Another Lopsided Poll: AIG bonuses.

[MichaelB]

It seems to me that other than a turnaround situation (e.g. a new management team takes over GM), no profits= no bonus. In AIG cases no government bailout would have lead to bankruptcy, and the bankruptcy judge would have certainly had the option to toss the bonus out the window. Now I'll admit my knowledge of bankruptcy laws is minimal and British contract laws non-existent.

So for those you urging a not enough information option, I doubt unless you were a Barrister, it would be that helpful to have more info.

Well said.

 

[Independent]

If the word "deserve" means "legally entitled to", then I think the answer is yes.

AIG chairman Edward M. Liddy informed the Treasury Department Saturday that the company was contractually obligated to pay the bonuses by a Sunday deadline, based on agreements concluded in early 2008. The firm, which lost nearly $62 billion in the last quarter of 2008, said it would try to reduce further bonuses to be paid in 2009. The payments due yesterday were part of overall promised bonuses totaling more than $400 million for 2008 and 2009.

washingtonpost.com

(The bonuses causing all the stir are in the Financial Products division, which is where all the problems are concentrated. Apparantly people knew the wheels were coming off in early 2008 and the company did "stay bonuses" to keep them around for a while.)

If "deserve" means "morally entitled to", then my answer is no. Not only did they screw things up, work for a division that lost huge sums of money, but they also wouldn't be getting the money if the gov't had let the company go into bankruptcy.

The same is true for most of the CDS counter-parties. They took their chances on AIG's financial strength, they only "deserve" the money legally because we're bailing them out. They certainly don't "deserve" it morally. The counter-parties are getting billions, the employees are getting millions.

 

[FIRE'd@51]

The same is true for most of the CDS counter-parties. They took their chances on AIG's financial strength, they only "deserve" the money legally because we're bailing them out. They certainly don't "deserve" it morally.

But wasn't the risk to AIG's counter-parties a major portion of the systemic risk that made the bailout necessary in the first place?

 

[clifp]

Not sure what this means. Should I feel good about myself or ashamed?

I am not sure that Anti-populism is word, but it should be. I think of Gregory Peck as the lawyer in To Kill a Mocking Bird standing up to the populist lynch mob. So if you see think being compared to Atticus Finch is good thing...

I happen to think the bonus shouldn't be paid, but I can't argue to much with those saying, laws and contracts need to be respected regardless of what the politicians and press are screaming.

 

[Gumby]

If AIG is to remain a going concern, they need to have the tools to retain and recruit successful people.

My guess is that there are plenty of currently unemployed people who would be more than happy to step in if the AIG employees are unsatisfied.

I say don't pay the bonuses and let them litigate. Do you think any of them will ever again have a future in this industry if they do? Heck, if I were AIG's board, I would not only refuse to pay the bonuses, I would sue the executives for what they already received, on a "theft of services" theory. (if for no other reason than to improve my leverage).

 

[FIRE'd@51]

My guess is that there are plenty of currently unemployed people who would be more than happy to step in if the AIG employees are unsatisfied.

Do the unemployed people to whom you refer know how to unwind derivative trades involving toxic assets? If they don't, who knows how much money they will lose trying to do this. They might lose more than the bonuses involved.

 

[Gumby]

Do the unemployed people to whom you refer know how to unwind derivative trades involving toxic assets? If they don't, who knows how much money they will lose trying to do this. They might lose more than the bonuses involved.

I bet at least some of them do. It has been a bloodbath on Wall Street and there are many qualified people looking for jobs.

 

[FUEGO]

My guess is that there are plenty of currently unemployed people who would be more than happy to step in if the AIG employees are unsatisfied.

You right, you right. Heck, why even pay them? I saw an article on CNN about attorneys who are out of work doing pro bono just to keep up their skills and pad the ole resume. You could probably pick some of them up cheap or free.

I'm sure high level financial execs are fungible commodities and any ole warm body could fill their roles.

 

[FUEGO]

I bet at least some of them do. It has been a bloodbath on Wall Street and there are many qualified people looking for jobs.

