President Obama and much of the country are outraged over AIG paying some $165 million in bonuses to their executives, considering that they've just posted the greatest quarterly loss of any corporation in history (something like $65 billion) and that the US government has handed them somewhere closing in on $200 billion dollars in bailouts. Plus, there'll likely be that much again.
"How do they justify this outrage to the taxpayers who are keeping the company afloat?" said President Obama. This violates "fundamental values" — as if a crooked demagogue Chicago politician would know a fundamental value if it bit him in his Hyde Park butt.
There's a pretty clear and irrefutable answer to the president's question: contractual obligation. Never having actually run a business, such things appear to mean little or nothing to Obama. Note the "cram down" rule he's trying to put through Congress to let judges arbitrarily rewrite mortgage contracts, for example. We won't have an economy at all if contracts are not legally binding documents but just suggestions that we might follow if they don't make anyone mad.
But he can't do a damned thing about it cause these executives have CONTRACTS. Those are legally binding obligations, and the company can't just decide not to pay them because it'll look bad if they do. If I were an executive that had a $500K bonus coming to me, I sure as hell wouldn't give it up just because it makes some people mad.
There's a strong general public sentiment against executive bonuses to companies getting government bailouts, but that's bad business going forward. If you've got a company that's in trouble, then they especially need the top talent. If you limit your company to paying execs a minimal wage, you ain't going to get the best and brightest you will desperately need to sort out the mess — though I grant you that this money obviously hasn't gone to any competent people at AIG specifically.
Then there's Senator Charles Grassley, who suggested that these executives should consider killing themselves to save face, like the Japanese. Really now — does Grassley have any room to talk? I don't know that we couldn't do without the AIG executives who've screwed the pooch, but I'm quite certain that the country would be better off if most of the Congress — definitely including Grassley — jumped off the top of the Washington monument to atone for their sins. They've screwed the pooch way more than even AIG — and they're the ones ponying up the money to keep AIG in business so that a bunch of European banks don't get screwed.
Article comments
— go to most recent comments1 - Baronius
We should have a fund-raiser. If 14,850,000 principled conservatives kick in $10 each, we could reimburse the AIG executives for the tax payments. I'd contribute.
2 - Clarence Yu
It isn't just the AIG executives. I'll bet there are so many others just buried in the mix. I'd agree that this is being done to drive attention away from Obama's "socialist" agenda---by the way, I'd call it a more "liberal" agenda.
3 - Al Barger
Clarence, I'm sure you're right. There are undoubtedly all kinds of lovely things like these AIG bonuses being covered by bailout money and the stimulus bill.
But "socialist" is the right word. In this context, "liberal" would just be a euphemism.
4 - Joanne Huspek
I don't know. I think he's still in the honeymoon period. But don't worry, the rest of the country will catch up someday.
5 - Aetius Romulous
Isn't anybody worried that while we all hamstring the government with this pointless dithering, absolutely nothing is being done in a coordinated fashion to address the real problem of international liquidity?
This is truly a problem measured in hours. Every clock tick moves the whole earth closer to catastrophe. Nothing is being done, and when it is, only through sporadic bouts of Washington politicking.
Focus on the problem people, none of this trite nonsense will matter a lick three months from now - except perhaps for the hand wringing and finger pointing over why we missed the boat.
It speaks volumes that The Fed moved so suddenly and dramatically yesterday...it knows there is no time to waste, and so much has been wasted so far.
6 - roger nowosielski
Welcome to the club, Aetius. Ideology is sweeter than cool, balanced reasoning.
7 - Dan(Miller)
The Congresscritters, who passed the "stimulus package" last month, having neither read nor understood it, are now hearing from the folks back home. It is unfortunate that they did not have such an opportunity before they passed it.
Today's bill was passed by the House 328-93. It would apparently require that most of the bonuses paid to employees of AIG and other companies receiving at least five billion dollars in stimulus funds be taxed at 90%. Two hundred and forty-three Democrats and eighty-five Republicans voted in favor of the bill.Senator Dodd, who agreed at the last minute and apparently without consulting his colleagues on the Hill, to include the stealth provision allowing the bonuses to be paid with Stimulus funds, is worried:"The public confidence in our ability is being adversely affected â€" not just mildly, but seriously. . . ."His concern is understandable, and he should be worried. What he should be worried about, however, is his blind acquiescence in stimulus language he did not understand because there was lots of pressure to get something done; right now. No matter what.
Now, the Congress is doing substantially the same thing again.Dan(Miller)
8 - bliffle
Sounds like it would have been best just to let failing companies fail last year. IIRC that was the path favored by most ordinary citizens when all this stuff started. The decision to support failing banks was foisted on us by the 'experts' in government. Sounds like they were wrong.
Then the government 'experts' decided that the company 'experts' should get their big unearned bonuses.
Do you think the 'experts' are conspiring together?
9 - Clavos
bliffle #8:
Excellent comment.
Dead on.
10 - Baronius
Interesting vote. You've got to figure that the Republicans who voted against that bill are obstructionists and/or people who are completely uninfluenced by polls. Six Democrats voted against it. Most of them are in their first or second term in right-leaning districts. However, Democrat Victor Snyder (Ark-2) voted against it, and he's a consistent liberal. He didn't like the lack of deliberation. Good on ya, Vic.
