I'm outraged that the morons still have jobs. They are garbage crooks who were finally caught when their probability based ponzi-scheme failed (they put massive leverage under the theory that this situation only occurs X percent of the time, and X happened with a vengeance). Stop thinking of them as some brilliant executives who work so hard to handle all this insurance and derivative shit... that job can be done by others. Taking apart and paying out your losses on dividends is something that the whole middle layer of the business can take care of just fine.

We need to decapitate AIG, very cruelly, and stick the head on a pike as an example of the government's vengeance... instead of the farce of charity we have today. I'm tired of the yes men for the corporate elite who are incompetent and crooked to the core... they obviously do not give a care as they cut millions of jobs in exchange for their FINANCIAL mistakes. They were paid millions if not billions to manage these companies, worst than being braindead and not planning for the future, they went worst than braindead, they actively did some of the stupidest hijinks in history, it would have been better to have the do nothing leadership! They didn't just stagnate, the dug a big fricking hole under their corporate headquarters... and it wasn't the teller you walk up to at the bank after waiting forever in a line, or the mid-level banker who helped set up your 30 year mortgage with good service... it was the guy in the really fancy office deciding on a get rich quick scheme who lost the company billions in one swish of the pen... that causes thousands of jobs that actually provided service to be cut.

It ticks me off. Executives should know what they are doing, and they should know that the crooked things can be caught and cost more than they are worth. That is the key, these guys are not really complete idiots, they simply chose to do something wrong because they believe they could get away with it in our lax enforcement of laws and shareholder scrutiny being non-existant, they didn't get away with it and boom, no more company. Until the government steps in with billions and the only people keeping their jobs are the overpaid pen swishers who cost the company billions.

I can see retaining your mid-level contract getters, that whole AIG resort scandal... really those people might actually be ones generating profit. But the entire top of the AIG skyscraper should just be blown up with the executives in it and the company would be better off.

That's a different issue and a fine argument. However, given your past postings on how well you've done on shorting various financial companies, I've got to admit I have some healthy skepticism on the sincerity of your outrage.

I don't care what industry you are in, or how small your salary is in comparison to whatever bonus you expect to receive, a bonus is a FUCKING BONUS. You do not, ever, under any fucking circumstance, receive a bonus when your company goes into the shitter and has to get bailed out by taxpayers. Ever. I don't fucking care how little the bonus is relative to the bailout, or how the poor fuckers will be living on food stamps without it. It's a fucking bonus. You took the job knowing that your salary was X, and if you did well, you got your fucking bonus. Well guess what? NO ONE FUCKING DID WELL THIS YEAR, SO NO ONE SHOULD GET A FUCKING BONUS.

In defense of the executives to be frank they had no real choice.

Think of it this way :-

Financial companies are doing extremely well selling 'risky' derivatives.

Executive 'A' continues doing so - profits rise for his company by 40%; shareholders happy he gets a huge bonus and pay-rise.

Executive 'B' says 'no' too much risk - profits only rise for his company by 5% - shareholders complain that by comparison company is doing poorly, executive gets lesser pay-raise etc. and is most likely sacked.

If Executive B existed and was sacked who would the shareholders have wanted to replace him - most likely someone like Executive 'A' who had a 'proven' record of success.

People are suckers, they WANTED to believe that it'd go on forever - Madoff found suckers to invest in his ponzi scheme for just this reason, logic goes out of the window during a gold rush.

Personally I think the whole situation sucks and yes the executives milked things, but heck most people in those situations would have given the chance - its not like they're evil, they were doing their jobs - they were employed to make huge short term gains without thinking about the consequences down the road, thats what they did - its a fault of the companies/shareholders/system not themselves imho.

I think the whole furore about bonus's/pensions etc. is just a smokescreen to make people look the other way while vastly huger sums of money are being spent on the companies themselves - scapegoats are needed as a distraction and thats what the executives are providing at present.

Thanks. You said it better than I have.

Also interesting that Cuomo has subpoenad AIG to provide names of who is receiving the bonuses. Again, without knowing anything specific about AIG and their comp structure, I suspect that any list provided would contain a huge number of names (that these aren't going to a few fat cats--though I'm sure there are more than a few of those getting what will be viewed as an ultrasweet deal).

