AIG uses bailout money to pay employees.

[UGAalum94]

Originally Posted by Munchkin03

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.

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.

[srmom]

And to add a little levity to the situation:

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

[srmom]

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.

[UGAalum94]

Originally Posted by srmom

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, but I have a hard time absolving borrowers completely. It just seems like people should have had a little more common sense and realized that anyone willing to loan that kind of money with that little documentation of your ability to re-pay might not have your best interest in mind.

I'm not suggesting that you or Munchkin are absolving the borrowers, but at the time the lending scandals first broke in the news, I read a lot of coverage that was perversely sympathetic to borrowers as if in being loaned 100s of thousands of dollars they'd been victimized. These were legally competent adult people signing contracts. Except in the cases where the lenders committed fraud, how can you blame a lender for the terms of your loan?

[UGAalum94]

I feel compelled to note that my outrage maxes out when Barney Frank tries to find fault with anyone else involved in this, period.

Could there be an individual with more culpability for the whole thing? It's hard to think of who.

[Munchkin03]

Originally Posted by srmom

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

Did I say that it was just inland California (believe me, not yuppie central) and southern Florida? No, but I do put the lion's share of the blame on conditions in those regions.

If you look at the twenty counties with the highest foreclosure rates or with the highest rates of defaulted subprime loans, usually 15 of them are in inland California or southern Florida. I've seen different lists with different results, but the only non-CA or south Florida counties tend to be in Michigan, sometimes Clark County Nevada or in the Phoenix metro area. I don't make this stuff up. Clearly subprime mortgages were everywhere--even here in NYC--but to not understand that these two areas were ground zero for the subprime crisis, and therefore the foreclosure mess, is myopic at best and ignorant at worst.

I blame the homebuyers--and these areas are clearly the easiest target--because no one puts a gun to your head and makes you buy a home. Like I said before, I got all sorts of credit card offers thrown at me during this whole time, but did I take advantage of them? No, I didn't. Neither did most people.

[KSUViolet06]

^^^ Agreed.

At the end of the day, no one FORCES you to buy a house. I feel like there were some people who wanted to be homeowners so badly that they didn't look at whether the offered mortgage was something they could realistically afford.

[AGDee]

The people I know in Michigan who have foreclosed have done so due to unemployment, not due to subprime mortgages (and of course, my neighbor who was work reduced due to breast cancer treatments and lost her husband). With no job, you cannot make a house payment, no matter what the loan terms were. If they want to move out of state for a job, they end up having to let their house here go to foreclosure because they can't sell it for even half of what it was worth a few years ago. This seems to be a never ending cycle since, the more houses go into foreclosure, the less money you can get for your house.

[UGAalum94]

Originally Posted by KSUViolet06

^^^ Agreed.

At the end of the day, no one FORCES you to buy a house. I feel like there were some people who wanted to be homeowners so badly that they didn't look at whether the offered mortgage was something they could realistically afford.

And there's a certain percentage, especially I think when you look at the top foreclosure counties that Munchkin notes, that were investment properties or attempts to flip properties for money. People didn't expect that they'd get stuck owning the properties long term.

Not to mention the straight up fraud that was also taking place with people colluding to drive prices up with straw buyers who never intended to actually own; they were just part of a scam. Some neighborhoods in Atlanta apparently had more of these "sales" than they had actual sales.

But all of these affect genuine owners in the same area.

[srmom]

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.

Of course, that's what they'd say isn't it??

The AIG exec partyline is - if these incredible business minds leave at this crucial time, the company will fail (although I'd say they've already failed, they're being propped up by the american taxpayer). All the work they've been doing to unwind the derivatives will unravel and will slow up the process. Investors will jump ship because their trust will be shattered (if they can fix the trust shattered issue then I bet they can walk on water too). etc. etc.

[KSig RC]

Originally Posted by srmom

Of course, that's what they'd say isn't it??

The AIG exec partyline is - if these incredible business minds leave at this crucial time, the company will fail (although I'd say they've already failed, they're being propped up by the american taxpayer). All the work they've been doing to unwind the derivatives will unravel and will slow up the process. Investors will jump ship because their trust will be shattered (if they can fix the trust shattered issue then I bet they can walk on water too). etc. etc.

I mean, of course they'll say that - but is there a compelling interest on the part of the company to pay out bonuses to crappy employees that aren't on the board (or whoever gets to determine who gets what)? The company might be feeding us a line, but like Munch said, there are people available - you have to really feel like it's Good Ol' Boys here to think that they wouldn't jump to get the same (or better!) people at lower cost in this kind of market if it were actually a net positive.

I mean, there's gross incompetence, then there's just a lack of common sense, and I'm not willing to assign them both, because their failings appear to be built on greed rather than stupidity.

