Obama to try and block AIG Bonuses

D

dmaul1114

Banned
I see good for him. Absurd for a company that's received $173 billion in bailout funds to stay afloat to be giving out $165 billion in bonuses--especially when it sounds like most of the bonuses are in the department that did a lot of the speculating etc. that got them in this mess and helped tank the economy.

Obama blasts AIG 'outrage,' will try to block bonuses[/n]

* Story Highlights
* President says he will try to block bonuses to AIG executives
* Obama, referring to $165 million in extra pay, asks: "How do they justify this outrage?"
* AIG has received $173 billion in U.S. bailouts over the past six months

WASHINGTON (CNN) -- President Barack Obama said Monday he will attempt to block bonuses to executives at ailing insurance giant AIG, payments he described as an "outrage."

"This is a corporation that finds itself in financial distress due to recklessness and greed," Obama told politicians and reporters in the Roosevelt Room of the White House, where he and Treasury Secretary Tim Geithner were unveiling a package to aid the nation's small businesses.

The president expressed dismay and anger over the bonuses to executives at AIG, which has received $173 billion in U.S. government bailouts over the past six months.

"Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. I mean, how do they justify this outrage to the taxpayers who are keeping the company afloat?"

Obama was referring to the bonuses paid to traders in AIG's financial products division, the tiny group of people who crafted complicated deals that wound up shaking the world's economic foundations.

The president said he has asked Geithner to "pursue every single legal avenue to block these bonuses and make the American taxpayers whole."

Obama spared AIG's new CEO, Edward Liddy, from criticism, saying he got the job "after the contracts that led to these bonuses were agreed to last year."

But he said the impropriety of the bonuses goes beyond economics. "It's about our fundamental values," he said.

"All across the country, there are people who are working hard and meeting their responsibilities every single day, without the benefit of government bailouts or multimillion-dollar bonuses. You've got a bunch of small-business people here who are struggling just to keep their credit line open," Obama said.

"And all they ask is that everyone, from Main Street to Wall Street to Washington, play by the same rules. That is an ethic that we have to demand."

Obama said he would work with Congress to change the laws so that such a situation cannot recur.

Then, coughing, he added in jest, "I'm choked up with anger here."

Under pressure from the Treasury, AIG scaled back the bonus plans and pledged to reduce 2009 bonuses -- or "retention payments" -- by at least 30 percent. That did little to temper outrage at the initial plan, however.

In a letter Sunday to Geithner, U.S. Sen. Russ Feingold urged the Obama administration to explore "legal options" to prevent the millions in AIG payouts.

"I write to ask why any bonuses would be legally required, given the company's abysmal performance," says Feingold, D-Wisconsin.

Feingold asked whether the bonuses could be canceled or recouped from recipients, and whether the administration will sue AIG executives for breaching their duties to shareholders

"There are a lot of terrible things that have happened in the last 18 months, but what's happened at AIG is the most outrageous," Lawrence Summers, head of the National Economic Council, told ABC's "This Week."

"What that company did, the way it was not regulated, the way no one was watching, what's proved necessary, it is outrageous."

And on "Fox News Sunday," White House economic adviser Austan Goolsbee said Geithner was "really upset by the news."

"He stepped in and berated them, got them to reduce the bonuses following every legal means he has to do this," Goolsbee said.

In a letter to Geithner, obtained Saturday by CNN, AIG Chairman and CEO Edward Liddy said his company was taking steps to limit compensation in AIG Financial Products -- the British-based unit responsible for issuing the risky credit default swaps that have brought the company to the brink of collapse. The default swaps amount to insurance against losses from bad loans, which have increased dramatically since the U.S. housing boom peaked.

In the letter to Geithner, Liddy said the unit's 25 highest-paid contract employees will reduce their salaries to $1 this year and all other officers in the unit will reduce their salaries by 10 percent. Other "non-cash compensation" will be reduced or eliminated. But he told Geithner that some bonus payments are binding legal obligations of the company, and "there are serious legal, as well as business consequences for not paying."

Rep. Barney Frank, the chairman of the House Financial Services Committee, told Fox that bailout recipients should have to follow stricter compensation rules, and said Congress should look into whether the bonuses are "legally recoverable."

