While listening to all the talk about the ridiculous AIG bailout bonus scandal and the absurdity of those who are defending it, I couldn’t help but wonder:
Million dollar bonuses for fat cat executives who were in charge of one of the worst financial disasters ever should be honored because they were pre-existing contracts, but the contracts of blue collar auto-workers on the line should be voided before the companies they work for get bailed out?
Or to put it another way, “union contracts should be torn up to save the company vs. executive bonus contracts must be honored to save the company!”
What’s the difference, other than the disgusting sense of entitlement emanating from Wall Street?
And as I like to do when it happens, I want to point out that Jay Weber had an excellent segment on this in the 8am hour this morning, and I agree with the vast majority of the points he was making about the AIG bonus bailout scandal.
Tomorrow may be a different story, but credit where credit is due.
I live in the Washington Heights neighborhood of Milwaukee, WI with my wife Jen, our daughter Emerson, and sons Carter and Colton.
Dan, did you see the piece yesterday that showed the counterparties who were effectively bailed out by bailing out AIG with your and my tax money? They were mostly European banks.
The government giving money to auto companies or AIG is bad, and neither should be giving bonuses or paying executives or employees like everything is going fine under these circumstances. AIG should have been required to tear up bonus contracts and reduce executive pay before AIG got a dime of taxpayer money.
This and the other horrid stories of management excesses leads to the invariable conclusion that America is fundamentally flawed due to the concept of ‘white privilege’. Yes it is precisely this so called god given American right that allows so many stories of graft and corruption to be constantly paraded in the news and media and little is done to stop it. It’s no wonder that most countries hate the United States and and our greed induced concepts of living to our standards at the expense of all other people and lifeforms.
@PhilBucks:
And what if AIG said no deal? If you are to believe the government, then our financial system would have crumbled if there was no bailout. It doesn’t sound like the government was in a position to make those sort of demands. The argument for the auto bailout, on the other hand, was much weaker. The three companies had been dwindling for decades and their loss would be minimal impact to the economy as a whole. The government therefore had a significantly stronger negotiation position, because the auto companies needed us more than we needed them.
Of course, none of these companies should have been bailed out, in which case we wouldn’t even need to debate this.
Let’s see, AIG gives $165 million to executives as per their contracts. Contracts that were signed prior to the bailout. Contracts that are legally enforceable. Obama, Frank and Cuomo will not be able to touch them, although I’m sure they’ll try.
Still, it’s bad PR. But mainly it’s demogoguery on the part of Congress and the Administration. It plays right into Obama’s class warfare tactics and Dan’s “fat cats” hysteria.
Of course, out of the billions given to AIG, #25 billion
went to foreign banks to prop up credit lines. That’s what the TARP bailout was supposed to do, but that money is now outside the United States.
Funny how the Democrats and the media would rather talk about the $165 million.
I am of the opinion, as a conservative, that no money should have paid for corporate welfare not should have been huge bonuses paid as well.
But let’s face facts, if they did not get the money as bonuses, they would have gotten the money some other way- increased salaries, under the table payments, paid money for being a consultant etc. I don’t condone that, but it is reality.
This looks as bad as congress as accepts it pay raises.
Where did all that TARP money given to AIG go?
http://industry.bnet.com/financial-services/1000576/is-aig-the-fall-guy-for-goldman-sachs/
Hollering about $165 million in bonuses is merely a diversion.
Shhhhhh, Smitty, it’s a secret. No one will tell us- no one from the Bush administration and no one from the obama administration. So, shhhhhhhhhh and stay out of their business. They know better than us.
Dan,
You’ve overlooked one big difference between the AIG contracts and the UAW contracts; the President of the United States, Congressman Barney Frank and New York Attorney General Cuomo are not talking about voiding the latter or firing the UAW employees.
These bonuses aren’t a partisan issue smitty, Republicans and Democrats can – and do – agree that this is unacceptable. It’s not something to be swept under the rug even though it’s “only” $165,000,000.
The fact that these clowns even got a bonus at all is more of a story than the amount.
