New Bailout Bonus Law is Flawed

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MasterG2kTR -> New Bailout Bonus Law is Flawed (3/19/2009 5:58:48 PM)
WASHINGTON- Denouncing a "squandering of the people's money," lawmakers voted decisively Thursday to impose a 90 percent tax on millions of dollars in employee bonuses paid by troubled insurance giant AIG and other bailed-out companies. The House vote was 328-93. Similar legislation has been introduced in the Senate and President Barack Obama quickly signaled general support for the concept. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ The problem with this new law that was so hastily passed, is that they still left a back door open for the unscrupulous money managers that are so good at finding ways to screw us. Sure a 90% tax seems very imposing, but when it's not their money that they are handing out as bonuses....so what?! Here's the way around the tax. If they are intent on giving bonuses (which it seems many like AIG will do) they simply multiply the bonus by 10. So if they want to give me a bonus of $1 million, they make it $10 million, pay the tax of $9 million and I get my $1 million bonus. Since it was taxpayer money to start with it goes back to the taxpayers (minus $1 million). First they were complete morons for not requiring accountability from the start. Second they should have enacted restrictions before the money was handed out. Last, if they wanted this bill to work they should have asked a couple of Fifth Graders to review it!!

ThatDamnedPanda -> RE: New Bailout Bonus Law is Flawed (3/19/2009 6:30:18 PM)
quote: First they were complete morons for not requiring accountability from the start. Second they should have enacted restrictions before the money was handed out. Last, if they wanted this bill to work they should have asked a couple of Fifth Graders to review it!! I totally agree with all three points. The thing about this tax law, though, is that I'm assuming it's the first step of a two-part process - first, tax those bonuses back into the treasury where they belong, and second, if they're going to insist on handing out money on these goddamned bailout bills, write provisions into the goddamned things proscribing these bonuses from even being awarded. Like i say, that's an assumption on my part, but I'd better not be wrong. If those stupid sonsabitches haven't at least learned that much yet, we are truly beyond any hope of salvation.

pahunkboy -> RE: New Bailout Bonus Law is Flawed (3/19/2009 8:30:05 PM)
Ron Paul says this is bad, as does Peter Schiff. SO- I agree. Congress is so sloppy. Why cant they use their own personal household checkbook from now on- not mine. Or better yet- just delete them. They have become too expensive. Get rid of the dead weight. Disolve the congress. Its function is no longer needed.

Honsoku -> RE: New Bailout Bonus Law is Flawed (3/20/2009 12:09:10 AM)
The "tax" is being imposed because AIG claims that they have to give that amount in bonuses because they are contractually obligated to do so (though that does beg the question; why the hell are the bonuses obligatory? Doesn't that defeat the point?). So, while they could try to pay more to defeat the bill, that would simply bring down the wrath of congress, if noticed.

awmslave -> RE: New Bailout Bonus Law is Flawed (3/20/2009 12:11:57 AM)
US is seriously screwed: the government is unable to come out with meaningful solution for anything. The bonus system was a factor why banks failed: it was important for top managment to accumulate as much financial leverage (risk) as possible in order to secure high bonuses for themselves. I support high government regulatory oversight of banking industry. People who sit on big pile of (mostly other peoples money) always develop creative ways how to grab big piece of it for themselves. So, The Congress could have designed new comprehensive solution how government regulators, shareholders and bank managers interact to replace failed system. There is current law that could have been followed in this particular case (§ 1831o. Prompt corrective action). If depository institution becomes undercapitalized or significantly undercapitalized then: 4) Senior executive officers’ compensation restricted (A) In general The insured depository institution shall not do any of the following without the prior written approval of the appropriate Federal banking agency: (i) Pay any bonus to any senior executive officer. (ii) Provide compensation to any senior executive officer at a rate exceeding that officer’s average rate of compensation (excluding bonuses, stock options, and profit-sharing) during the 12 calendar months preceding the calendar month in which the institution became undercapitalized.

