Because this is a gross oversimplification?

In order for a renegotiation, there has to be an incentive on both sides - usually that incentive has to be more than goodwill, too. In your example, the incentive for your side was to stay afloat - the incentive (for either Shell or Mom'n'Pop) to renegotiate was to keep your money flowing to them, instead of getting a small portion of your assets split among all your various creditors.

In the AIG scenario, what incentive does the employee have to renegotiate? Public outcry? Goodwill (over an amount of money that is essentially a rounding error in the grand scheme of this CF)?

How about to keep their job? Most of the scoundrels are still working at AIG -and if you want to read about incompetence and malfeasance, there is quite a bit laid out in this:

http://online.wsj.com/article/SB123812287215554481.html

A very well written article (if you are not a subscriber, you can subscribe for free for 2 weeks)

And, like I said in my last sentence - how about in good conscience? Unless a person (especially, an extremely well compensated person) is morally bankrupt, how could they accept a bonus paid with money supplied by the American people?

I'm sorry, this can be spun in many ways, but accepting those bonuses is just wrong.

See above. Barney Frank did not say that. Charles Grassley, a Republican from Iowa is responsible for that.

You're going to collectively refer to a thousand people as "scoundrels"? Seriously?

Fire the guys if you're going to fire them. That's fine. But using downsizing as a threat for renegotiation is a very dangerous slope to walk, and may move into illegal territory if used without due care. This isn't an at-will employment situation - it's a contractual obligation.

. . . and here's the part with the subjective outrage. "Wrong" is also temporal, which you're abusing for your own benefit, but I'm not sure you have an iron-clad ivory tower position here.

Look, if you were promised something (let's say a brand-new kitty for Christmas) and then received that, then were told you had to give it back because a third party had given the money (with no restrictions in place) but now does not want to fund your cute kitty, you would simply give it back?

Now what if you only went to that particular Christmas party because you had been given the kitty in a contract?

If there were malfeasance or breach of care on the part of the individuals receiving the bonuses, then the contract would not exist (note: gross oversimplification to make a point, I'll admit). Don't you think that, if this were the case, that step would have been taken?

Do you really think any person with half a brain will want to work for AIG going forward if they know that they'll have to perform at an arbitrarily-determined level of success in an unknowable time frame (as dictated by people with little to no experience in the field) in order to actually get the compensation they were promised? How on Earth do you expect AIG to get better?

Frankly, I don't think AIG will get better... And throwing money at it isn't going to rectify the problems within the company as far as management decisions, and certainly the problems within their risk management department, which I believe is led by either idiots or scoundrels - meaning either they didn't see it coming (idiots) or they did and just wanted to cash in on it before the fall (scoundrels) - and I'm not talking about the thousands of back office people, I'm talking about the people making the unwise business decisions.

I also know that there are divisions of AIG that are not involved in this (I actually have friends and neighbors that work for AIG that have nothing do to with this, here in Houston - just as I have friends who worked for Stanford Financial who didn't sell Antiguan CD's ;))- they will likely need to change their name to get out from underneath the taint of the AIG umbrella.

And, as for your cute kitty analogy - If I was given a cute kitty that I found out was paid for out of money that did not belong to the person who gave me the kitty, in good conscience, I would not keep the kitty, I would give it back to the person whose money was stolen to pay for said cute kitty.

And, I wouldn't need some legal clawback to make me give it back. I just, personally, could not take something from an innocent party to a fraud.

And, Munchkin - I apologize for wrongly ascribing that quote to Frank (I was just going off what the earlier poster said), but I still think he's an idiot and a fraud!

Wow, I'm ready for Friday Margaritas!! I need to get out of the office and start thinking good thoughts - CENTER, OHMMMM :)

OK - this is fair, and kind of a different issue in my mind, but I can definitely see where you're coming from, and might even agree that AIG as currently comprised is doomed. However, it's not like these bonuses are going exclusively to who I would consider the 'decision-makers' - true, they're going to executives, but it's not like each individual is complicit just because of hive mind or something, right?

Let's find out who green-lighted the maneuvers, who know what and when, and fire those people - after all, we can probably assume that there are some bright and talented executives at AIG who could help steer the company out. It's important to retain those people for the company to have any chance, because it's not like they're going to pull the best and brightest from the market or other firms at this point.

The money DOES belong to AIG. We gave it to them. It's theirs, not the American people's, no matter how nice that sounds on conservative talk radio or Keith Olbermann outrage footage.

No money was stolen.

There is no way you can really think the American people (as a collective) are an 'innocent party' to any fraud, real or perceived, that AIG was involved with . . . AIG didn't create the crappy mortgages, it just traded them and insured them.

No, but the person who took the cute kitty money was, and I won't be involved in kitty fraud ;)

But, the idea that you can "insure" derivatives (as in this case - bundled mortgages with various levels of "spread risk") thereby allowing banks and lending institutions to use lower capital reserves so that they can then go out and make more risky loans is, in my opinion, a little too cute (making money out of nothing - emperor's new clothes-ish), and that's where the risk management geniuses should have stepped in and said, "wait a minute, what if this housing bubble doesn't last? - I mean when in history have we been able to sustain housing market growth at these absurd levels?"

