AIG uses bailout money to pay employees.

[Kevin]

Originally Posted by UGAalum94

Maybe you are right and the employees could have sued for breach of contract, but it seems kind of unlikely under the circumstances.

You've got to be kidding me.

Someone is under contract to pay you $1 million and they decide not to pay you... Maybe you're some sort of saint or something, but I'm betting you hire the best lawyer you know and tell her to sic 'em.

[UGAalum94]

Originally Posted by Kevin

You've got to be kidding me.

Someone is under contract to pay you $1 million and they decide not to pay you... Maybe you're some sort of saint or something, but I'm betting you hire the best lawyer you know and tell her to sic 'em.

Not if you honestly believe that you'll bankrupt the company if you try to take the money. Would you rather get your bonus this year or a have a job next year in this economy?

I think there's a measure of self-interest in renegotiating the contracts.

But as I said, I agree it's probably too late now.

I think there are a lot of industries where you see people taking pay cuts to keep companies solvent. It doesn't seem that unreasonable.

[KSigkid]

Originally Posted by UGAalum94

Not if you honestly believe that you'll bankrupt the company if you try to take the money. Would you rather get your bonus this year or a have a job next year in this economy?

I think there's a measure of self-interest in renegotiating the contracts.

But as I said, I agree it's probably too late now.

I think there are a lot of industries where you see people taking pay cuts to keep companies solvent. It doesn't seem that unreasonable.

In the grand scheme of things, a bunch of people collecting bonuses that they initially negotiated for as part of their contract isn't going to bankrupt the economy.

[Kevin]

Originally Posted by UGAalum94

Not if you honestly believe that you'll bankrupt the company if you try to take the money. Would you rather get your bonus this year or a have a job next year in this economy?

I doubt an AIG exec is going to have a very lucrative 2010, so I think I'd still sue. The company's troubles are none of my concern. I'd figure there's a good chance AIG is going under anyhow and if that occurs, I'll never see a penny of that money they owe me.

As you've seen, the bonuses are hardly a blip on the radar screen in the grand scheme of things. We're only talking about like $170 million when there are many billions at issue.

So no, taking a bonus is not going to mean an individual is choosing between AIG not existing anymore or him getting paid. Your example has no foundation in reality.

[Munchkin03]

Originally Posted by Kevin

I doubt an AIG exec is going to have a very lucrative 2010, so I think I'd still sue. The company's troubles are none of my concern. I'd figure there's a good chance AIG is going under anyhow and if that occurs, I'll never see a penny of that money they owe me.

As you've seen, the bonuses are hardly a blip on the radar screen in the grand scheme of things. We're only talking about like $170 million when there are many billions at issue.

So no, taking a bonus is not going to mean an individual is choosing between AIG not existing anymore or him getting paid. Your example has no foundation in reality.

I foresee lawsuits. Not many, since in some cases the legal fees may end up being more than the bonus, but enough.

The tax and the apologies, in my opinion, are more of a response to the populist rage than to a real administrative objection to the bonuses. The term "bonus" is misleading anyway--it's not always performance-based, especially in law or finance.

[UGAalum94]

Originally Posted by Kevin

I doubt an AIG exec is going to have a very lucrative 2010, so I think I'd still sue. The company's troubles are none of my concern. I'd figure there's a good chance AIG is going under anyhow and if that occurs, I'll never see a penny of that money they owe me.

As you've seen, the bonuses are hardly a blip on the radar screen in the grand scheme of things. We're only talking about like $170 million when there are many billions at issue.

So no, taking a bonus is not going to mean an individual is choosing between AIG not existing anymore or him getting paid. Your example has no foundation in reality.

You're kind of missing my point. I'm not talking about where we are now; I was suggesting how this could have been handled differently to prevent this issue.