A couple of points to address what you asked me earlier, digamma- basically, why am I so ticked.

1) To address the windowdressing- like I initially said and like you agree with- it's just not that much money. I think one of the big problems is that in the stories I read, these are bonuses going to the financial products division. Those are the exact guys that made up this crap that got us into this mess. While, SD was using this to blast management, I think this goes doubly so for the guys inventing them: "these guys are not really complete idiots, they simply chose to do something wrong because they believe they could get away with it in our lax enforcement of laws and shareholder scrutiny being non-existant"

2) What has me really mad is that I absolutely hate that AIG is being used as a backdoor to being the "bad bank" that has been floated around since the first TARP was on the drawing boards. I think I've written about it here, but maybe not- I went through a couple of "stages" the week they were hammering out and selling TARP to the public. First, I was in that "chicken little/sky is falling stage" where something had to be done. Then, I started educating myself about things I never had looked into, and, frankly, never even knew existed during that week and my "must do" went to "probably should do" went to "maybe- I'm just confused" went to "this sounds like a bad idea" and finally ended with "holy crap- don't do it at all".

Frankly, after looking back- the only thing that *had* to be done was the shutting down of the money market and injection of $105B of capital by the fed when the dollar was broke back in September. I think upping FDIC insurance to $250K is a no brainer because it looks like no one is going to use that anyways but it's a nice confidence boost to individuals. After reading everything I have over the past few weeks about naked short selling, I think the short selling ban helped, too, because I think there more than a few players out there who were ready to start taking (keep, if you think lehman or bear were affected) down really big companies with naked shorts.

Once I started reading, there's no way in hell I think the government should have been in the business of buying mortgage-backed securities and unwinding them. Ok, clarification: If we, the taxpayers, were going to, it would have had to be all-or-nothing: we nationalize your company or you don't get any funds or any help.

This trepidation out there has been and is occurring because everyone is still out there trying to get their full 100 cents on a useless dollar since some parties are (and, oddly enough, the closer you are to the architects of this plan, the better chance you have of getting your crap paid out at "cost"). If the government had said "nope, let the free market figure it out"- these things would have started trading again, but for pennies on the dollar and paying out to guys who knew that if they could untangle them, they'd make a profit. I think that's a less attractive solution than nationalizing the whole lot of them because business can game the rules that the government has to abide by.

3) So how does this all tie back to the outrage? If we had created a "Bad Bank" and called it "Bad Bank, LLC" or something like that- it's a lot harder to defend publicly than backdooring it though AIG, which is receiving, again, more scrutiny for 1/1000th of the bailout than the big picture, which is vastly more appalling. Then again, I'm putting faith in public scrutiny in one hand and completely slamming it in the next clause of the sentence so maybe it's just kindof hopeless.

SI

Wow- which is a lot easier way of saying what it took me like 10 paragraphs to do above ;)

SI

Consider the scenario. If bailout money wasn't given to AIG, we were told that they would have gone bankrupt, correct? Under that circumstance, the bankruptcy court would have done one of two things. One, them might have shut them down completely (we'll ignore the economic reactions for now). Two, they would have renegotiated many contracts and likely, these bonuses would have been gone. Under either of these situations, no bonuses would have been paid.

Given that these options would not have been available without the taxpayer money, the taxpayers have good reason to be pissed off about this financial gluttony.

Thanks, SI. I understand what you're saying, and I think you fall into my first category of those opposed to bailing AIG out in general.

Only time will tell, but my reaction to this point is that I think we'll look back on letting Lehman go into bankruptcy as a mistake and that we'll be glad we kept AIG out of bankruptcy.

If they were hired for short term hype-mongering, maybe that means they don't have the right skill set now that the bubble on that has collapsed, so they should be fired anyway!

I don't accept it as an excuse, it is your job to make money, if you sacrifice massive downside to play with the Joneses, you deserve to get your ass reamed with the rest of the Joneses when the time of reckoning comes.