[UGAalum94]

Originally Posted by KSig RC

I mean, of course they'll say that - but is there a compelling interest on the part of the company to pay out bonuses to crappy employees that aren't on the board (or whoever gets to determine who gets what)? The company might be feeding us a line, but like Munch said, there are people available - you have to really feel like it's Good Ol' Boys here to think that they wouldn't jump to get the same (or better!) people at lower cost in this kind of market if it were actually a net positive.

I mean, there's gross incompetence, then there's just a lack of common sense, and I'm not willing to assign them both, because their failings appear to be built on greed rather than stupidity.

This crosses over into a bit of paranoia, I admit, but isn't there some interest in simply keeping the people who know the crappy stuff you've been pulling in your company rather than cutting them loose to testify against you? (I don't just mean legal testimony, but keeping them from being free to lobby against your efforts.)

[KSigkid]

Originally Posted by UGAalum94

This crosses over into a bit of paranoia, I admit, but isn't there some interest in simply keeping the people who know the crappy stuff you've been pulling in your company rather than cutting them loose to testify against you? (I don't just mean legal testimony, but keeping them from being free to lobby against your efforts.)

I don't know about that; you have non-disclosures and everything else that could help protect your business practices, and whistleblower statutes in many areas to protect employees who report out on problems.

I'm not saying that those can't be reasons to retain employees who "know too much," but I don't think it's a significant number.

Originally Posted by Munchkin03

Did I say that it was just inland California (believe me, not yuppie central) and southern Florida? No, but I do put the lion's share of the blame on conditions in those regions.

If you look at the twenty counties with the highest foreclosure rates or with the highest rates of defaulted subprime loans, usually 15 of them are in inland California or southern Florida. I've seen different lists with different results, but the only non-CA or south Florida counties tend to be in Michigan, sometimes Clark County Nevada or in the Phoenix metro area. I don't make this stuff up. Clearly subprime mortgages were everywhere--even here in NYC--but to not understand that these two areas were ground zero for the subprime crisis, and therefore the foreclosure mess, is myopic at best and ignorant at worst.

I blame the homebuyers--and these areas are clearly the easiest target--because no one puts a gun to your head and makes you buy a home. Like I said before, I got all sorts of credit card offers thrown at me during this whole time, but did I take advantage of them? No, I didn't. Neither did most people.

This document from the Federal Reserve talks about how California and Florida were two of the areas with the highest concentrations of those subprime mortgages: http://www.federalreserve.gov/pubs/f.../200829pap.pdf .

A lot of people went into these without thinking about 5, 10, 20 years down the road. They either wanted to turn a quick profit, or they wanted to get more house than they could afford. People didn't have a longterm view, and it's costing them now.

When my wife and I were looking for houses, we were approved for a much larger mortgage than we used, and we were sent offers that were obviously too good to be true. You have to take a realistic view of your own finances, and a lot of people failed to do that.

Originally Posted by AGDee

The people I know in Michigan who have foreclosed have done so due to unemployment, not due to subprime mortgages (and of course, my neighbor who was work reduced due to breast cancer treatments and lost her husband). With no job, you cannot make a house payment, no matter what the loan terms were. If they want to move out of state for a job, they end up having to let their house here go to foreclosure because they can't sell it for even half of what it was worth a few years ago. This seems to be a never ending cycle since, the more houses go into foreclosure, the less money you can get for your house.

But, I think Michigan is an exception rather than the rule. With the troubles in the auto industry, even people who spent within their budgets are facing foreclosure. I don't think you can use Michigan as a representative sample of the rest of the country.

I'm guessing there were still people in MI who over-extended themselves, but overall I think the state is an exception when examining the foreclosure problem.

[Munchkin03]

Originally Posted by KSigkid

A lot of people went into these without thinking about 5, 10, 20 years down the road. They either wanted to turn a quick profit, or they wanted to get more house than they could afford. People didn't have a longterm view, and it's costing them now.

Those counties with the high foreclosure rates were also developed in a weird way. Areas that hadn't been developed for perfectly good reasons--inadequate infrastructure, lack of natural resources, and considerable distance to metropolitan areas--were being developed at a crazy rate because the easy credit and cheap construction costs. People who couldn't afford to buy in San Francisco or the Silicon Valley were buying mini-mansions in places like Modesto and Stockton, regardless of the fact that it's not the easiest commute. Add to that there weren't enough schools, grocery stores, and gas stations, and it makes it so much easier to walk away from your home if it's two hours away from work and the rate on your crazy mortgage just shot up to 10%. It's hard to be committed to a brand-new bedroom community, especially if you're not looking at it as a long-term investment.

It's just unfortunate. There are entire communities that are virtually abandoned, and the housing stock is new and of fair quality. What will happen to those homes?

[UGAalum94]

Originally Posted by KSigkid

I don't know about that; you have non-disclosures and everything else that could help protect your business practices, and whistleblower statutes in many areas to protect employees who report out on problems.

I'm not saying that those can't be reasons to retain employees who "know too much," but I don't think it's a significant number.

I don't know if I was think about illegal activities, just not dumping a bunch of disgruntled former employees into the mix if it could be prevented.