US Govt bailouts and staff bonuses

Re the IAG bailout... and the plan to pay a pile of staff bonuses...

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10562099

The issue with it, according to legal advisers, is there would be bigger (legal) costs if they didn't pay some of the bonuses.

The Obama admin plan to do something about it - hopefully a bit more than publicly shaming the companies who plan to reward incompetence.

I don't see why they can't make it as simple as saying, 'no matter what staff contracts are, no bailout money will be given to any company unless they cancel all bonuses for the foreseeable future. If you want the money, you negotiate it with your team - or they leave'.

Sure, you might say staff will leave - but then they have been proven as utter failures in their roles (as a team) as it is - so a hard, harsh clean-out of top brass couldn't come at a better time in many cases.

It'll not be the same in every case but the average person seeing the insane bonuses given - even moderate ones in the hundreds of thousands of $ - will be wondering why they're paying for such stuff as the bank takes their house from them.

how does a staff member qualify for a bonus if the company is in such bad shape? Don't make sense to me

then most of this bailout stuff doesn't either

the consumers (victims) are left to flounder and lose everything, the architechs of the disaster get rewarded

time to give Hitler that Knighthood your majesty?

Isn't it interesting that one thing the Great Depression and this current whatever it might turn into both originated in the USA? The only difference now is that British financial system was up to its neck in it as well. The problem with all this globalisation is that it also means the centralisation of risk - risk centralised to a group of people, probably numbering in the thousands, who are still totally in denial about their criminal culpability in the current crisis.


Personally, i think now would be a good time to think "what would Joseph Stalin do"? And then do that to the Wall Street & City bankers. Nothing like being worked to death on a public works project in Siberia to bring the bankers back to the real world.

Financial speculation is a 14th century Florentine invention. It's cause then, as now, is an over accumulation of capital, and an over expansion in productive capability, the effect of which is that capital can no longer profitably be invested in production. In our time, that happened around 1970, when the productive cycle that began around 1950 came to an end. Speculation is seductive because profits are incredibly high (and for profits to be high when productive capacity is in excess of consumer demand there is no other choice). But eventually the bubble bursts. Even though the 1929 crash started in the USA, the main beneficiaries of the speculation that caused the 1930s depression was Great Britain, and British financiers. The ending of that boom ended British hegemony, just like this one might well end the hegemony of the USA, which has benefitted the most from this current round of financialisation. Let's just hope that things don't get too ugly when America becomes roadkill. The last crisis of this nature lead us to WW2.

...but that involved a third party, Germany, which had been encumbered with ruinous, puntitive reparations and was able, whilst Britain and the U.S were preoccupied with their Depressions, to give them the two fingers and to re-arm itself, while they dozed thus being in a much better postion by decade's end than they to up the brinksmanship and to wage war

I can see no such power at present to compare but the wars of tomorrow will revolve around climate change and water shortages, if it gets to that.

plenty of wars going on right now

Just to clear it up, it's AIG not IAG (who I believe are still going fine).

The thing with these "bonuses" is that nobody is saying exactly what they're for. But there has been reports that they are at least partly a retention bonus agreed to last year if people stayed on with AIG until now - I'm sorry but those should be paid. When the Govt took over the company they took over their employment contracts.
If any of the amount is a performance/STI bonus then that's absurd of course.

does anyone find it funny how the US govt will honour these contracts because its the LAW yet breaches other laws (both domestic and international) all the fucking time

I'm sorry its the US govt, they can and will do exactly what they like... so one must conclude that they have no problems with these bonuses - please note the Car bailouts specifically excluded any bonus payments

*on a totally unrelated but related topic, for them that like English comedy and current affairs, grab the Friday Night Comedy from BBC Radio 4 podcasts off itunes - funny CA related content

Ha ha, yes. Typo.


These are the ones people will be most annoyed about. I saw on Fox this morning there were people who negotiated 'sheer volume' performance in their contracts but not actual bottom line results based ones... meaning a fund could be losing millions but they signed up x people therefore their bonus is activated.

Unfortunately, it was their sales pitch and deception rather than good business which got customers on board. And some of these people are in line for millions for (over)selling faulty products.

As for top staff - the overwhelming opinion on paying bonuses to retain them is that it wont work one bit - they'll leave the second they can anyway as the market for proven 'sellers' starts to ramp up again.

Since yesterday the Obama admin has made some pretty big pledges which is good to see. Depends now if they'll follow through.

minor skirmishes based on mediaeval mythology

Frankly, while that was appalling governance from AIG, they DID sign those emploment agreements. The Govt can't just then tear up an employment agreement when it takes over.

It really seems that the vast majority of these bonuses were retention bonuses agreed to in 2008 to keep the staff around then - i.e. work through to March 09 and we'll pay you $x. Those staff are completely entitled to those.

I don't seem why not

see

let them fight it out in the courts

well if you want to undermine the whole basis of contract law then sure, just tear it up.

Or is it Ferengi rule of acqusision #16 - a deal is a deal (until a better one comes along)

WASHINGTON - The head of American International Group Inc. says he has asked employees to voluntarily return millions in bonuses that have outraged American taxpayers who spent billions bailing out the troubled insurance giant.