"We can't just violate legal obligations, I understand that," the Massachusetts Democrat said. "But I do want to find out at what point these legal obligations were incurred. Who said, and at what point, 'We're going to give these bonuses no matter what?' And I do think it's inappropriate for those people to stay in power at that company."

Frank said that if banks complain that the Obama administration has made things too tough, "They can give the money back. We made that easy."

Goolsbee said AIG was following "a policy that's really not sensible, is obviously going to ignite the ire of millions of people."

"We've done exactly what we can do to prevent this kind of thing from happening again," Goolsbee said. Summers told ABC that the administration was taking "every legal step possible to limit those bonuses."

AIG lost a record $62 billion in the fourth quarter of 2008. It has more than 74 million insurance policies issued in 130 countries around the world.
Click to expand...
 
Not only that, Cuomo wants names. Probably won't amount to a hill of beans, but I'm shocked that Americans are actually getting it for once, and it warms my heart to think of the morally bankrupt AIGers speed-dialing their lawyers and reaching for the Tums.

The hot seat is getting even hotter for AIG Chairman and CEO Edward Liddy. Not only has President Barack Obama called on his Treasury Secretary to do everything possible to block the bailed-out insurance company from doling out $165 million in bonuses, but now the New York Attorney General has set a deadline of 4pm Monday for Liddy to release the names and job descriptions of those receiving bonuses stating that if the information is not received this afternoon that he will seek a subpoena to force compliance.
...
"Moreover, you should immediately provide us with a list of who negotiated these contracts and who developed this retention plan so we can begin to investigate the circumstances surrounding these questionable bonus arrangements," said Cuomo.
Click to expand...

http://www.abcnews.go.com/Blotter/story?id=7093689&page=1
 
ha ha!

I hope they get every single $ blocked.

It's about time a backbone formed and using it to beat these stupid people on the head.
 
I'll be impressed if they actually stop them. But when they come out and admit they can't stop these bonuses, I'll come back here to post and call them idiots.
 
[quote name='KingBroly']I'll be impressed if they actually stop them. But when they come out and admit they can't stop these bonuses, I'll come back here to post and call them idiots.[/QUOTE]

I doubt they have any legal way to stop them--they'd have to change the law/regulations for companies receiving bail out funds.

But hopefully the negative PR this will bring on AIG will shame/force them to stop the bonuses without being forced too legally.
 
Playing devils advocate here but, is it worth it to attempt to deny these bonuses through lengthy legal proceedings even if the tax payer cost of the government dealing with these potential law suits actually amounts to more than the total value of the bonuses being paid out? As we all know, there is nothing speedy about our justice system and attempting to break firm legal contracts is certainly not going to be a quick or cheap process.

IMO, this sound like a case of cutting off the nose to spite the face. It would be a PR win but in terms of total cost, it looks like a lose/lose scenario.
 
I'm amazed nobody saw this coming. There will be more.

Further proof the bailouts were a huge kneejerk reaction with a made up number attached, that wasn't very well thought out at all.
 
[quote name='dmaul1114']I doubt they have any legal way to stop them--they'd have to change the law/regulations for companies receiving bail out funds.

But hopefully the negative PR this will bring on AIG will shame/force them to stop the bonuses without being forced too legally.[/QUOTE]

I am pretty sure the auto workers had to accept less compensation in return for bail out cash. We live in a society that allows pensions to be raided and not paid out.

Them trying to say their hands are tied is an insult really.
 
[quote name='Msut77']I am pretty sure the auto workers had to accept less compensation in return for bail out cash. We live in a society that allows pensions to be raided and not paid out.

Them trying to say their hands are tied is an insult really.[/QUOTE]

Yeah, they added stipulations on bonuses, wages etc. on the latest round of bailout funding. Could be trickier with people like AIG that got bailouts in the first wave from Bush that didn't have such strings attached.

Though I think AIG got money both times, so maybe they do have some grounds.
 
[quote name='BillyBob29']Playing devils advocate here but, is it worth it to attempt to deny these bonuses through lengthy legal proceedings even if the tax payer cost of the government dealing with these potential law suits actually amounts to more than the total value of the bonuses being paid out? As we all know, there is nothing speedy about our justice system and attempting to break firm legal contracts is certainly not going to be a quick or cheap process.