Dan,
It most certainly is a partisan issue. Those bonuses were contractural obligations and the government was aware of them when they gave the TARP money to AIG. If the politicians, Republican and Democrat, somehow cancel them, the “clowns” have every right to sue—and collect. $165 million in bonuses may be excessive (and I’m not arguing that point) but it’s what all parties to the contracts agreed to in writing.
BTW, have you (or anyone else) proven that these “clowns” did not fulfill the terms of their contracts? AIG’s fiscal mismanagment doesn’t mean that it’s employees didn’t work up to all expectations.
I wonder what you’d say if federal government lent money
GM then re-wrote the union contracts, unilaterally lowering wages and benefits. Of course it wouldn’t do that, since the UAW has a lot more clout than the few AIG “clowns”.
Irony alert! President Obama has asked Treasury Secretary
Timothy Geithner “to use that leverage and pursue every single avenue to block these bonuses and make the American taxpayer whole.”
Yes! Let’s have an admitted tax cheat pursue people who entered into legal, binding contracts.
Without seeing the terms of their contracts, of course I can’t say whether or not they fulfilled the terms and therefore deserve the bonuses.
Unless those contracts stipulated that they run their company in to the ground with such force that the government would step in, alleviate their risk, and pay them huge sums of money for doing so. Then I could say they fulfilled the terms negotiated well before this all started to happen, and timing is an important point in this whole deal.
And Smitty, this isn’t about AIG’s bread and butter employees. The vast majority of folks, and I personally know two of them, who work for the company are honest hard working people. Those people aren’t in line for hundred thousand dollar bonuses though.
This is about the clowns who were in charge, and I use that term purposely, that are getting the bonuses, contractual or not, who are reaping the benefits of doing nothing more than completely screwing up the worlds largest insurance company.
But let’s make this about the 25 year line worker who’s been installing engines into cars his whole life, because that’s the real outrage!!
Senator Dodd was for AIG bonuses before he was against them.
http://www.foxbusiness.com/story/markets/industries/finance/dodd-cracks-aig—time/
BTW, who were the two biggist recipients of AIG politcal contributions? Hint, their names were Dodd and Obama (just scroll down on that link).
http://personalfinanceandinvesting.com/archives/aig-and-populist-rage/
Dan, do you have thoughts on Liddy’s comments? http://www.marketwatch.com/news/story/aigs-liddy-bonus-payments-distasteful/story.aspx?guid={5B9D3C04-7819-43A5-817B-E6A0BAEC0BF3}&dist=msr_3
Matt, I was only able to catch a bit of what he said at the committee meeting yesterday, but regarding the link you posted about it being “distasteful”, uh, yeah.. that’s one way to put it.
What caught my eye in that quote was, “We have to continue managing our business as a business – taking account of the cold realities of competition for customers, for revenues and employees.” That’s a joke. If they managed their business as a business, and not as a Vegas craps table where the only concern wasn’t “how much money can I make and how fast can I do it” (hardly the position of an insurance company), none of this would be a concern. Or, if they wanted to operate like, “a real business”, they could have just closed up shop.
Instead, they’re not a real business anymore, so him trying to say that million dollar bonuses to keep executives around who totally F’d up is ridiculous. They’re in the new class of enterprise known as, “Too big to fail”, and just like the normal rules of business and capitalism have been suspended to save their butts, so to should they be for existing practices of compensation and such.
This whole thing is just a massive depressing catastrophe, and is threatening “THE ADVENTURES OF PLUTO NASH” for most expensive comedic flop ever produced.
Dan, I wholeheartedly agree. The bottom line is that if these business are indeed “too big to fail”, then this is one place where government regulation MUST step in and divest holdings until they are no longer too big to fail. This practice of bailing out businesses who have made bad bets completely distorts the risk-reward ratio and only encourages everyone to take on more and more risk. It needs to stop if any of us hopes to have a productive economy again.
In the short term, I don’t know what you do, though. If they are indeed “too big to fail”, then we cannot allow their executives to leave en masse, as that would surely lead to the company’s destruction. Just another reason that we can’t allow “too big to fail”.