Bonuses, Bailouts, and Bullshit
By omb on Mar 18, 2009 in Finance, Porkulus
Gambling? I'm Shocked!
“I’m shocked! Shocked! – that gambling is taking place on the premises!” Followed by “Sir, your winnings…”. That scene from ‘Casablanca’ is the first thing that popped into my head when I heard the outcry from D.C. that AIG execs return their bonuses.
We’ve got Barney Frank, Chris Dodd and every other Democrat, some Republicans, not to mention and most of the media calling for the heads of the AIG executives because they paid out bonuses to themselves and their employees after receiving several rounds of Federal bailout money. The Pretender-in-Chief has been out there as well, doing his part.
Folks, this is a classic distraction technique. First of all, for Barney Frank and Chris Dodd to question the management abilities of anyone, given their vigorous denials that anything troublesome was amiss with Fannie and Freddie, is a joke to begin with. But I really don’t see where AIG is at fault here.
The theft is not in AIG taking $170M and handing it to its ‘greedy’ executives. The theft and mismanagement lies in the fact that something on the order of $150B taxpayer money was given to AIG in the first place, initially with Bush’s efforts, and most recently with Obeyme’s. A good deal of that money has already found its way into the coffers of foreign banks and insurance interests.
How much of your money has ended up in the hands of foreigners? Nobody knows, because the money was given to AIG with essentially, no strings attached. Still care about the .11% of the total sum of AIG dollars(note, they are no longer taxpayer dollars) were paid out in bonuses? Well, then your gripe is with Bush, Obama, Bernake, Geitner, and the U.S. Congress, not AIG.
Does it look bad? To some, but to my knowledge, bonuses can be contractual. Sometimes bonuses are granted in a year of good performance to be paid out in partial over following years. Other times employees are retained through the use of bonuses. But, even if this isn’t the case and upon receipt of the Fed money, the top execs at AIG said ‘Let’s party’, I would argue that they are still within their rights to have done so. They gave them the money so that they could continue operating, with no strings, and operate they did. That’s why these government bailouts of private industry are a bad idea.
If these grandstanding politicians were concerned about the AIG execs slathering themselves in taxpayer sponsored bonuses- and they are not concerned, they never would have bailed out AIG in the first place. We’ve all been told about how they were too big to fail and it would have brought the financial system to its knees, but I don’t buy that for a minute. The fact is they DID fail.
They did fail and they should have been put into bankruptcy and receivership. That is the only way the system can clean itself. This allows other smaller companies to fill the gaps left behind- feeding on the carcass of AIG, if you will. Take the pain, allow what is a very natural process take place, and guess what? Nobody’s getting any bonuses!
The whole notion that a company is too big to be allowed to fail is a straw man set up to frighten you into opening your wallet and letting greedy politicians to take your wealth. GM is not too big too fail. They also need to go into bankruptcy and reorganize – of course, there are those UAW contracts to consider.
I don’t care about the bonuses. It’s such a miniscule amount as compared to the vast sums that are flying out of the wallets of our descendents on a near daily basis. They will pay for this with a lower standard of living than we currently enjoy – and probably ridicule us for letting it happen, and rightly so.
This outcry over these bonuses is to distract you and get you focused on ‘greedy executives’, the objective is to vilify capitalism and get you to accept more and more government control over the economy. That is why Obeyme is out there beating this drum and for no other reason.
-OMB
Ok, so I wrote and posted this and right after, sat down to watch Glenn Beck which I had DVR’d. He basically said everything I just did, except in a lot more detail. I swear I didn’t copy Beck!!!
-OMB
omb | Mar 18, 2009 | Reply
Politicians and the press have long taken advantage of the populus’ jealousy of successful business men/women. They love to point out the details to their opulent lifestyles and considerable bonus checks.
Most people hear these stories and believe:
A) Nobody is worth that much money.
and/or
B) The spending is unjustified from a business standpoint.
I disagree totally, the $170,000,000 is peanuts compared to the amount of money that those individuals will *hopefully* bring to the company in return.
I think the scariest part of this whole deal would be our governments suggested fix for the problem, by creating a special tax for AIG bonuses.. the same bonuses they safeguarded in the redistribution of wealth (stimulus) bill.
Longshanks | Mar 18, 2009 | Reply
This is nothing but more class envy crap designed to get people focused on the big greedy businessman getting what he deserves by the ever vigilant politicians while they are backing up the truck to the treasury and driving off with our children’s financial future.
-OMB
omb | Mar 18, 2009 | Reply
I saw last week that congress’ approval ratings were actually at a 4-year high.. how does that happen? I feel like we must be living in a scene from the movie Idiocracy..
Longshanks | Mar 18, 2009 | Reply
Longshanks,
Where did you see that? Congress approval ratings have been in the toilet for the last couple of years, so it could move to 30% and be at a 4 year high. I’d like to see that link if you have it.