Well, as a taxpayer to the US govt who owns much of AIG, I am all for cutting labor costs. You may be on to something here. Maybe we should fire all the highly paid folks and then put those jobs out to bid. Low bidder on salary figures gets the job. That'll cut those costs right to the bone.

I'll put in my bid for only $249,000 for any upper level CEO position.

 

[Gumby]

Do you really think the guys at AIG are the only ones who can do that work?

 

[clifp]

Heck I say hire the 2 year old from the E-Trade commercials. Unlike stocks, derivatives trading is a zero sum game. The folks in AIG financial products group have proven themselves to either very unlucky or very bad in the aggregate. Now some maybe good but it indisputable that as group the people at AIG were on the wrong side of many trades over the last year. As involuntary shareholder of AIG, I say fire the group and hire the folks that beat them last year.

This guys are in the insurance business and they sold insurance premiums way too cheaply. I think what is worse is they destroyed AIG reputation. As Buffett says.

If you lose money for us, we will be forgiving. If you lose reputation for us, we will be ruthless.”

 

[FIRE'd@51]

I bet at least some of them do. It has been a bloodbath on Wall Street and there are many qualified people looking for jobs.

Perhaps there are some who could come up to speed in time. But they are currently not familiar with AIG's book of business, so there is money lost in the time that it takes them to come up to speed. I'm sure that is why these folks were payed retention bonuses in the first place. They were deemed necessary for the ongoing book of business.

Sort of like replacing a lawyer in the middle of a case. The replacement attorney may be qualified, but there still may be an opportunity cost to the client while he comes up to speed with the case.

 

[FIRE'd@51]

As involuntary shareholder of AIG, I say fire the group and hire the folks that beat them last year.

I doubt there are many Goldman Sachs derivative traders who would want jobs at AIG.

 

[73ss454]

Hey, these people are lucky to have jobs the way things are out there. I got a bonus for them, my 13EEE.

 

[harley]

Personally, my Megacorp never hesitated to change the rules whenever it worked out better for them. Off with their heads, says I!

 

[clifp]

I doubt there are many Goldman Sachs derivative traders who would want jobs at AIG.

I think the converse is true also, not many AIG traders could get a job at Goldman Sachs right now. Really, with thousands of Merrill Lynch, Bear Stearns, Citigroup and Hedge fund traders looking for jobs, who would want to hire somebody from AIG financial products given the alternatives. Much like stock investing, or sports betting, there is very large element of luck in additon to skill involved in trading. Maybe the AIG traders were just unlucky and not stupid but why take a risk and hire one. I suspect AIG FP group is a pretty tainted bunch, so their threats of lawsuits or walking, are pretty hollow.

 

[FUEGO]

Guys, you aren't thinking of the practical elements of this issue. If these guys don't get their multi-million dollar bonuses, then who is going to pay their mortgages? That is right! You and I via the mortgage bailout. Servicing a note on a multi-million dollar house ain't cheap after all.

 

[audreyh1]

Isn't that just great when a group of people run their company in the ground so bad they threaten to destroy the global financial system, but on the way there, they are sure to write iron-clad contracts that guarantee themselves all sorts of sweet bonuses no matter what happens!?!?!?

Contracts? Please! There was downright fraud at this company. I don't care if a contract says "I still get my excessive bonus even if I or my employer engages in fraudulent and outrageously stupid behavior." That doesn't make sense and should allow a compensation contract to be renegotiated.

Audrey

 

[Running_Man]

http://www.foxbusiness.com/story/markets/industries/finance/dodd-cracks-aig---time/

The lack of concern over contract law that is overtaking America is very troubling to me. If your word is no good so that one needs a signed contract to enforce and if that signed contract can be voided if enough in the populace scream, then there is no system upon which to base a business other than currying favors with the government and PR with the populace.

The error made was by the government paying money without any restrictions at the time nor idea of how the money was to be used. Screaming about this 100 million + is a very pleasant distraction of what is truly happening with the 2 trillion of funds paid.

Do people still believe the original government TARP of 750 billion will ultimately be profitable for the US?

