The Bonus Tax - Opinion

[grumpy]

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. Their argument strikes me as fallacious. They say that they need to retain those employees who have the knowledge and experience needed to help unwind the mess those companies are in.

It was my experience, while I was still working that very rarely did executives know the details of what was going on. It was the working level folks, not the ones getting big retention bonuses, that really did the work and knew the nitty-gritty details. My take is that the best thing that could happen to these companies would be for the executives to leave (who would hire them?) or be fired and for the companies to promote the working level folks to positions of authority.

 

[ziggy29]

I think the bonuses are an outrage, but I think a government that can change the rules after the fact because they don't like the results of what they already passed is even more of an outrage -- and a lot scarier.

And then they came for me, but....

 

[Midpack]

I also think the AIG bonuses are an outrage with two caveats.

1) There are certainly other bailout companies that have paid outrageous bonuses over the past few months, not sure why AIG has received extraordinary attention from the public, Congress or media?

2) It's more outrageous that our Congress & administration is acting all indignant when they a) specifically approved the AIG bonuses in Feb, b) have had a hand in the bailouts all along, and c) many have taken large contributions from AIG over the past few years. What's most appalling about it to me is that they get away with it. Chris Dodd flat out lied about his role on CNN this week, caught red-handed by Dana Bash, and again there will be no consequences. He's as crooked as they come, yet nothing happens to discourage it. That's at least as outrageous as the AIG bonuses IMHO.

I am also curious why we're outraged at $165M in bonuses, but no one seems to care that BILLIONS of the AIG bailout money went offshore (that's stimulus?). 40 TIMES as much just with the two below...

The list released Sunday of "counterparties" that benefited from the bailout is topped by European banks Societe Generale and Deutsche Bank, which received $4.1 billion and $2.6 billion, respectively.

AIG names recipients of its bailout money - CNN.com

 

[dex]

Frightening - IMHO
Government attempting to target a very specific group for a 90% tax. If this precedent is established who is next?
I'm guessing it is illegal.
- Retroactive
- Key issued - as a result of taking money from the USA gov't.

As others have said - this is a distraction from the key issues.
We are being failed by:
US government
US News organization
US Talk show hosts
US Entertainment industry
All of who are not raising the true issues and allowing themselves to go along with this deception.

 

[Gone4Good]

My take is that the best thing that could happen to these companies would be for the executives to leave (who would hire them?) or be fired and for the companies to promote the working level folks to positions of authority.

In this situation it is the "working level" folks who are making 7 and 8 figures.

This is all a bit of a farce. Had AIG been allowed to go bankrupt, the bankruptcy court would be agreeing to pay people millions of dollars to administer the wind-down of the derivative portfolios, just as the government agreed to do. For sure, many other highly paid AIG employees would have been terminated as fewer people are needed to run a liquidation rather than a "going concern".

If these taxes become law, I wouldn't be surprised to see effected employees stage a work stoppage. Hold on to your hats, boys and girls.

 

[FUEGO]

What's next? Health care reform/nationalization passes and a 90% retroactive tax is passed on any doctors that make more than $250,000 (total household income)?

It is scary to think that if this 90% tax goes unchallenged, it could be an easy way for the government to punish whoever they want.

What if Atlas shrugs?

 

[dex]

What if Atlas shrugs?

Good topic for another thread.
I don't want to distract from this one.
Get is started and I'll contribute.

 

[newporttony]

This just in on The Drudge Report. Only a matter of time before Obama, Pelosi, Schumer, Dodd, Reid, and Frank will determine what Americans are allowed to earn.

Obama will call for increased oversight of 'executive pay at all banks, Wall Street firms and possibly other companies' as part of sweeping plan to 'overhaul financial regulation', NY TIMES reporting Sunday, newsroom sources tell DRUDGE

 

[Gone4Good]

This just in on The Drudge Report. Only a matter of time before Obama, Pelosi, Schumer, Dodd, Reid, and Frank will determine what Americans are allowed to earn.

My sense is that Obama is desperately trying to dial this thing back and find a way to quell the angry mobs without completely destroying Treasury's ability to aid the financial system. Unfortunately, that train may have already left the station.

In an interview on 60 Minutes last week, Bernanke said his biggest fear is that we'll lose the political will to do what is necessary to stabilize the financial system. This blow-up over bonuses looks to me like it might be the last straw. Those who are advocates of letting large institutions fail may just get a chance to see how that works out. Lord help us all.

 

[FUEGO]

Good topic for another thread.
I don't want to distract from this one.
Get is started and I'll contribute.

Good topic for another forum! I'm not sure if an actual discussion of this could take place here with the standing prohibition on political discussions.

 

[ziggy29]

Good topic for another forum! I'm not sure if an actual discussion of this could take place here with the standing prohibition on political discussions.

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.

 

[jug]

This just in on The Drudge Report. Only a matter of time before Obama, Pelosi, Schumer, Dodd, Reid, and Frank will determine what Americans are allowed to earn.

Obama will call for increased oversight of 'executive pay at all banks, Wall Street firms and possibly other companies' as part of sweeping plan to 'overhaul financial regulation', NY TIMES reporting Sunday, newsroom sources tell DRUDGE

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.

The real concern is the incestuous relationship tween Congress and Wall street in preparing the ground for the rape of the banking industry with the US treasury insuring any screw up Wall street may cook up in it's vampirious quest to suck out a profit anytime anywhere. The bonus "issue" is a smoke screen to keep the American sheeple at bay so they will direct their wrath and pitchforks in a differrent direction.