Honsoku -> RE: New Bailout Bonus Law is Flawed (3/20/2009 12:30:46 AM)
I doubt AIG is considered a "depository institution" as it is an insurance company, not a bank. However, they might have been able to extend that law to include any company under government support. Though that would require congress having knowledge of the law [:D]

NeedToUseYou -> RE: New Bailout Bonus Law is Flawed (3/20/2009 2:05:02 AM)
So, the government wrote a contract, signed it, agreed to it, then in hind sight decided they didn't like what they agreed to, so wrote a punitive law specifically designed to target an unpopular group of individuals. And people think that is a good thing.

StrangerThan -> RE: New Bailout Bonus Law is Flawed (3/20/2009 3:51:10 AM)
quote: ORIGINAL: NeedToUseYou So, the government wrote a contract, signed it, agreed to it, then in hind sight decided they didn't like what they agreed to, so wrote a punitive law specifically designed to target an unpopular group of individuals. And people think that is a good thing. Yup, pretty much. To top off this autistic sit-n-spin display, we're going to be happy about getting 90 percent of 165 million while we let 170-180 billion flow like the amazon of money rivers to this one company. I heard an ABC reporter remark yesterday in a news segment that some furious wording was going on behind the scenes so that the next time AIG bellied up to the bailout bar, bonuses would not be allowed. The NEXT time.

corysub -> RE: New Bailout Bonus Law is Flawed (3/20/2009 4:02:01 AM)
quote: ORIGINAL: NeedToUseYou So, the government wrote a contract, signed it, agreed to it, then in hind sight decided they didn't like what they agreed to, so wrote a punitive law specifically designed to target an unpopular group of individuals. And people think that is a good thing. I agree totally. However, it wasn't "hind sight" made them decide they didn't like what they agreed too...it was "the public outrage" that scared the shit out of them. There was a clause in the so called "Stimulus" democrat spending bill that would have stopped payment of these types of bonuses to insitutions who received TARP money. It was the Obama Administration and Sen. Dodd that eleminated that clause literally at the eleventh hour and substituted a "time line" of February 11th, which allowed AIG to pay contractual bonus arrangements. It was the democrat Congress that passed this legislation withhout reading it because of the "critical" state of the economy....and there was no time for promised "transparency"..and than took four days for the President to sign it into law in a photo op. After a "lapse of memory" the good Senator from AIG homestate "remembered" that Geithner had pressed him to make this change. Must have taken a great deal of 'pressing". The good news is that in between jokes on Leno, the President said he had confidence in the Secretary of the Treasury. Since there is no one else in place at treasury with eleven open deputy spots not filleGd, I guess there is no surprise at this comment since Geithner is the guy. It's also amazing to me that a country built on law now has a "bonus law" that scraps contratual arrangements from mortgages to compensation. Gonna keep lawyers busy and employed fighting these cases for years! It's amazing that we have a government that feels it can run the auto industry, the insurance industry,the healthcare industry, but itself is totally dysfunctional in the sense of doing the right thing. It is NOT dysfunctional when it comes to their agenda...and that's what we now have...a government with an agenda for social change but no plan for the "economy". I believe "it's the economy stupid" was once a slogan that changed governments. There is a new generation that can use those old banners.

Owner59 -> RE: New Bailout Bonus Law is Flawed (3/20/2009 4:12:53 AM)
It`s un-realistic to think that no one will make mistakes or errors.In fact,it`s about the only thing that can be counted on. It`s how people handle mistakes that counts. I find it refreshing that those that made a mistake manned up,admitted it and fixed it.

