the list goes on. But people tend to ignore all of the hard work that went into it, believing that they somehow arrived at their fortunes accidently. As though they were just walking down the street one day and divine intervention scooped them up and made them wealthy. Just not true.
Well-stated. When I was first starting out in my career in industry, working in engineering/estimating I noticed something about those who were the most financially successful- they all worked extremely hard, put in long hours, lived below their means, and were either in an equity position with the company or were in outside sales. It didn't take me long to realize that I could get into a commissioned sales position a lot quicker than an equity position. So, after 20+ years of 120+days/year on the road and 60+ hour work weeks, guess what? I 'm now "rich" at 50 (by both Obama's and Biden's definitions! ) and will retire a lot earlier and easier than 95+% of the 8-5 crowd who just put in their 35-40 hours and went home to their spouses, kids, and TV's every night. Not passing judgement, just making an observation. Unfortunately, many of these are the same folks whom are now getting bailed out of their mortgages because they thought they could live above their 8-5 incomes on their HELOCS ) Amazing how that works.

I don't have a problem with the AIG bonuses as long as AIG had the financial strength to pay them. I have a big problem when the taxpayers are footing the bill.
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Old 03-23-2009, 11:49 AM   #38
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I think compensation for athletes, TV personalities, and hollywood actors and actresses has gotten out of hand; shouldn't the government do something about that?
Absolutely! And I think Congress should be involved in developing a format for NCAA football playoffs, criteria for Academy Award nominations and voting and should mandate to businesses what they produce, how much they can charge, who they can hire and whether single or 2-ply tp is provided in the potty.

They know better than plebian private citizens and need to speak up for all our benefit.
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Old 03-23-2009, 11:54 AM   #39
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Absolutely! And I think Congress should be involved in developing a format for NCAA football playoffs
They've already blustered about this. In particular Congresscritters from Texas and Utah, thinking their teams got shafted in the BCS, threatened to sue the BCS over "false advertising" if they continued to call it a "national championship" game when there is no playoff.
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Old 03-23-2009, 12:08 PM   #40
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And this in a nutshell is the problem with govt interference in private business in the first place. Define "perverse compensation".... define "rich".. Most people including myself have a hard time doing that. Why? Because these are subjective terms with no actual meaning. To someone who makes 30k/ year I am rich. To someone who makes 30 million/year, I am poor. Who is right or wrong?

Once the govt start tageting people that are "too rich" (whatever that term means), they can set their "rich" bar anywhere they want to. What happens if you find yourself on the wrong side of that bar some day. I am sure there are many here in the forum that already do. If you get over a certain threshold and the govt taxes all of your assets away who in their right mind would work past that limit? And in doing so, does that increase or decrease the productivity of the US? It is almost like saying that in the US you are only allowed to be successful up to a certain point. Why bother trying if the sky is NOT the limit?

What most people still refuse to see is what these "rich" folks had to do to get their "rich" status in the first place. Read the forbes 100 richest people in the world and the thing that will stand out is how few of them inherited their money. The rest made it themselves. And what we see today is their success. But that success did not come overnight. NO! It took years of hard work, sleepless nights, 100hr work weeks, months away from their families, and the list goes on. But people tend to ignore all of the hard work that went into it, believing that they somehow arrived at their fortunes accidently. As though they were just walking down the street one day and divine intervention scooped them up and made them wealthy. Just not true.
So, you think it's perfectly fine for a CEO to legitimately loot his company and abuse his fiduciary responsibilities by engaging in "perverse compensation" practices like paying himself "exorbitant" levels of compensation that bear no relationship to long term growth and long term business practices of the company he's mismanaging -- where there is really no effective way of policing this, other than counter-productive shareholder derivative suits? You want the Government to stand on the sidelines and not ensure greater transparency for shareholders or ensure a greater level playing field. This is why "golden parachutes" are generally prohibited; Let's just stick with that "perverse compensation" feature instead of raising the red herring of "rich" or "generous" levels of pay.

I don't really understand your concept of capitalism that appears to permit unmitigated and unrestrained greed that would result in "perverse" societal outcomes. You can't give the snake oil salesman free reign over everything!

Ah fagedaboutit, we've been down this path before.
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