11 - Al Barger
Bliffle- Let me take this rare opportunity to say that I completely agree with you.
I'm getting the sense that on a lot of this bailout stuff, the left and the right are thinking alike in opposition and suspicion. It's like people seeing bigger pictures (even very different ones) look at this differently than non-ideological ie no-ideas-having "moderates" who see no principles.
I can tell you that speaking as a right wingnut, I think that the entire bailout and crazy interventions from the guvment are outrageous and counterproductive. The Dow was at 10-11K as we hit the credit crunch in September.
Rather than letting the natural forces of the market and bankruptcy law work things out, we've just thrown more and more money away and created chaos and confusion with constantly changing rules, with another dive every time the feds do anything. So instead of taking the hits last fall and starting our way back out by spring, we've lost another third of the value of the Dow.
Three or four more goddam schemes for the guvment to fix things, and there won't be a stock market left to fix.
12 - bliffle
Seems to me that government characters and businessmen have submerged their differences in favor of their joint interest in Corporate Statism. That way they can smoothly agree on how best to fleece the peasants.
13 - roger nowosielski
I hope that ain't so, bliffle. Because then we're really dead ducks.
14 - Clavos
Well, at least the dead ducks can be fed to the peasants.
Soylent Green, anyone?
15 - roger nowosielski
There you go. Nothing goes to waste. It's a food chain.
16 - Dan(Miller)
According to the Connecticut Attorney General, the bonuses paid by AIG amounted to $53 million (32.12%) more than the $165 million reported earlier:
This will, obviously, cause more turbulence than if the fifty-three million dollar higher figure had been known even a few days ago. The words uttered long ago, "modified limited hangout" come to mind.Dan(Miller)
17 - roger nowosielski
The following is the link to Dan's story.
It may get ugly as "activists are expected to rally at AIG's Wilton office on Saturday to protest the bonuses, [and] a busload are also touring some AIG executives' homes in Connecticut, organizers said."
"Class warfare" in America? Who would have thought? It will give our resident Marxists all the boost they need.
18 - Dan(Miller)
Thanks for fixing my screw up, Roger. I had intended to link a story on Fox, but the link you provided is identical.
Dan(Miller)
19 - roger nowosielski
Well, the link I tried, Dan, was to the article itself. Fortunately, I saw the news story on Yahoo news.
Roger
20 - handyguy
Re: Bliffle's snarky assessment of government bailouts, and the [rare] concurrence of Clavos et al with him:
I'm more interested in what works than in posturing 'right' or 'left.'
If bailouts ultimately get the crippled/frozen banking/credit system moving again, then the phony moral/ethical analysis of details and methods will fade into oblivion where it belongs.
If the financial system remains paralyzed, all the moral outrage in the world will be made meaningless in comparison to the expanding misery.
No one ever claimed the bank rescue would take only a few weeks or months. It could be starting to work already and the Know-Nothings could still succeed in shouting it down, sabotaging the whole effort.
The market crash after Lehman Brothers was allowed to fail spooked the Feds into 'saving' AIG. The AIG bailout has since then been so caricatured that it's hard to know what's real and what's not.
But from Liddy's testimony the other day [in between self-congratulatory expressions of outrage by each and every Congressperson on the subcommittee], indications are that the company has already made significant progress winding down the bad part of the business and is preparing to try to sell off [or just give to the government] the parts that still operate at a profit.
Now the sideshow of the bonuses may have turned AIG into such a toxic brand name that the previous plan to sell off its parts may be very seriously undermined.
Thus: "Bailouts don't work" -- a self-fulfilling prophecy.
21 - roger nowosielski
Handy,
I don't think you need to be on the defensive. Even if the AIG case is a screw-up, it doesn't necessarily have to mean that all bailouts are. But your trying to defend AIG comes awfully close to apologetic attitudes and stance which, when coming from the other side, you yourself find contemptible. So if you try to be a little more reasoned here, I'm certain you'll be able to advance your cause much better.
Roger
22 - roger nowosielski
Handy,
The following is a rather misguided enterprise by Republican attack groups vs Hillary:
"Hillary" : the movie.
It doesn't exactly fit on this thread, but what the hell. There's also a link to the movie itself.
23 - Clavos
handy #20:
You're right. We should all just sit back and let the government experts fix the boo-boos, take care of us, and quit worrying, just like these folks.
24 - handyguy
Of course, that's not what I said, Clavos. But blowing up the solutions before we know whether they're working gives new meaning to that old cliche, cutting off your nose to spite your face.
25 - handyguy
But your trying to defend AIG comes awfully close to apologetic attitudes and stance which, when coming from the other side, you yourself find contemptible.
Sorry, Roger, but this is not very perceptive of you. In fact, it is nonsense. This has little or nothing to do with the left/right arguments that so frequently populate this space.
I just think the populist dust-storm about AIG is media-fueled and wrongheaded. That does not mean I think AIG is angelic or that the ridiculous bonuses were a great idea.
But the disproportionate reaction to them, often by people who are not very well informed, is causing more harm than good. The collateral damage could include much of the remaining bank rescue plan.
And if Clavos et al say, good riddance to those plans, they'd better be ready for the [calamitous] consequences.