MmeGigs -> RE: New Bailout Bonus Law is Flawed (3/20/2009 4:34:46 AM)
quote: ORIGINAL: StrangerThan quote: ORIGINAL: NeedToUseYou So, the government wrote a contract, signed it, agreed to it, then in hind sight decided they didn't like what they agreed to, so wrote a punitive law specifically designed to target an unpopular group of individuals. And people think that is a good thing. Yup, pretty much. Nope. The govt had nothing to do with the contract. The contract with these employees was entered into by AIG before the bailouts - I think last spring. quote: To top off this autistic sit-n-spin display, we're going to be happy about getting 90 percent of 165 million while we let 170-180 billion flow like the amazon of money rivers to this one company. I heard an ABC reporter remark yesterday in a news segment that some furious wording was going on behind the scenes so that the next time AIG bellied up to the bailout bar, bonuses would not be allowed. The NEXT time. They've already bellied up. They're hoping to get another $30 Billion.

Lorr47 -> RE: New Bailout Bonus Law is Flawed (3/20/2009 9:35:16 AM)
quote: ORIGINAL: Owner59 It`s un-realistic to think that no one will make mistakes or errors.In fact,it`s about the only thing that can be counted on. It`s how people handle mistakes that counts. I find it refreshing that those that made a mistake manned up,admitted it and fixed it. I agree. Yesterday one of the news stations analyzed the problem. The problem has many aspects not the least of which is that the stimulus package is so large that those writing it cannot foresee the ingenious ways that it may be abused. The AIG thieves only had to focus on a small part of the package to try and pull this off. Those writing the whole package have a mammoth undertaking trying to anticipate all the ways dishonest people can try to steal from it. I am heartened that congress, except the usual suspects, had the guts to say we screwed up but will try to rectify the matter. When the secretary of treasury says " I screwed up but will try to rectify it" my respect for him grows. We have never been here before. I still respect Alan Greenspan. His mistake was that he underestimated the greed and depravity of Wall Street. And, he admitted his mistake.

Archer -> RE: New Bailout Bonus Law is Flawed (3/20/2009 10:04:10 AM)
The bonuses were in contracts that the employees had met the requirements of, that were written BEFORE the bailout. If the employee does A,B,C,D then they will receive a bonus of X. The Employee met the goals/ requirements in the contract to receive the bonuses, the bonuses are legally obligations of the company. So those saying that they (the employees) post fact are trying to get around the new law are just ill informed, spouting off. Passage of this bill may in fact violate the US Constitution under the Post Facto law making and Bills of Attainder prohibitions. The reason the (after Feb) date That Dodd has disowned from his amendment, was placed in the law to begin with is likely because some legal staffer was trying to avoid this constitutional law problem of passing retroactive punitive laws. Many of the bonuses were paid as a retention bonus to retain the people who are the best informed and educated about the sub prime market problems. The question is simple is it cheaper and more practical to pay bonuses to folks who know the problem well already or to lose them and hire in someone and have them take time to learn to that level? Which course of action is most likely to handle the problem as quickly as possible? WHich choice is likely to drag out the problem longer? BTW nobody has examined the fact that some departments of AIG were actually profitable and had nothing to do with the sub prime problems that caused their insolvency. Do we really want to deny someone who works in another department entirely and had nothing to do with the sub prime real estate area of the company the bonuses they have earned? When they start to divide out those that were involved in the bad decisions from those who were not then I'll start to think maybe they have gotten past the knee jerk reaction and started to actually look at fairness.

Owner59 -> RE: New Bailout Bonus Law is Flawed (3/20/2009 10:11:50 AM)
Bonuses?! For the year in which these very executives drove the company into a ditch?!!! Bonuses are for when you MAKE money.

Archer -> RE: New Bailout Bonus Law is Flawed (3/20/2009 10:14:04 AM)
You really don't read do you Owner. A retention bonus isn't paid for any other reason than to keep the person at the company regardless of profit or loss. Other departments of AIG were in fact profitable, and yet you seem to want their bonuses to be punatively taxed as well.

Owner59 -> RE: New Bailout Bonus Law is Flawed (3/20/2009 10:22:24 AM)
Retention? YGTBFKM.... Let`m leave. They got a problem with that...let`m sue.