If one of my shorts blows up in my face, that is entirely on me. I don't expect the government to bail me out. So that means I watch like hell when I do a short, I don't take risks with my short, and I give up gains to protect myself from the downside. I play by basic financial assumptions that these fools knowingly ignored as part of this hype machine tactics, I have zero confidence in their ability to run a company when they go against fundamental finance under the banner of 'the market always goes up'.

So my outrage is at their incompetence as much as the result (which is the only reason other people are outraged, they only worry once shit hits the fan, I'm pissed off on principle). So I gladly shorted the hell out of them to make money when the market corrects their price from hype-levels. It is one of those rare situations where my outrage can be channeled into profit. Even so I'm still trying to get out of that frame of thought, and want a recovering economy, since I think the bloodbath has gone as far as it can go without going into outright collapse of companies mode (which the gov is not allowing). I would like to run my own business someday and I don't want the entire economy to be battered into such a mess that we start doing reactionary crap that makes it harder to really start business.

If I had a billion dollars, then I would not mind so much, because I could use the down economy to load up on assets for my mega company of doom.

And bonuses should be tied to results. I know my bonus at my work is, and they are not paying it all. And we did our job and are weathering the storm better than most. The fact these bonuses did not have such clauses in them is just another demonstration of how cheesed up the executive/shareholder setup has become.

+1 (to Digama) and I was for the good bank/bad bank scenario so am glad that it's been put in place through a surrogate

AND

believe that we've skirted the worst case scenarios I was screaming about pages ago by doing the things we have done. Now that being said, Im sure people can look att he exact same events "that didnt occur" and draw opposite conclusions.

OH and I wish I wouldve kept my financials thread I started in January 2008 going as I think we'd look back at that thread as GOLD in a historic sense simply due to the luck of timing that thread to start in one of the most historic financial events in our lifetimes.

I was against the short selling ban at first, obviously because I was making money off of it, and figured there was nothing wrong with it from an economics point of view. However, the whole naked short thing is a major factor, and in hindsight I think i was wrong and they were trying to cut out raids through phantom stock.

I really think they need to get into the guts of the stock transaction system and verify the heck out of it.

I think the Lehman bankruptcy will hardly register as a blip in a historical sense. It obviously caused a lot of companies using it as a counterparty to lose money... as with AIG, which is why I'm for government stepping in and basically piecemeal liquidating the company and backing its debts in a minimal fashion, but letting the productive assets be spun off and continue doing business as new companies (with new leadership and smaller scope).

Looks like NY Attorney General Cuomo is on the same line of thinking that I posted above.........

FOXNews.com - RAW DATA: Cuomo Letter on AIG Bonuses - Politics | Republican Party | Democratic Party | Political Spectrum

Of course,

Mr. Harvard Law Degree Obama and Congress didn't spend five minutes of sending billions and billions of no-strings attached dollars to this companies. They are just as much as blame as the greedy bastards at AIG.

Yes, I'm sure they had no reservations. One of them said, "let's pay them with taxpayer money!" and Obama said, "Great idea!" and never thought once about how that would affect Americans. Not a single time.

Guys, Obama's been President since late January. AIG and the banks received the bulk of their money (so far) prior to December.

And like a typical democrat, he's taking a principled stand over something that in the grand scheme is almost irrelevant while allowing the majority of the bullshit to go on unfettered.

Well. the Democrats had control of the congress last year as well. GOP or Democrats, they are the same to me now (they did just get a $30 billion more early this month). I just hate the political grandstanding on both sides, when in fact, they are just as responsible.

Neither party was going to block an AIG bailout and watch the country's financial system burn to the ground. If you want to go after someone, it should be whoever allowed AIG to become what they did with literally no regulation. Also the people within the company who let it happen who should be in jail right now.

Any law guys know why the U.S. didn't try and fight the bonuses as "unconscionable" which I've read is a potential defense. Might not win, but I think you could make a case that someone earning millions in bonuses for losing his company billions is unconscionable.

Why?

This is the attitude I don't get - it was a private company, it didn't do anything illegal - stupid, unethical by many moral standards yeah ... but to put someone in jail when they have committed no crime is untenable to me.

Creating laws to punish someone for a crime they committed which was legal at the time is wrong imho and only a small step away from a police state imho.