We were told that AIG going under would be catastrophic for the entire financial sector. We were told that they would go under without government funds. The company turned to the government for funds. Those funds could have been tied to AIG changing the terms for bonuses, had the same people in congress who claim to be outraged today actually been concerned with what AIG would do with the money.

Under those circumstances, since you'd have had zero guarantee of getting your bonus anyway since the company was, we were to believe, on the brink of bankruptcy, you probably wouldn't sue. What would it get you? The hastening of the company going under? I seriously doubt the AIG contracts stipulate that employees would be paid bonuses even if the company is entirely insolvent, and if they do, it makes you wonder how they stayed in business as long as they did.

I agree with you that if you are looking for examples of potential government economic screw ups, we've got some doozies right now that eclipse the bonuses. I also agree with you that I don't think punitive taxes on the bonuses are the way to handle it.

ETA: Is no one else facing changes in employment terms because of the state of the economy? I know I am.

And delusional as Kevin finds my idea, I'm apparently not alone:
http://www.cnn.com/2009/POLITICS/03/19/aig.contracts/

And, AIG's trouble would have been none of my concern had they not gotten a big influx of cash from the government. I suppose I'm culpable because I did vote for Bush in 2004. I'm not sure it makes any sense at all to give money to private companies with no expectations about how the money will be used, especially considering the conditions under which they approached the government.

[AGDee]

I wasn't sure which of these threads to put this, so I chose this one. I know I've talked about my neighbor who lost her house to foreclosure. It was auctioned off by a company, for the bank, last week. It sold for $30,000. It was mortgaged for about $180K. So, my friend and former neighbor, who tried to work with her mortgage company to get her payments down after her hours were cut due to her medical leave from breast cancer and her husband's death and they wouldn't work with her at all. It seems to me that if they had worked with her, she would have ended up paying at least $100K of her original mortgage, plus interest. Since they didn't work with her, they got $30K minus the auction companies fees. Does this make any sense? It sure seems like it would have been in the bank's best interest to work with her on her payments rather than lose that much money in the long run. It doesn't make sense to me. I am glad that someone bought it. I'm hoping it was a real person and not an investment company that is going to fix it up and rent it out. I wasn't able to catch them to introduce myself when they were at the house last weekend. Hopefully I'll be able to this weekend.

[UGAalum94]

Originally Posted by AGDee

I wasn't sure which of these threads to put this, so I chose this one. I know I've talked about my neighbor who lost her house to foreclosure. It was auctioned off by a company, for the bank, last week. It sold for $30,000. It was mortgaged for about $180K. So, my friend and former neighbor, who tried to work with her mortgage company to get her payments down after her hours were cut due to her medical leave from breast cancer and her husband's death and they wouldn't work with her at all. It seems to me that if they had worked with her, she would have ended up paying at least $100K of her original mortgage, plus interest. Since they didn't work with her, they got $30K minus the auction companies fees. Does this make any sense? It sure seems like it would have been in the bank's best interest to work with her on her payments rather than lose that much money in the long run. It doesn't make sense to me. I am glad that someone bought it. I'm hoping it was a real person and not an investment company that is going to fix it up and rent it out. I wasn't able to catch them to introduce myself when they were at the house last weekend. Hopefully I'll be able to this weekend.

I kind of wonder if she might not simply have been chronologically ahead of the curve before the banks realized home many foreclosures there would be and how little they could expect to recover. I wonder if someone starting the same negotiation today might have the negotiation go differently.

[KSigkid]

Originally Posted by UGAalum94

You're kind of missing my point. I'm not talking about where we are now; I was suggesting how this could have been handled differently to prevent this issue.

We were told that AIG going under would be catastrophic for the entire financial sector. We were told that they would go under without government funds. The company turned to the government for funds. Those funds could have been tied to AIG changing the terms for bonuses, had the same people in congress who claim to be outraged today actually been concerned with what AIG would do with the money.