IMO, this sound like a case of cutting off the nose to spite the face. It would be a PR win but in terms of total cost, it looks like a lose/lose scenario.[/quote]

Yes. By way of analogy, there are a vast amount of thefts where it costs more to pay a policeman to arrest and process the thief then it would to write off the loss. You need to add the benefit of linking a deterrent with immoral action and just plain ol' justice. Unfortunately we are dealing with sociopaths. These executives cannot be reasoned with, simply put they have the etiquette of pigs at a trough.
 
As bad as recessions are, sometimes positive things do come of them. People finally waking up and seeing how insane these bonuses are is one. Had these companies never needed government help, we wouldn't have half the information on these bonuses that we do.
 
I like the fantasy people have about the government NOT being able to do something.

The only thing the government can't do is be smaller.

Rewriting laws and making them retroactive? It has been done.
 
[quote name='BillyBob29']Playing devils advocate here but, is it worth it to attempt to deny these bonuses through lengthy legal proceedings even if the tax payer cost of the government dealing with these potential law suits actually amounts to more than the total value of the bonuses being paid out? As we all know, there is nothing speedy about our justice system and attempting to break firm legal contracts is certainly not going to be a quick or cheap process.

IMO, this sound like a case of cutting off the nose to spite the face. It would be a PR win but in terms of total cost, it looks like a lose/lose scenario.[/QUOTE]

Court costs and legal costs are high, but g'lord, $165 million for one case? That's silly to think they could match the cost, let alone exceed it.
 
[quote name='fatherofcaitlyn']I like the fantasy people have about the government NOT being able to do something.

The only thing the government can't do is be smaller.

Rewriting laws and making them retroactive? It has been done.[/quote]

Ex Post Facto law, but then again it's not like it's new for the Government to ignore the law
 
[quote name='mykevermin']Court costs and legal costs are high, but g'lord, $165 million for one case? That's silly to think they could match the cost, let alone exceed it.[/quote]

There wouldn't even be high courts costs.

Run a law reading "All compenstation above $500K give to an employee of AIG from 2007-2009 will be taxed at 100%." through Congress.

Have Obama sign it.

Notify the IRS of back taxes for every AIG employee with high compensation.

Would it be horribly unfair and vindictive? Absolutely.

However, I think the SNL skit with "The Rock Obama" would be a better solution.

The Rock Obama: You want $30 billion to stay in business?

 
[quote name='KingBroly']Ex Post Facto law, but then again it's not like it's new for the Government to ignore the Constitution[/quote]

Bill Clinton and George W. Bush each pushed retroactive tax laws.

Happened twice already. Too bad.
 
[quote name='VipFREAK']All I can say is good. What should be said is why is this an issue in the first place?[/quote]

Culture of privilege.

These investment bankers didn't get MBAs to make a pissant 500K per year.

Most of them live in New York. You have to make at least 100K to be above the poverty line.

Could you imagine how horrible it would be for an investment banker to start driving a 2 year old car worth less than $50K, wearing only $1000 suits or having to send their children to public schools or public colleges? No thank you, SIR.
 
dmaul, it looks like it's $165 million, not billion.

Anyway, this shouldn't even be an issue. This stupid company should've failed a long time ago. How were these people going to get bonuses if the company had already gone bankrupt? Problem solved.
 
[quote name='rickonker']dmaul, it looks like it's $165 million, not billion.

Anyway, this shouldn't even be an issue. This stupid company should've failed a long time ago. How were these people going to get bonuses if the company had already gone bankrupt? Problem solved.[/QUOTE]

Didn't you get the damn memo? They are on the list of "too big to fail". And that list was made by those much smarter than any of us (either that or bribed).
 
Normally, company practices are company business, but when you take taxpayer money to keep you afloat, your board of directors just grew by 300 million. An overwhelming number of those people say your contract is crap because your negligence led to poor performance and the current situation. Seems fair to me.
 
[quote name='thrustbucket']Didn't you get the damn memo? They are on the list of "too big to fail". And that list was made by those much smarter than any of us (either that or bribed).[/quote]

Congresspeople can't be bribed. They can only receive campaign contributions.