It'd be a bit like making smoking an illegal substance and then going around arresting all people who have ever smoked, hardly fair imho.

Something being 'morally right' isn't the same as it being illegal ...

Hard for me to think of the largest bankruptcy in US history by a factor of six times over as "hardly a blip." While counterparty issues are causing much of the delay and complication in the bankruptcy proceedings themselves and certainly caused losses for a large number of investors, let's not lose sight of the hordes of stockholders and bondholders who lost, or will lose, a ton from Lehman going down.

We're still probably too close to know what the ultimate impact will be, but Lehman going under has changed a lot of things, some for the good, some for the bad, and some with unknown effect. Too soon to tell whether the lessons learned will be put to good use.

Unfortunately capitalism is not about "once you get a certain number of dollars you should be invincinble from collapse". Historically, Lehman will be another company that overstepped on greed and ultimately was wiped out because of it. Does it suck that people are losing their investments, of course, but that is the price we pay by not insisting on better information and control over these corporations through the mechanisms we are supposed to have (voting of shares, ignoring preferred and common share differences for a moment, SEC, laws, and media/analyst scrutiny).

You can't have a zero sum game without losers, its impossible. Lehman itself will be just a blip, the historical thing will be the general problem... which is not caused by the company going under, the company going under was a symptom of that problem. Lehman going under CHANGED nothing, the change that was coming from the economy being screwed with too long CHANGED Lehman.

orderly unwinding is good change.

disorderly collpase of the world's financial system is a bad change.

So far, IMO <------- I've feel good about the stance and sides Ive taken in this case. I feel terrible that the first TARP ended the way it did, with lack of oversight and paulson's torpedo BUT I DO believe that it accomplished what it was aimed at. Ive said all of this before and repeat it again.

Nobody is arguing with you on whether there should be winners or losers or whether there are in fact winners and losers in all of this. Nobody is saying everyone should be squeaky clean in all of this. Is this a good wake up call to the old risk vs. reward charts? Sure. But that's not a new concept. It's easy to preach to the choir from that bully pulpit.

Informational barriers are always going to be an issue. There are insiders, plain and simple. Access to information has improved a great deal over the last decade. Hopefully, these events will continue to improve disclosure. What goes along with that is regulation and regulators with teeth. We've seen in Madoff that the access to the information was there. The guy in Boston figured it out through FOIA requests and the like. But it fell on deaf ears.

On your final point about Lehman being a symptom. There is of course some truth to that, and by saying "Lehman going under" I was, in a sense, referring to the larger problem. It's not exclusive to Lehman, but they get to be the posterchild. And most of the debate around changes have focused on the more macro and systemic issues.

But rest assured, your capital letters aside, Lehman filing for bankruptcy changed and the Lehman bankruptcy process has changed and is continuing to change many things on the micro level.

To name a few, I think we'll see a reexamination of the government's role in a bankruptcy and in bankruptcy proceedings. From the first hearing in Lehman, it was obvious that the fix was in--debtor motions were being ramrodded through over vociferous creditor protest. This resulted in Barclays getting one hell of a sweetheart deal on the Lehman asset sale. And of course not ring fencing and obtaining the best value on assets hangs creditors out to dry. (And, I'm not sure I've ever seen "the government may anally probe you and leave you with nothing in a haphazard asset sale resulting from a bankruptcy" listed as a risk factor in a prospectus.) We're already seeing the effects of this treatment in a number of other bankruptcies since Lehman. Creditors have taken a more hardline approach from the beginning (refusing to negotiate DIP loans, for instance) of a bankruptcy rather than hemming and hawing and taking a few small victories while generally taking what the court gives you. It will be interesting to see how the creditor/debtor dynamic plays out over the long haul. This is probably the biggest effect and one that is really too soon to tell whether changes are good, bad or immaterial to the market. But to downplay the changing landscape is shortsighted.