 

[OAG]

Running Man: We must be doing the identical surfing as I was going to post this same or similar link. It is really kind of scary to see these politicians reverse their own laws virtually days after passing them. The way I read the article Mr/Senator Dodd wrote a into the law specifically to EXEMPT these bonuses (they could be accomplished) and now is trying to tax them at up to 90%. All I can say is watch out if these folks decide to go nuts (well more nuts than they already have). Rewriting contract law on the fly is going to have a lot of "unintended consequences". As far as TARP being profitable for the US Taxpayers goes, and as our VP likes to say "Give me a F**king break".

 

[Midpack]

Amid AIG Furor, Dodd Tries to Undo Bonus Protections He Put In - FOXBusiness.com

The lack of concern over contract law that is overtaking America is very troubling to me. If your word is no good so that one needs a signed contract to enforce and if that signed contract can be voided if enough in the populace scream, then there is no system upon which to base a business other than currying favors with the government and PR with the populace.

The error made was by the government paying money without any restrictions at the time nor idea of how the money was to be used. Screaming about this 100 million + is a very pleasant distraction of what is truly happening with the 2 trillion of funds paid.

Do people still believe the original government TARP of 750 billion will ultimately be profitable for the US?

Fair enough re: contracts - you're right it's a very slippery slope. But without the $170B in TARP/bailout money, how would AIG pay the $165M in bonuses - how do you reconcile that? Taxpayers have a right to be outraged here IMHO...

 

[jug]

Amid AIG Furor, Dodd Tries to Undo Bonus Protections He Put In - FOXBusiness.com

The lack of concern over contract law that is overtaking America is very troubling to me. If your word is no good so that one needs a signed contract to enforce and if that signed contract can be voided if enough in the populace scream, then there is no system upon which to base a business other than currying favors with the government and PR with the populace.

There is a very good possibility that these people who are getting the 165 m in bonus money are being scapegoated. The stars of wall street are those who do the trading and selling, they are paid on performance.

The products, such as swaps, whatever, are produced by actuaries and ok'd by the big guys, Liddy, Paulson, Fuld and the boys.

The boys knowing the products could well sink the company essentially gave the orders to sell these products like hotcakes, since AIG seems to be the only game in town to sell swaps against the mbs/cdo.s The sales people just sell and trade.

So who is the culprit here? Today I saw Schumer going after the bonuses, but if one is to look carefully, how many in the congress have received big bucks from these firms on behest of the "boys" on wall street.

Schumer is not going after Liddy, not after Thain, not after Greenberg, but going after this sales arm. It's like blaming the car dealer for the crappy car put out by the "boys" in Detroit.

They are being scapegoated.

Jug

 

[Running_Man]

Fair enough re: contracts - you're right it's a very slippery slope. But without the $170B in TARP/bailout money, how would AIG pay the $165M in bonuses - how do you reconcile that? Taxpayers have a right to be outraged here IMHO...

But what happened to the other 169.9 Billion? Government is just not telling, it is only the light of day that is making this stink. The truth is the government paid them the money to meet their obligations, I would have let AIG go bankrupt myself.

 

[HFWR]

This thread, and the Santelli thread, highlights the dangers of "populism". I expect the likes of Schumer, and most every other politician, to grandstand. But Mr. Santelli should have had a clear enough understanding of markets to know that if we just "let it fail", the dominoes could keep falling until there are none left standing.

My analogy is an old clunker, with carb and ignition problems, that requires you to always keep your foot on the throttle, lest the thing die, and be hard as hell to get started again...

Still, it's easy to see the irony in using the "keeping key people" argument; does this mean the same "key people" who drove AIG and other institutions, not to mention the world economy, into the ditch? Sheesh...

 

[dex]

It seems we are moving away from "rule of law" to the "rule of mob".

What the mob forgets is that weapons it supports be used on others can be turned around and used on it.

From the WSJ article quoted earlier:

In the letter, Mr. Liddy wrote that "outside counsel" had advised that the previously agreed to payments to employees at the financial products unit are "legal, binding obligations of AIG." He wrote that there are "serious legal, as well as business, consequences for not paying."
"I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them," Mr. Liddy wrote, but added, "Honoring contractual commitments is at the heart of what we do in the insurance business."