Believe me, Congress's worst nightmare is a massive march on Washington, since then they know it's the beginning of the end.

jug

 

[bubba]

Believe me, Congress's worst nightmare is a massive march on Washington, since then they know it's the beginning of the end.

jug

And if Obama and his crew try to put limits on compensation for executives in this nation and change the tax rules to gig their political opponents, my guess is that a massive march on Washington is exactly what they will get. I thought this was still America. Heard one of those tea-parties is scheduled for around here soon - I think I'll check into one.

 

[newporttony]

Believe me, Congress's worst nightmare is a massive march on Washington, since then they know it's the beginning of the end.

jug

I'll get the tar and feathers. Just let me know the date and time.

 

[harley]

And if Obama and his crew try to put limits on compensation for executives in this nation and change the tax rules to gig their political opponents, my guess is that a massive march on Washington is exactly what they will get. I thought this was still America. Heard one of those tea-parties is scheduled for around here soon - I think I'll check into one.

I don't think any rich executives will need to march. In the first place, they've got corporate jets. In the second place, in about 2 years the politicians will be asking for contributions so they can run again, and the answers will be "sorry, we're broke. Ask the proletariat."

 

[samclem]

The government's (latest) plan to address "toxic assets" involves a public/private partnership. Government underwrites some of the risk and private investors buy the assets a a deep discount. One problem appears to be that private investors and companies with any money and/or sense do not want to partner with the government given the quickly changing policies and the latest vindictive pinpoint tax law outrage. Who would jump into bed with the government and invite this pain on themselves if there any bumps in the road? As a result of this little AIG fit, the government will get fewer participants/a worse price for these assets than if they'd just let the (relatively tiny) AIG exec bonus thing go. But, there were speeches to be made and grandstanding to be accomplished.

 

[armor99]

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. Their argument strikes me as fallacious. They say that they need to retain those employees who have the knowledge and experience needed to help unwind the mess those companies are in.

It was my experience, while I was still working that very rarely did executives know the details of what was going on. It was the working level folks, not the ones getting big retention bonuses, that really did the work and knew the nitty-gritty details. My take is that the best thing that could happen to these companies would be for the executives to leave (who would hire them?) or be fired and for the companies to promote the working level folks to positions of authority.

While it is certainly true that a CEO probably does not know how to do each and every job in his/her own company. The reverse is also certainly true. I doubt very much that a line worker would have any idea how to run an entire company either. And to all those who claim, "Well how hard could it be?"... I challenge you all to create your own company and find out for yourself how difficult it really is or not. Feel free to prove me wrong... and I will applaud your efforts.

I actually do agree with you on this point thought. I think those CEO's and high level exec's should quit, but probably not for the same reasons. If my contract bonus were being threatened, (and I would think it would be the same for most people reguardless of what their position is) I would probably choose to retire, or go find work somewhere else. Talented people will usually be able to find jobs even in a bad economy.

I guess what I cannot see.... is that if all of your high level exec's quit, then who will go out to try to create companies of their own? Why try to create a profitable business where if you succeed the govt will claim you are too "greedy" and then take away you profits? Will there be some profit level limit instituted by the govt as to how much profit you can take? Should a company only be able to launch so many new products a year, because they might become "too profitable" and that would hurt their bottom line?

I guess in closing the last questions I would ask are these. If you believe that most underlings in these companies are capable of becomming CEO's, then why do they not strike out on their own, and create their own companies? And if you claim they do not have the money or the intelligence to do just that, then don't they derserve to have the jobs that they presently do?

 

[Rambler]

...and just how do you think the 90% tax will be enforced on the overseas divisions It won't be. AIG et al will have to foot the bill if the US govt determines a 90% tax on the whole thing. That would be stupidity, yet again.

So, what if AIG asks for the money back (from overseas execs)? I don't think there's any way they'll give it back. If megacr@p gave me a 3-4 mill$ bonus and then said give it back or we fire you, I for one, would say "FIRE away, baby".

Yeah, the whole AIG thing irks me. "too big to fail, too big to understand, too big to control"...

R

 

[Texas Proud]

I saw on the news where some guy from overseas that works at AIG said most of the company is mad also... that a small group of 450 (IIRC) brought down the company that employs about 120,000 (again IIRC)...

I think that anyone who worked in that are is probably not 'talented' as some make out.... They either knew the risk they were taking and should not be hired by anyone else OR they did not know the risk and... why hire someone who is stupid

Most of the people who got the 'bonus' and want to keep it should be fired... but I do not think the gvmt should come in and tax it after the fact..

 

[JOHNNIE36]

Hope I'm not repeating or asking the same questions; but, I don't understand the salary/bonus pay structure of companies like AIG. I heard that (don't quote these numbers) 100's of people were getting upwards of $10M bonus and 1000's were getting $1M bonus. Back when I was w*rking, if the company had a losing year, there was no bonus. Bonuses are for sharing in the profits if you had a good year and you contributed to those profits in some way. Exceptional performance in your field, department, etc. Your level in the company certainly was a big part. Did AIG make a profit? Hell no! Why were they awarding these people? Why would they want to retain all the higher exec's? They were "losers". It seems like "this is your salary for the year and if you are still alive at the end of the year, you get a $1M bonus". Can someone explain campensation structures such as the ones at AIG, Morgan Stanley, Bank of America, Fannie and Freddie?

 

[freebird5825]

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...

 

[bubba]

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.

 

[newporttony]

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%.


Kudlow's Money Politic$

A bit of history is in order. Following WWI, the Harding-Coolidge-Mellon Republicans returned the country to tax normalcy by reducing Woodrow Wilson’s 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.

 

[Westernskies]

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...

 

[freebird5825]

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.