A second thing I think we might see is a reevalution of some government policies and laws that Lehman was able to take advantage of in their bankruptcy. The easiest example in the Lehman case is the ability to choose which executory contracts you want to assume and which ones you want to reject. The idea is that the debtor can reject its worst contracts and let its best ones live on in order to maximize the value of the estate for the benefit of creditors. The problem is that by rejecting contracts, you end up with more creditors. Lehman has played this beautifully, most notably in their bank loan trading entity. Bank loans took a nose dive last fall and Lehman easily rejected all trades which they were long on and assumed the bank loans they were short on. Nice work for the estate. I think folks have questioned since then whether this is too broad a sword for a debtor to yield.

Third, we will likely see the prime brokerage business dry up, specifically due to Lehman's bankruptcy filing. The prime brokerage business was always sold as a way to reduce counterparty risk. Trade with a prime broker and they face the market. Your margin is in a segregated account and is safe. Wrong. It was generally commingled, and those who used Lehman as a prime broker are likely going to be general creditors for any collateral they had posted there as margin. Not such a great risk mitigator, huh?

The last one I'll mention is the changes we're likely to see on the counterparty front. CDS clearinghouse? Participation by the buy side in a mortgage securities clearinghouse? These are more systemic, but were brought to a head by the Lehman failure.

So, thanks for indulging me--if you're still reading Dino. It's just not as simple as this is another company that went bad in a poorly run industry. We should all appreciate that.

Yes. Yes. Yes. Same with the earmarks. So like 1-2% of the bill is going to specific projects to be done in the 50 states and the other 98% is going to banks and companies who still at this point seem to have zero accountability for what they do with the money. Yet we get outraged at three things (the media one could say, but they really only report what gets the public going)

1) The millions of dollars in bonuses to AIG
2) The $30 billion for GM
3) The several billion for earmarks.

Where is the outrage on the other TRILLIONS? That is the real question.

The Founding Fathers agreed. Ex post facto laws are prohibited by the US Constitution.

I figured that the AIG news would be a hot topic here today. A couple of points that may have been brought up earlier.

The AIG bonuses aren't performance bonuses. These were retention or "stay" bonuses, arranged a year ago to make sure that these employees stayed with a sinking ship to help manage the "unwinding" of these complex contracts and financial instruments. If these folks walk away, then the company could experience even a greater losses.

I'm not buying the outrage that the President expressed today. He knew what was going on, he knew that this has been planned and discussed with both administrations for months. He waits until it is too late to actually stop the payments and then grandstands.

On the plan to tax the bejesus out of the bonuses. I'm curious how, well how constitutional, highly targeted taxes such as this are.


Whoever it was who said that the folks we need to be enraged at are those who allowed this to go on without regulation. Based on my understanding of some of the "insurance" policies that AIG trafficked in avoided regulation simply by having a name that didn't include the word "insurance". Top this off with the fact that they insured the same "assets" many times over, mostly offering to pay off "investors" who had no original stake in the security to begin with. Sort of like me and ten of my friends buying insurance on your house. So yeah...the guys who wrote the laws with bad loopholes, and then provided absolutely zero oversight which could have corrected the situation...yeah they get a good share of the blame. The guys who decided to avoid regulation by not calling insurance insurance. I'm thinking that they might just deserve some ex post facto justice.

Interesting piece on the AIG mess:

http://www.slate.com/id/2213942

Not only that, but Obama received over $100,000 in compensation from AIG last year and Christopher Dodd received over $30,000. It's hard to buy the outrage when they certainly knew what they were doing when they took that payout.

Yeah, this is a lot like what I wrote 30 posts ago- I'm not pissed at the bonuses. A little visceral hate but can't do much about it. I'm pissed about the backdoor bank shenanigans because that's a lot more money we're talking about pissing away.

SI

Ex post facto only refers to criminal penalties. So no they can't pass a law banning these bonuses and then arrest AIG for it, but they can certainly pass a tax bill to cover bonuses that have already been paid out.

+1 to Glengoyne's post.

Utterly nauseating to watch our President expressing outrage when this was the exact scenario his entire campaign was supposed to change. And his administration just gave AIG $30bil more this past month. Why didn't they put in some controls over this last bailout (irregardless of where the bonus money came from)?

