[hrothgar]

luke warm, on Mar 18 2009, 01:13 AM, said:

what do you think of the idea floated today that any bonus over $100,000 will be taxed at 100%?

I'm opposed to passing special purpose laws to punish AIG
As I mentioned earlier, I consider this political theater.

I do believe in progressive taxation. I think that all of these types of bonuses should have been taxed at a much much higher rate in year's past. I also think that the government needed to regulate AIG much more strongly. AIG's CDO group was not acting as an insurance company. They were an unregulated hedge fund.

I also have concerns whether shareholder's have been capable of exercising effective governance. However, that's another story...

[Lobowolf]

mikeh, on Mar 17 2009, 02:37 PM, said:

The use of bonuses as a contractual term of remuneration is commonplace. Some bonus plans really do relate to discretionary rewards payable at the whim of the employer, but it is far more common to find that bonus schemes are set up with identifiable, measurable metrics, which may but do not have to include, as a paramount terms, that the company or division be profitable. Such bonus schemes, at least in the jurisdiction in which I occasionally practice employment law, are enforceable.

This is fairly evident in other arenas, too... sports salaries may provide for bonuses if a player, for instance, makes the all-star team, hits 50 home runs, etc. It's not part of the "base salary," but it's legally enforceable if the conditions are met. Similarly, the "hours-based" bonuses based on how many billable hours an attorney makes.

You'd THINK that it would pertain to profitability, in the business world, but...

[jdonn]

luke warm, on Mar 17 2009, 05:13 PM, said:

what do you think of the idea floated today that any bonus over $100,000 will be taxed at 100%?

Do I want to see anyone at that company get a big bonus? No. Is that idea clever? Very. But that solution seems like a complete loophole since it's exactly equivalent to simply not giving them the bonus, and I object to that sort of manuvering.

In general, I don't think the fact your opponent may be using shady tactics is a very good reason to use them yourself. I don't believe in torturing enemy combatants even if they torture Americans. I don't believe in the death penalty even for murderers. And I don't believe in 'legal stealing' even if AIG 'legally stole' from us.

This should have been considered before issuing bailout money. Make the restrictions you want a requirement of receiving the money before you give it to them. Don't give it to them and then cry they aren't using it how you want.

None of this is to say I will be upset if that plan occurs. I don't think it's right. But karma is tough to dodge, often deserved, and probably entertaining for me.

[Winstonm]

This was enlightening for me.

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In general, I don't think the fact your opponent may be using shady tactics is a very good reason to use them yourself.

I agree.

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I don't believe in torturing enemy combatants even if they torture Americans. I don't believe in the death penalty even for murderers.

I agree.

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And I don't believe in 'legal stealing' even if AIG 'legally stole' from us

. I agree.

Quote

This should have been considered before issuing bailout money. Make the restrictions you want a requirement of receiving the money before you give it to them. Don't give it to them and then cry they aren't using it how you want.

Again, I agree, but I can't help but express my outrage.

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None of this is to say I will be upset if that plan occurs. I don't think it's right. But karma is tough to dodge, often deserved, and probably entertaining for me.

Karma, maybe. In this whole mess what seems to be lacking is personal accountability - it appears to me all we are seeing is corporate accountability.

[Winstonm]

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I think you are framing the question deceptively as well.

I didn't think about it long enough to be deceptive.

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You are implying that people believe AIG deserves millions in bonuses

.

I am implying that Madoff went to prison while AIG execs are getting bonuses, nothing more.

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It's inherent in insurance that if everyone (or even just very very many) needs a claim around the same time then you won't have the money to pay, because obviously any claimant will need more money than they pay into the insurance or else there wouldn't be a need for insurance.

If it were AIG the insurance company I would agree, but as Richard pointed out this was the part of AIG that acted as a non-regulated hedge fund and the losses were not insurance losses but more like gambling losses.

[jdonn]

Winstonm, on Mar 17 2009, 05:56 PM, said:

Quote

I think you are framing the question deceptively as well.

I didn't think about it long enough to be deceptive.

I didn't mean to seem like you were doing anything shady or intentional, just that it was an unfair way to frame the question. But....