EDIT: We really need to stay focused on this. Recovering that $165 million is the most important thing ever. Yes, I'm being sarcastic.
 
[quote name='Anexanhume']Normally, company practices are company business, but when you take taxpayer money to keep you afloat, your board of directors just grew by 300 million. An overwhelming number of those people say your contract is crap because your negligence led to poor performance and the current situation. Seems fair to me.[/quote]

No, the board of directions grew by 545. And on some occasions, 546.

House (435) + Senate (100) + President (1) + Supreme Court (9)
 
[quote name='mykevermin']Court costs and legal costs are high, but g'lord, $165 million for one case? That's silly to think they could match the cost, let alone exceed it.[/QUOTE]

But it wouldn't be one case. Every one of these people has a contact for their bonus. That is a court case for each one + appeals on top of appeals.

Then you are assuming that the government wins the cases and gets the contracts voided. If they lose then the taxpayer is out all those court costs and AIG employees get the $165 million in bonuses.
 
Speaking of contracts, I can't wait for those right-wing fuckheads who spent the last three months of the year decrying UAW contacts to hold this millionaire's club to the same standards of outrage.

I can't wait, but I ain't gonna hold my breath.
 
In an interview with Cedar Rapids, Iowa, radio station WMT-AM today, Sen. Chuck Grassley, R-Iowa, ranking Republican on the Senate Finance Committee, said executives of AIG should consider following what he described of the Japanese model of shamed corporate executives: apology or suicide.
"I don't know whether the ($165 million in bonuses) is an issue as much as just the chutzpah of the people running AIG," Grassley said. "That they could thumb their nose at the taxpayers, it's more that.
"The attitude of these corporate executives and bank executives, and most of them are in New York, that somehow they're not responsible for their company going into the tank," he said.
"I suggest, you know, obviously maybe they ought to be removed, but I would suggest that the first thing that would make me feel a little bit better towards them [is] if they would follow the Japanese example and come before the American people and take that deep bow and say I'm sorry and then either do one of [two] things: resign or go commit suicide."
Grassley added, "In the case of the Japanese, they usually commit suicide before they make any apology."
Click to expand...
http://blogs.abcnews.com/politicalpunch/2009/03/gop-senator-aig.html

This guy brings up a good point. This society has lost the concept of shame. Somewhere "greed is good" and "winning is everything" went from silly movie cliches to gospel truth. For the modern American rich no exploitation is too unethical, no extravagance is too decadent, no amount of failure justifies a pay cut or even a bonus reduction.
 
...which is why I recommend corporal punishment for white-collar offenders.

I murdered someone. Bernie Madoff stole a couple bucks.

Who harmed society more? The justice system's bias is based off of the lack of "proportionality" applied to white-collar offenses.
 
[quote name='mykevermin']...which is why I recommend corporal punishment for white-collar offenders.

I murdered someone. Bernie Madoff stole a couple bucks.

Who harmed society more? The justice system's bias is based off of the lack of "proportionality" applied to white-collar offenses.[/quote]

It really depends on who you killed.
 
[quote name='Friend of Sonic']The fact the bailout money didn't have clauses written in them to exclude bonuses is silly.[/quote]

Our government at work, and proof why all of it sucks.

I can understand why people don't want the bonuses paid, I don't like them either, but it's still scary that the goverment thinks they can just flex muscle to get AIG to bend to their will. That kind of stuff looks great until they do it to the little man too.
 
[quote name='BillyBob29']But it wouldn't be one case. Every one of these people has a contact for their bonus. That is a court case for each one + appeals on top of appeals.

Then you are assuming that the government wins the cases and gets the contracts voided. If they lose then the taxpayer is out all those court costs and AIG employees get the $165 million in bonuses.[/QUOTE]
The government won't hire new attorneys for this case. The cost for our government to litigate is $0 in real terms. Their salaries are sunk costs one way or the other.

Labor union employees get treated like scumbags that brought down their companies single handedly, white collar workers who did actually did destroy their companies are treated to bonuses without anyone thinking to force concessions ahead of time. Interesting how that works out.
[quote name='Larry Summers']We are a country of law. There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system.[/quote]
Someone should have told the auto workers.
 
