AIG uses bailout money to pay employees.

[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.

[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.

[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.

[Kevin]

That really wouldn't have mattered though. The company still would have been on the hook for the money and I'm sure it has revenue apart from bailout money which could be used for the purpose of paying those contracts. Yes, it sucks and yes, I hope there's some way to get the responsible parties some sort of justice. It just looks unlikely right now.

Maybe the people will 'clean house' and vote out every single elected official who supported the bailout? That's what really needs to happen here.

We can all dream.

[UGAalum94]

Originally Posted by Kevin

That really wouldn't have mattered though. The company still would have been on the hook for the money and I'm sure it has revenue apart from bailout money which could be used for the purpose of paying those contracts. Yes, it sucks and yes, I hope there's some way to get the responsible parties some sort of justice. It just looks unlikely right now.

Maybe the people will 'clean house' and vote out every single elected official who supported the bailout? That's what really needs to happen here.

We can all dream.

I disagree about how absolutely you accept the company was on the hook for the money. Have you seen one of the contracts? I haven't, but I have a hard time imagining that the bonuses are completely divorced from every other corporate factor. Why would a company write a contract that way? We'll pay you the bonus, no matter what?

Doesn't that seem odd to you? What would be the benefit of having bonuses rather than a pay structure that simply contractual guaranteed the money as base salary? I understand that the bonuses may not have been individually performance based, but completely guaranteed just seems weird.

ETA: about cleaning house. I don't know if that would help, but cleaning up the leadership who should have known better, sure, absolutely. Didn't we somewhat recently have a house cleaning to install the most ethical congress ever? How is that working out?

[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."

[TexasWSP]

The faux outrage over these bonuses and the subsequent treatment of the recipients by, basically, everyone is ludicrous...and disgusting.

These contracts were written in March 2008....before any money was even allocated. The employees in question were asked to stay on an work their asses off for the sake of the company and they were continually assured that they would be receiving bonuses for their work.

Didn't Barney Frank suggest suicide for the people that received the bonuses and aren't willing to give them back??

One of these guys submitted an op-ed to the NY Times yesterday..heard Glenn Beck and Rush read it on their broadcasts word for word. Y'all should too.

[Munchkin03]

Originally Posted by TexasWSP

The faux outrage over these bonuses and the subsequent treatment of the recipients by, basically, everyone is ludicrous...and disgusting.

These contracts were written in March 2008....before any money was even allocated. The employees in question were asked to stay on an work their asses off for the sake of the company and they were continually assured that they would be receiving bonuses for their work.

Didn't Barney Frank suggest suicide for the people that received the bonuses and aren't willing to give them back??

First--I chalk most of this outrage to Middle America not understanding the way that Corporate America works. I'm not a big fan of populist rage, so take that as you will. I understand that retention bonuses aren't the same as performance bonuses; I don't understand what going to someone's house is going to do.

Second--The congressman who made the suicide suggestion was Senator Grassley, a Republican from Iowa.

[ISUKappa]

Originally Posted by TexasWSP

Didn't Barney Frank suggest suicide for the people that received the bonuses and aren't willing to give them back??

I don't know if Frank made a similar comment, but Sen. Charles Grassley (R-Iowa) made a comment that the AIG execs should do as the Japanese execs do when something gets royally screwed up: apologize sincerely and then either resign or commit suicide.

ETA: x-posted with Munchkin. Grassley is a fairly blunt guy and made a similar comment last fall (before the bonus "scandal"). What he really wants is the AIG execs to admit, "Hey, we completely effed up everything. We realize that. We know we can't change it, but we are sorry." Not like it will ever happen, but that's the supposed explanation for his comment.

[srmom]

You know, that's all fine and good, but I (and my husband) are business owners and if we made a bad business decision which resulted in a loss, to the point that we had to take out loans to keep the doors open (because we sure as heck wouldn't be getting any money from the govt.), there is no way that bonuses would be distributed, either to our employees or to ourselves. We would be hanging on for dear life, and our employees would be lucky if we could keep the doors open so that they could continue receiving their paychecks.

I certainly think Barney Frank's suggestion for suicide was not only ridiculous, but repugnant (but that goes IMO for just about everything that comes out of his mouth).

But, as a taxpayer, and as someone who runs a business that is confined by the rules of "sensible business practices", the idea of handing out bonuses when your company is going down the drain, and that those bonuses are coming from my and other fellow taxpayers' money is as ridiculous and repugnant.

[srmom]

And, contracts are made to be broken (or renegotiated)- When I worked in the oil & gas business back in the 80's, our company got involved in what were called "take or pay" contracts (simplified - we contracted to take the gas at a set price and quantity or pay for it anyway). Well the gas market crashed and we were stuck with take or pay provisions that would have bankrupted the company - these were with companies ranging from Mom & Pop org.s to Shell, Exxon & Chevron.

We HAD to renegotiate or go under. So, that's what we did.

In this case, those contracts, if AIG had gone bankrupt, (which for most of us business owners out there without govt bailouts is what would have happened), would be worthless.

How about, in good conscience, renegotiating the provisions??