Quote

Quote

You are implying that people believe AIG deserves millions in bonuses

I am implying that Madoff went to prison while AIG execs are getting bonuses, nothing more.

Then I would like to know what you meant by referring to

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what makes one a Ponzi Scheme with prison time and the other is a bailout with millions in bonuses?

as

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a final frustrating question

[Winstonm]

Sorry, but I don't grock. I didn't sleep all that well last night and am pretty worn out today - so anything I wrote or will write may make less sense than normal, even.

I'll try to explain. Frustrating question - meaning simply the feeling of frustration over all the bailouts and what could be taken as shady dealings to protect the bankers, banking industry, and bondholders, while the US taxpayer gets to hold his nose.

[Al_U_Card]

Pay the bonuses in AIG stock, wtp? (Back-dated to the signing of the contract, of course )

[mike777]

In fact many companies are paying bonuses in the form of toxic assets and not cash.

The populist idea to retroactively tax a few people at 100% seems like a dangerous precedent.

I note that these guys did get the government to give them 170 Billion bucks. Paying them 170 million seems like too little in bonuses not too much.

I would guess alot of people would be willing to pay 170 million in a bonus to get 170 billion.

As others have noted it seems one small division placed a lot of bets with huge banks and other investors. First off I am not sure AIG lost these bets but would like to see reported more information on this issue. I assumed these bets were that massive amounts of loans would not go into technical default. However the counterparties to these bets demanded billions more in collateral as these loans declined. Again I think most of them did not default. In any event I would like to see more detailed information on what exactly is the problem and why the taxpayer is paying off these bets.

Why AIG could simply not hand over the cash and let the chips fall where they may needs to be made clear. Why the taxpayer should make these counterparties whole for trusting AIG is not clear.


Side note just as the commercial banking system has FDIC and the Fed to prevent bank runs, the heavily regulated insurance part of AIG is protected from "runs". These funds are segregated from the rest of AIG.

[Phil]

Winstonm, on Mar 17 2009, 04:28 PM, said:

My outrage is that without the support AIG would be bankrupt and the contracts would be worth nothing, or that with total nationalization the contracts would be worthless, but with only 80% ownership somehow we have to make these dolts who stole us blind whole.

Exactly. Finally someone said it. No AIG = No Contracts.

I'm not a labor lawyer, but I rather doubt 'bonuses' get the same bankruptcy treatment as 'wages' anyway.

[kenberg]

I once read of a perhaps apocryphal incident where after one coutry intervened to save another, the ruler of the saved country commented "We will astound the world with our lack of gratitude". I forget the setting.

But fundamentally we are not saving these assholes because we like them but rather for our own good, at least our own perceived good. We did not do this for them, so don't expect gratitude.

Not only should we not expect gratitude, we should not trust them to work for the good of the company, or the nation, or to have any concern for anyone other than themselves. They are proven greedy bastards and we should accept that as fact and act accordingly. To my mind, that means we hold the bonuses until they perform the work that needs doing and that they claim only they can do. If they do it, give them their money and tell them to take a hike. They can co-operate with this plan or they can all see how it will go if we start looking closely for malfeasance. They can contemplate explaining the legality of each their actions to twelve honest citizens.

[helene_t]

Phil, on Mar 18 2009, 02:54 AM, said:

I'm not a labor lawyer, but I rather doubt 'bonuses' get the same bankruptcy treatment as 'wages' anyway.

I have a vague memory from when we were taught bankruptcy law that the priorities of the creditors are
1) The lawyers who sort out the bankruptcy
2) Creditors with security in real estate
3) Wages
4) Government
5) All others, including employees' claims which are not wages, such as holiday extras.

(I may have it slightly wrong, it may also be different in US from Europe).

Then again my guess would be that "bonuses" are in category 5.

[kenberg]

The morning Post has the headline: White House Calls Bonuses a Late Surprise..
Yesterday i heard Larry Summers bragging about how rapidly the White House reacted.


This really is aggravating me. We are dealing with a company whose troubles are the result of their involvement with worthless trash. They attempted to conceal the true non-value of the junk they were peddling and the scheme fell apart. Have our leaders been assuming that we were dealing with honorable men? I hope we are not investing government money in helping Nigerians extract money from bank accounts.