[quote name='GuilewasNK']Our government at work, and proof why all of it sucks.

I can understand why people don't want the bonuses paid, I don't like them either, but it's still scary that the goverment thinks they can just flex muscle to get AIG to bend to their will. That kind of stuff looks great until they do it to the little man too.[/QUOTE]

This whole thing is a flaming glorious future text book example of why you don't look to government try to "fix" problems.
 
This should have been a poll. I vote : should have let AIG fail in the first place. The whole argument of too big to fail fails when Paulson let Lehman Bros. die while orchestrating the first bailout debacle. Then the whole point of employee bonuses becomes moot and a matter for the courts instead of the political dodgeball that's being played now.

So, if you want to make it a class warfare issue and pit the white collars against the blue, you have to ask yourself why your now "blue collar representative", i.e. democrat, government is bailing out the starched collars in the first place.
 
[quote name='thrustbucket']This whole thing is a flaming glorious future text book example of why you don't look to government try to "fix" problems.[/quote]

Yeah, and just at the time when the invisible hand of the free market was doing such a bang-up job.

If this exercise gets people to notice how morally bankrupt, how financially incestuous, how contemptuous the elite class are of the rest of us, then it will not be in vain.
 
So apparently the way they are looking to block money is by passing a bill that will tax at 100% rate all income from bonuses after an intial $100,000. Its a step in the right direction, but still not even close to enough given $100,000 is stlll 2-3x most peoples yearly income.
 
[quote name='MSI Magus']So apparently the way they are looking to block money is by passing a bill that will tax at 100% rate all income from bonuses after an intial $100,000. Its a step in the right direction, but still not even close to enough given $100,000 is stlll 2-3x most peoples yearly income.[/QUOTE]

Yeah, FoC hit that one on the head. Congress's plan is a narrowly focused tax IF they don't return the money to the company willingly.

http://www.washingtonpost.com/wp-dyn/content/article/2009/03/17/AR2009031701195.html?hpid=topnews
 
It'd still be Ex Post Facto. Charging a 100% tax on something they already got...I smell a fight and/or letdown.
 
http://www.foxbusiness.com/story/markets/industries/finance/dodd-cracks-aig---time/

Dodd Tries to Undo Bonus Protections He Put Into Law ----- While the Senate was constructing the $787 billion stimulus last month, Chris Dodd (D-Conn) added an executive-compensation restriction to the bill. That amendment provides an “exception for contractually obligated bonuses agreed on before Feb. 11, 2009” -- which exempts the very AIG bonuses Dodd and others are now seeking to tax. The amendment made it into the final version of the bill, and is law. Separately, Sen. Dodd was AIG’s largest single recipient of campaign donations during the 2008 election cycle with $103,100, according to opensecrets.org.
 
I guess I need to learn more about business end of bonuses, but couldn't the shareholders say no to these contractual bonuses?

Even though they were signed at the begining, and they are suppose to "keep" these awful people there, couldn't the the shareholders, revoke that option?

I mean these should be reflected on the performance and evaulation, not because you stuck it through all the shit and mud.


Edit: oh lol, Chris Dodd.
 
some of this vitriol needs to be redirected to our public servants, watchdogs should be spending energy fixing themselves and explaining how they failed to regulate.
 
[quote name='xycury']I guess I need to learn more about business end of bonuses, but couldn't the shareholders say no to these contractual bonuses?

Even though they were signed at the begining, and they are suppose to "keep" these awful people there, couldn't the the shareholders, revoke that option?

I mean these should be reflected on the performance and evaulation, not because you stuck it through all the shit and mud.


Edit: oh lol, Chris Dodd.[/quote]

The board of directors has all the power.

Shareholders have very, very, very little say in how the company is run beyond electing the board of directors.

Even if, by some miracle, an item is put on a ballot about executive pay and the shareholders vote for more reasonable pay, the vote can simply be overruled.
 
[quote name='willardhaven']It's all song and dance, Obama will high-five the AIG execs over coffee after everything is finished.[/quote]

Obama lost political capital, no amount of capaign contributions could make up for that (even in AIG was in a giving mood, which after being made the villians they won't be)

Someone in govt will have a secret toast with AIG if this whole thing blows over, but it won't be Obama.
 
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