Under those circumstances, since you'd have had zero guarantee of getting your bonus anyway since the company was, we were to believe, on the brink of bankruptcy, you probably wouldn't sue. What would it get you? The hastening of the company going under? I seriously doubt the AIG contracts stipulate that employees would be paid bonuses even if the company is entirely insolvent, and if they do, it makes you wonder how they stayed in business as long as they did.

I agree with you that if you are looking for examples of potential government economic screw ups, we've got some doozies right now that eclipse the bonuses. I also agree with you that I don't think punitive taxes on the bonuses are the way to handle it.

ETA: Is no one else facing changes in employment terms because of the state of the economy? I know I am.

And delusional as Kevin finds my idea, I'm apparently not alone:
http://www.cnn.com/2009/POLITICS/03/19/aig.contracts/

And, AIG's trouble would have been none of my concern had they not gotten a big influx of cash from the government. I suppose I'm culpable because I did vote for Bush in 2004. I'm not sure it makes any sense at all to give money to private companies with no expectations about how the money will be used, especially considering the conditions under which they approached the government.

Fair enough, but it seems like you're directing your outrage at AIG and the people who accepted the bonuses. I think it's more reasonable to think about it in the manner that Professors Warren and Baird did; instead of asking why the AIG execs took the bonuses, you should be asking why the President's economic team didn't take a closer look at the contracts, or why it didn't put up more of a fight on the issue.

[Kevin]

Originally Posted by UGAalum94

Under those circumstances...

But you changed the facts to create a hypothetical situation which doesn't exist which seemingly justifies your point of view. That's just not the case. In the real world, AIG has a contractual duty to pay the money, Congress didn't require them to undo the contracts prior to receiving bailout money, ergo, the money should be paid or the execs should sue and get whatever extra damages New York allows for bad faith breaches of contract or failure to pay wages or whatever remedies exist there.

[UGAalum94]

Originally Posted by KSigkid

Fair enough, but it seems like you're directing your outrage at AIG and the people who accepted the bonuses. I think it's more reasonable to think about it in the manner that Professors Warren and Baird did; instead of asking why the AIG execs took the bonuses, you should be asking why the President's economic team didn't take a closer look at the contracts, or why it didn't put up more of a fight on the issue.

Originally Posted by Kevin

But you changed the facts to create a hypothetical situation which doesn't exist which seemingly justifies your point of view. That's just not the case. In the real world, AIG has a contractual duty to pay the money, Congress didn't require them to undo the contracts prior to receiving bailout money, ergo, the money should be paid or the execs should sue and get whatever extra damages New York allows for bad faith breaches of contract or failure to pay wages or whatever remedies exist there.

I may be misremembering my posts, but I think if you read back through, even as stupidly long as they are, you'll see my outrage is pretty well spread out.

I think I spent the longest time on the point that "yeah, things could have been done differently" simply because there seemed to be an attitude of "oh, the money had to be spent on that." Nope. It didn't. It could have been restricted in advance, probably multiple ways. There are people quoted in the article I linked that think it could have been limited after the fact as well.

[madmax]

Originally Posted by Kevin

But you changed the facts to create a hypothetical situation which doesn't exist which seemingly justifies your point of view. That's just not the case. In the real world, AIG has a contractual duty to pay the money, Congress didn't require them to undo the contracts prior to receiving bailout money, ergo, the money should be paid or the execs should sue and get whatever extra damages New York allows for bad faith breaches of contract or failure to pay wages or whatever remedies exist there.

How do you know AIG has a contractual obligagtion to pay the bonuses? If so they why are they called bonuses?


Former AIG CEO, Hank Greenberg said last week that AIG did not have rentention bonuses when he was running the company.

[Kevin]

Originally Posted by madmax

How do you know AIG has a contractual obligagtion to pay the bonuses? If so they why are they called bonuses?

Because these bonuses are part of the overall compensation packages and not tied to performance.

And I haven't seen the actual contracts. As the late, great Will Rogers said "All I know is what I read in the newspapers."