Nearly equally nauseating is to see these Congress people out there expressing outrage about a topic they are really playing 'fox in the henhouse' with. These knuckleheads will all readily admit to you that the Stimulus Plan had billions in pork, but it was dire to pass the bill(that they didn't read). So again...we continue to elect Congress people who believe they are more important members of society than our business leaders...so they believe it's appropriate for them to pick the winners and losers, and decide who gets the pork.

Not that we have many options, but we get what we elect.

Dola.

I think it is a very dangerous precendent for Congress to start enacting ad-hoc "punishment" tax bills to rectify their own incompetence. We keep saying, "Well, they'll need to put some oversight on it next time"...well, this is about the 3rd or 4th next time we should have done by now.

Someone might want to remind the president and several senators of that as they appear to have forgotten ;)

compensation != campaign contributions

If this is truly the case then its scarey - not least because I'd expect if they do this then they'll truly shake investor confidence hugely.

Put it this way if the goverment shows they're willing to take money away after the fact then how does any investor or company really know if they've made a profit as the goverment may at some point in the future decide to take that money back.

PS - To me this whole debacle has just shown what I'd already guessed a while back; Capitalism isn't fundamentally good for mankinds future - its goals and aims are far too short-termist and lead continually to the development of bad habits in the general population (obesity, keeping up with the Jones etc.) and not enough on real long term problems (millions starving in other countries, looking after the environment etc).
People are naturally selfish and short-termist, its in their natures - its how our brains are built to function; its not nice to admit it - but most people don't have a clue about whats good for them imho.

If that makes it more acceptable to you, more power to you.

yes it does

MBBF = Spinster

I had pleasantly forgotten that the reason the last few pages were non-partisan debate is because you were inconspicuously absent.

You're a better person than what you just did there. Prove me right.

So, to clarify, you believe it's OK that the same people who failed to read the bill and note the loophole available also took political contributions from that company? The shoe would be on the exact same foot if a Republican president were doing the same thing. This has nothing to do with partisan politics and everything to do with shady dealings.

read what I called you.

You use verbiage like a sniper to subtly spin things in a way that you hope resounds like a drum.

How do I know this? Due to the reactions you get and then your defense of your initial statement.

NOWWWWWWWWWWWWWWWW

Like a strawman, like in most other threads you do this in, you will try to weave together people's 'calling you out' for 'what you do' as some sort of pro/con for the topic at hand. This, however, is almost NEVER the case.

What it is, is exhaustion for what YOU do and not the topic at hand.

If and when you can see what YOU DO than you will find that the discourse that you are participating is is lively, fun, educational, and respectful...until then you will continue to drive your car into the ditch and take many a thread with you.

So, no comment? For the record, I think that any political official that takes money from a company and then has something like this happen is a schmuck and deserves to be criticized. Feel free to agree or disagree.

I agree that the discussion is lively, fun, educational, and respectful. I'd also note that if this was Bush rather than Obama taking the money, then we'd both be pissed about AIG giving Bush money and then allowing this situation to happen.

:banghead:

MBBF - you're ignoring the very real point that AIG (like all other mega-corporations making campaign contributions) donated (95% of the time equally) to both sides.

So how about equal scorn for all the republicans who have voted for the bailout and for the previous administration as well?

Actually, I've been looking trying to find what McCain received, if anything, from them since he was obviously the other candidate. I'll be just as pissed at him.

Do you have any info on what Bush may have received from AIG? Just curious since the initial bailout happened under his watch. And as you likely remember, I was irritated with Dubya for failing to veto that bailout.

Edit: Just saw your post about Bush getting stuff. That makes his failure to veto that initial bailout all the more suspect.

AIG did give money to Bush and did melt down during his admin and did pay out bonuses, yet there was no outrage from you at the time.

Bitching & kvetching about favortism because of campaign contributions is a non-issue 99% of the time. It's a simple fact that while there may be minor swings, any company that is large enough to donate significant funds will donate equally in order to ensure they are looked upon favorably by the party that actually wins.

Your attempts to ignore that will not be successful MBBF.

Whoops I edited my post with the data you were looking for as you were posting. check up above.

Surely you must be joking. I complained non-stop about the failure of Dubya to stand in the way of the initial bailout bill. It was either a terrible lapse in judgement or a calculated move for a donor in my mind.