All this being said, I think the imposition of a special tax on AIG bonuses is about the craziest damn idea I have heard. I seriously doubt it would stand up to a legal challenge, or at least I hope it wouldn't. Tomorrow the government might get pissed at me and decide to tax my income at 100%.

I still think that if they wish to wave the bonus clause of their contracts in our faces the best response is to look very carefully at the entire contract. Who knows, maybe there is another clause that says that if they engage in a scam that runs the company into the ground then the bonuses are canceled.

[hrothgar]

The Diane Rehm Show devoted an hour to this topic yesterday morning.

The show is titled "Bonuses and Disclosures at AIG". I found it balanced and informative.

You can listen to a recorded version at

http://wamu.org/prog...03/17.php#24623

[ASkolnick]

Just for the record, unless you change the law, the highest rate you are allowed to tax at is 90%, not 100%.

[kenberg]

ASkolnick, on Mar 18 2009, 10:10 AM, said:

Just for the record, unless you change the law, the highest rate you are allowed to tax at is 90%, not 100%.

Should 10% appear to small
Be thankful I don't take it all


But 90 or 100, I don't like it. Way to gimmicky for me.


I'll survive if these guys rip us off for a bit more. The key is that they get the job done. I don't trust them at all, I don't have faith in their competence or in their integrity, and I get immensely frustrated when it appears that our leaders are in a perpetual state of surprise.

I really hope to hell this flight lands on at least a couple of wheels.

[barmar]

I think of this similarly to criminals getting off on a technicality. Yes, you're outraged when a person who is obviously guilty doesn't get punished, but the laws that allow this are there for a good reason. The same thing goes with the laws that require contracts like this to be honored.

Here's another difference with the auto industry: we haven't yet given the automakers their bailouts (or not all of it). When they went to Congress, we sent them away saying "Come back on March 31 with a plan to get back in shape, and if we like it we'll bail you out." This contingency pretty much requires them to renegotiate with the UAW. On the other hand, we gave AIG their money months ago, without similar strings attached.

BTW, to put this in perspective, the bonuses are only 0.1% of the bailout money.

[Winstonm]

Fresh from Yahoo News.

Sen. Chris Dodd (D-Conn.) looks like he may be facing a fresh political firestorm.

Quote

Dodd just admitted on CNN that he inserted a loophole in the stimulus legislation that allowed million-dollar bonuses to insurance giant AIG to go forward – after previously denying any involvement in writing the controversial provision. .

“We wrote the language in the bill, the deal with bonuses, golden parachutes, excessive executive compensation that was adopted unanimously by the United States Senate in the stimulus bill,” Dodd told CNN’s Wolf Blitzer this afternoon.

Oops. I wonder what lobby groups give the most money to Sen. Dodd - gee, could it be banking? Ya think?

Just more wood for my fire that there isn't any real difference between Republicans and Democrats, they are all simply puppets who look out for the special interests groups who sponsor them, their own reelection efforts, and not much else.

[macaw]

The one thing I've never seen in any of the reports is exactly when these bonuses were paid. Was it at the end of the year which is usually when those things happen? Or just now. Anybody know?

[jdonn]

Winstonm, on Mar 18 2009, 08:20 PM, said:

Fresh from Yahoo News.

Sen. Chris Dodd (D-Conn.) looks like he may be facing a fresh political firestorm.

Quote

Dodd just admitted on CNN that he inserted a loophole in the stimulus legislation that allowed million-dollar bonuses to insurance giant AIG to go forward – after previously denying any involvement in writing the controversial provision. .

“We wrote the language in the bill, the deal with bonuses, golden parachutes, excessive executive compensation that was adopted unanimously by the United States Senate in the stimulus bill,” Dodd told CNN’s Wolf Blitzer this afternoon.

Oops. I wonder what lobby groups give the most money to Sen. Dodd - gee, could it be banking? Ya think?

Just more wood for my fire that there isn't any real difference between Republicans and Democrats, they are all simply puppets who look out for the special interests groups who sponsor them, their own reelection efforts, and not much else.

I agree.

It might sound corny, but what bothers me most is that he lied about it. Even more than that he included the provision.

In fact what bothers me second most if that it's so easy to insert loopholes into legislation without anyone knowing.