StrangerThan -> RE: New Bailout Bonus Law is Flawed (3/20/2009 10:30:39 AM)
quote: ORIGINAL: MmeGigs quote: ORIGINAL: StrangerThan quote: ORIGINAL: NeedToUseYou So, the government wrote a contract, signed it, agreed to it, then in hind sight decided they didn't like what they agreed to, so wrote a punitive law specifically designed to target an unpopular group of individuals. And people think that is a good thing. Yup, pretty much. Nope. The govt had nothing to do with the contract. The contract with these employees was entered into by AIG before the bailouts - I think last spring. quote: To top off this autistic sit-n-spin display, we're going to be happy about getting 90 percent of 165 million while we let 170-180 billion flow like the amazon of money rivers to this one company. I heard an ABC reporter remark yesterday in a news segment that some furious wording was going on behind the scenes so that the next time AIG bellied up to the bailout bar, bonuses would not be allowed. The NEXT time. They've already bellied up. They're hoping to get another $30 Billion. The contract in question is that driving the bailouts. That contract the governmet did write, now doesn't like it and are trying to write a punitive law to recoup it because of public outcry. As for people manning up, it's easier to do that when you're on the verge of being outted. Dodd denied, denied, denied and denied, even on the very day I believe that he finally fessed up. That's not manning up. That is squirming and twisting and evading until you hit the point where you can no longer do so. He was also vague about administration officials - which a reporter let him be - until the next day. That's a cover everyone's ass move. It's give them time to figure out who is the most expendable. I've no knowledge of AIG wanting more money right now but nothing surprises me anymore when it comes to the marriage between Wall Street and the government except that you, I and anyone who works, will monetarily support it to the bitter end. The only real question is in this until death do us part scenario, is who will finally go belly up. The banks, government, or the people paying for it.

Archer -> RE: New Bailout Bonus Law is Flawed (3/20/2009 10:30:58 AM)
They have a legally binding contract, if they sued AIG the system says they can collect double damages so yeah take the bonuses back let them sue and collect double and then leave forcing AIG to hire new workers who have to learn their jobs taking additional years to solve the problem. After all people who understand the intricacies of the sub prime market better than they do are all over the net, we can just hire one of the net experts. That makes perfect sense. Are your knees worn out yet Owner, cause they seem to be jerking alot.

Honsoku -> RE: New Bailout Bonus Law is Flawed (3/20/2009 10:31:45 AM)
From the article: "The bill would impose a 90 percent tax on bonuses given to employees with family incomes above $250,000 at American International Group and other companies that have received at least $5 billion in government bailout money. It would apply to any such bonuses issued since Dec. 31." Underlined for emphasis. "About 400 AIG employees and future employees received bonuses, but not all of them earned over the $250,000 family income threshold specified by the House bill." $160,000,000/400 employees = average of $400,000 bonus/employee. Does seem a bit out of whack, now doesn't it? Especially if they are for "retention". The argument that it isn't directed solely at the financial products division does have some merit. However, we aren't just bailing out that division. We are bailing out AIG. When a ship is leaking, it isn't just the idiot that dropped the bowling ball through the deck that has to bail the water out.

Archer -> RE: New Bailout Bonus Law is Flawed (3/20/2009 10:44:08 AM)
Now I'm not saying that all the bonuses are good things, some of those bonuses are crap, no doubt some of the folks they paid to retain are not worth much retaining. But it's not an all or nothing thing when it comes to who's worth retaining and who's worthy of a bonus from outside that division. Fail to pay that bonus to the outside the problem department and watch as their talent that was up to the bonus level of performance for that department leaves, how likely is it you can hire someone for less that will be that productive, especially after finding out the last guy wasn't paid his bonus and that the job now has a cap in compensation. How quickly you figure they can find such an altruistic employee that will accept that deal? The message you send when you deny bonuses because other departments failed is simple promises don't mean shit even if thy are in a contract. how you figure that's going to go over with prospective and current employees? I'm simply saying before we demonize every AIG employee who got a bonus that we actually try to see which folks deserved the bonuses and which ones didn't. and look beyond the first glance when doing it.

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