But, they didn't and they got deeper and deeper into unsustainable risk levels and the rest is history (at least their part in it). There is plenty of blame to be laid.

Oh and while you were typing I edited my earlier post - I don't blame all of AIG, just the people in the Financial Products Unit

This is exactly why I can't fake any more populist rage with this AIG business. No one forced these people to buy an overinflated home with a crap mortgage.

Yep, the idiots who bought more house than they could afford, the lenders who didn't do due diligence in lending money to people who couldn't pay them back, the brokers who decided to "package" mortgages and sell them as derivatives, AIG for deciding that it would be a brilliant idea to "insure" the derivatives, and the various governments around the world (cuz it's not just us who are in this mess) who turned a blind eye to the irresponsible and barely legal shenanigans that were going on.

And in some cases - (ahem the afore mentioned - Barney Frank) exacerbating them:

http://www.youtube.com/watch?v=hxMInSfanqg

And to add a little levity to the situation:

http://www.nbc.com/Saturday_Night_Li...ailout/727521/

I still put the lion's share of the blame on idiots in South Florida and inland California. After all, CDOs have been around for years, and AIG did fine with insuring them just like they did when most people had prime mortgages.

I think everyone saw this coming; I was receiving letters asking me to mortgage my (non-existent) home and to increase my credit lines when I was an unemployed graduate student. After I started working, I couldn't go to the mailbox without encountering 5-6 credit card offers. I knew full well I couldn't afford any of this stuff without leveraging my future. If I knew, people twice my age who did this had to have been aware. Chalk it up to irresponsible Baby Boomers? :confused:

I was cleaning out my desk a few weeks ago, and I found a business card from a college classmate, who was (as a year and a half ago) at Lehman Brothers specializing in CDO Sales. Before that, he was at Bear Stearns. I'd bet he is no longer employed.

I don't listen to talk radio or experience Olbermann in any form, so I have no idea what's being said there.

There was a time pre-bailout that the money was the American taxpayers' (at least on some theoretically level), and it's pretty outrageous that government officials thought that the way to keep AIG from failing was simply to give them money with absolutely no stipulations about what it would be spent on. What reasonable person thinks like this: "hey, AIG, you demonstrated horrible judgment about how to successfully run your business; here's $144 billion with no strings attached to give you another shot."

As far as anger being directed at AIG employees, again, I'm not watching or listening to the nuts making death threats and sure, everyone didn't participate in the bad decision making at AIG. Generally speaking though, I'm not sure the rest of us are guaranteed that our salaries will remain unaffected by bad decision making by the people we work for. I'm not really angry at the average AIG employee who got a bonus, but I don't accept this idea that they were entitled to the bonus money and there was nothing that could be done. If you're working for a business on the brink of going under, you should probably HAVE to make concessions to try to ensure that the company won't fail. The common interest in renegotiating should have been saving the company, and if the employees don't have any interest in that, why should the rest of us?

There was a ton of pressure put on lenders to open up lending to people who in the old days wouldn't have qualified for a loan, both by the higherups at the lending houses and by the government, as is shown in the fannie mae congressional hearings that are on cspan and youtube.

Those crazy lending schemes were a bi product, and it wasn't just Florida retirees and California yuppies that caused it.

My niece worked for Countrywide in the DC area right out of college about 5 years ago. She told me some pretty crazy stories about their lending practices and what sufficed as credit history - they were doing no paperwork loans there too. She finally quit (before the crash) because she was so sick of the cut throat competitiveness of the lending agents. Bonuses were contingent on closing deals, it didn't matter if the deals were legitimate or not - or if the mortgage would ever be repaid.

Could have been part of the SNL skit.

Yeah, and this is also why the idea that retention bonuses were absolutely essential in a time when a lot of people in the financial sector were losing jobs is even more baffling from the outside looking in. If you needed to force concessions, it seems like AIG employees, particularly in the parts of the company most closely linked to losses, would realize that it wasn't going to be a good time to be looking for work.



I hate it that people are losing jobs. I don't mean to come off like individuals deserve the hardships they face.

That might be how the average person views it, but reasonable should be an entirely different standard.

Look, AIG is sunk cost at this point. The money's gone - and if you want to unseat your Congressman because s/he voted for it, go nuts, because that's the only say we have in it now. But let's not misrepresent the idea here - the thought wasn't "oh, $144 billion and things go away" . . . not in the slightest. The idea was "oh, $144 billion and maybe we'll help prevent or stave off a market collapse that will devalue the currency, cause massive bank failure and create a situation of incredible panic." Because that was one of the potential downsides of the AIG failure - and we need to look at it more like this:

(these are all completely made up)

-10% chance of market collapse given the Lehman/Bear Stears/AIG troika, with only AIG needing to be propped
-25% chance of deep depression
-65% chance the failure has no long-reaching consequences

The 10% chance costs the economy something like $2 trillion, the 25% chance something like $1 trillion, the 65% chance something like $144 billion. The math is very simple: the 'risk' of the $144 billion is worth even a moderate to small chance of collapse.

If the company doesn't have the money to pay me, I don't get the money, sure.

The company does have the money to pay them - and it's a tiny, tiny amount of the overall income process.

There's also a very good chance that there paying the bonuses IS in the best interest of ensuring the company doesn't fail, by the way - no one has addressed that yet.