Testifying under oath at a congressional hearing as angry as any in recent memory, Edward M. Liddy said he understands the rage over executive bonuses and said some AIG executives already have stepped forward to give money back.

yeah I don't think there are too many people sympathetic to contract law right now

well no one said this great recession (tm pending) would be exactly the same as the great depression

people should stop expecting the past to repeat itself this time round

certainly not the mortgage holders who want to break their rates....

how can you even go down this path??? are you an anarchist?
its not like I want these failed masters of the universe to have their bonuses but we cant just go rewriting the tenets of society.

the anarchists are the ones demanding a bonus when their division has cost their company a 165 billion dollar bailout by the US tax payers

If the company went down then they wouldn't have got anything.

http://current.com/items/89897463/aig_s_poor_ceo.htm

AIG CEO in senate hearings

These are the tenets of capital, not society - its good to see that maybe capital could be the one compromised for a change.

Huh? No they're not, they're the tenets of LABOUR, pretty much the opposite!
Employment contracts are pretty sacrosant, you don't just ignore them.

Look, if these guys were getting PERFORMANCE bonuses, then yup it would be a huge question as to why. And if they are continuing to write contracts now that allow for huge payouts then that would be equally questionable. But these contracts existed, and the employees did everything required of their side of the contract. Nobody, even the Govt, can just discard that contract now that they don't like it, especially after the employees have already fulfilled their part.

Actually the government CAN.

It's called sovereignty :>

thats a good point... but we have a process for it - they would have been unsecured creditors and in the queue for any money that became available, but the company didnt go under so its business as usual.




ahh no I dont see that.... society agrees that a deal is a deal...

Some of these guys are getting bonuses in the region of US$100,000 to more than US$1million, each

the newsreader hawkesby got a 6 million dollar payout from tvnz back in the day if you can remember that far back and the govt tried to quash it (and lost in a court case - acontract is a contract)

BUT

this situation is different

as bob wrote, but for the taxpayer they would NOT have a company to pay out them ANYTHING, thanks to their division's wreckless mismanagement

ipso facto

FUCK 'EM

Yeah i was wondering what would have happened to their bonuses if the company had been allowed to fail

Wow, I can uncritically regurgitate Niall Ferguson to. But I won't.

inaccurate and uninformative, and all in the same breath

US govt has voted to slap a 90% tax on the bonuses

that'll fuck 'em

100pc tax plan for AIG bonuses approved

even better

pacta sunt servanda

... and all that

Pacta sunt servanda rebus sic stantibus

thanks NR, mr scholar

lets just create retrospective taxes...

surely they should be allowed to donate it to charity??

the US govt is a charitable case these days

I agree with onehappy, there's not really enough information to judge.

I for one have not seen the nitty gritty of these contracts anywhere and at the end of the day that's what will determine if they should be paid or not. Perhaps there are privacy issues with releasing that information.

The 90% tax might help the average American sleep a little easier tonight but in the long run it undermines the value of American financial agreements both at home and abroad.

Not such a good thing since they are going to be relying heavily on foreign support for quite some time.

ops I meant I agree with garethw not OneHappy!

Why is it every time something dodgy happens in the U.S there's a distinct lack of critical information? (Somewhat rhetorical question)

That 90% tax is morally much much worse than acceptance of the bonus I think. God, restropective taxes over individual contracts are about as poor as it gets...

Rips, I agree on the detail thing - I have read a variety of things on it, but the most plausible description still seems to be that these are the final payments for retention agreements from a year ago.

Hey, nice work Obama:
"President Barack Obama is wagering significant political capital by signalling opposition to a highly popular congressional drive to slap a punitive 90 per cent tax on bonuses to big earners at financial institutions deeply in debt to taxpayers.

Obama defended his stand by saying the tax, passed quickly in the House of Representatives last week, would be unconstitutional and that he would not "govern out of anger"."

http://www.nzherald.co.nz/world/news/article.cfm?c_id=2&objectid=10563195

Gdub,

Nobody would have an issue if this were CORPORATE money. But the government bailed the company out and surely has the right to choose who and how much the company will pay.

If they don't like it, they can give the government's money back.

It's basically like me spending all my money on crack, begging you for a few dollars for food, then using that money to buy MORE crack.

Retrospective taxes? Not true at all. How is it anymore retrospective than if the govt raised NZ taxes by 5% tomorrow (which would also affect contracts signed in the past...)

I actually think the Govt should have properly nationalised AIG and set it up as a separate company, at which point employment agreements could have been rewritten.
But they didn't - they just became a shareholder in a company that had a number of contractual liabilities on it's books, one of which was that it had previously agreed to pay people $x if they stuck around until March 2009. Those staff fulfilled the very simple and specific side of that agreement, regardless of their appalling performance over the previous years.

It's retrospective in that it is targetted at previously paid bonuses, but it's more the specificity of using the tax code to go after a particular, completely legal contract that you don't like that really gets me.