-OMB
omb | Mar 18, 2009 | Reply
FWIW:
http://www.gallup.com/poll/116530/Approval-Congress-Hits-Four-Year-High-Fueled-Dems.aspx?loc=interstitialskip
Longshanks | Mar 18, 2009 | Reply
I heard on Fox News today that in closed door meetings last month, negotiators from the House the Senate and the White House stripped a measure from the ‘stimulus bill’ which
would have restricted AIG bonuses.
So yes, the ‘heat’ from Congress is disingenuous.
They are all grilling Liddy who came in after the big collapse of AIG and the government interference. It is all a show for our benefit. They are going to save us again.
EAP | Mar 18, 2009 | Reply
PS. Bullshit is the right word.
EAP | Mar 18, 2009 | Reply
I am concerned about the “we can just tax them 100%” comments which are being thrown around as well. Think about it-congress making a tax for a specific group of people ( I mean aside from the money grubbing business owners). Hmmm.
do you think someone in congress already has this written up somewhere? Just a thought.
pj | Mar 18, 2009 | Reply
PJ
Whatever happened to ‘equal protection under the law’?
-OMB
omb | Mar 18, 2009 | Reply
OMB,
That’s only for people who don’t make enough to pay taxes, or if you are in Obama’s cabinet.
cocktail weenie | Mar 18, 2009 | Reply
Bad PR for AIG? Sure, especially when, oh, 95% of Americans have absolutely no idea what going on. But let’s not forget a few things. First, these bonuses were retainage bonuses. They were promised to AIG’s traders so they all wouldn’t leave the firm. These guys are very talented and experienced Wall Street derivatives traders. Those don’t grow on trees. They could have left AIG and gone elsewhere in a heartbeat. But AIG had TRILLIONS of derivative contracts to unwind. Who, exactly, do you think was going to do it? Second, AIG did nothing illegal in its trading activities. Its mistake was assuming the collateralized mortgage market wouldn’t collapse. Lots of people made that unfortunate assumption. Third, and this is the part that makes me crazy, is the politicians all know this!! The Honorable Chris Dodd, he who is one of the individuals most responsible for the whole Freddie/Fannie meltdown, put the provision into the bailout bill that allowed these bonuses!! The righteous indignation is nothing more than covering their own asses. How about the spectacle of the POTUS and Honorable Members of Congress demanding that perfectly legal private sector contracts be broken by fiat? Washington has become a frenzied mob, and they are very, very dangerous.
The Libinator | Mar 19, 2009 | Reply
Libinator,
Having worked under a retention bonus plan in the past, I know this is a very common too used to keep top talent while a transition takes place. As you say, most have no idea. Also, I know for a fact that performance bonus payouts can be structured over years, so its not uncommon for a company to have to make good on bonuses that were earned in previous years, in a year when they happen to be losing money. I believe that they are just using AIG execs as a whipping boy so as to focus public attention away from their own economy destroying actions and plans. They want to limit executive compensation in all industries, and this may be the vehicle they use to do so. I specifically don’t like, as PJ pointed out, the notion that they would pass a law to target one company with 100% taxes on specific income. This has to be unconstitutional under the equal protection clause.
Like I said, I don’t see where AIG is at fault here.
-OMB
omb | Mar 19, 2009 | Reply
I know that it is very pleasing to want to hate on the AIG bonuses-I actually do have a problem with it at a certain level, since I don’t think they did such a bang up job-but really this much fuss from our representatives? Methinks they do protest overmuch! How about since congress gave AIG the opportunity to continue their business practices as usual it’s their fault. Congress alone should take the blame for the current situation. I blame the house and senate. I also say we take away their pay for as long as it takes to come up with the amount spent on the AIG bonuses. These people are not doing their jobs! Let’s tax them at 100% for as long as it takes! I am pissed.
EAP | Mar 19, 2009 | Reply
EAP
Exactly! Congress gave them money to continue operations and that’s exactly what they’ve done. My guess is that most of the bonuses are warranted. You have to understand that bonuses are given for a lot of reasons – including retention. Like Libinator pointed out, its not like you can hire these derivatives guys on every street corner. But again, the main point is, this one tenth of a percent of the total AIG bailout money is irrelevant!!! How are we any better off as taxpayers if Congress indignantly beats their chests and passes a law to recover this money? We’re not! The other 99.9% of the money is still out there, a large percentage of which is being paid to foreign investors! The bonus thing is a distraction! The administration knew about the bonuses, they were sliding in the polls and decided they needed to beat on a scapegoat to get their numbers back up.
-OMB
omb | Mar 19, 2009 | Reply
J.P Morgan is going to spend $400 million to outsource their integration IT jobs to India. Thanks for putting Americans to work with our money. I get depressed when I think about how these companies are so willing to patriotically reinvest in our country.
Fluffy | Mar 19, 2009 | Reply
Interesting article by Matt Taibbi from Rolling Stone. It’s long, but worth getting to the end.
http://www.rollingstone.com/politics/story/26793903/the_big_takeover/print
Fluffy | Mar 22, 2009 | Reply
cartoon:
http://patriotpost.us/images/broadcasts/humor/images/mrz032009dAPR.jpg
Longshanks | Mar 24, 2009 | Reply