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General Category => General Discussion => Topic started by: Parsad on March 19, 2009, 01:00:59 PM

Title: Congress Passes Bill To Tax AIG Bonuses!
Post by: Parsad on March 19, 2009, 01:00:59 PM
I'm not sure which is the bigger joke...the whole financial industry debacle or how the political parties operate after such a crisis!  Cheers!

http://www.globeinvestor.com/servlet/story/RTGAM.20090319.wAIGtax0319/GIStory/
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericopoly on March 19, 2009, 01:53:07 PM
Yeah, I don't like what they are doing here.

Nobody at AIG can have a bonus?  What about the managers who aren't screwing things up?

Somebody compared this to a classroom where a few kids get an F in math, so the teacher gives the entire class an F.  The classroom is AIG, and the individual students are managers of the subsidiary entities.
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: Parsad on March 19, 2009, 02:02:37 PM
Yup, that's a pretty good analogy.  What I hate about Congress is how after every debacle, they get on this friggin' high horse and hang a few people.  Yet, they never explain how all of them or the regulators missed all of this as well. 

- Didn't Congress approve the increased leverage that Fannie Mae and Freddie Mac started using a few years ago? 
- Didn't they also approve the merger of banks and investment companies? 
- They also created the precedent a decade ago by approving the merger of banks and insurance companies...remember Citibank and Travellers merging? 
- Why didn't Congress enact any legislation preventing 100% or 110% mortgage financing back when Angelo Mozillo was sitting on CNBC talking about it?

This era's Milken or LTCM will be AIG & Madoff!  Cheers!
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ExpectedValue on March 19, 2009, 02:08:58 PM
Bonuses should only be given out if the business is profitable. In this case, it clearly is not.
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: JAllen on March 19, 2009, 02:17:55 PM
I wish they were more concerned with the imminent P&C losses from them writing Florida homeowner's policies way/$3,000 cheaper than everyone else among other travesties that wouldn't surprise me.

They and the public are up in arms about $150M when it's a ~trillion dollar company and they own 80% of it!  Shouldn't they be more concerned with the ongoing operations (or at least mention them every once in a while?!?!?

Why wasn't AIG put into runoff the day after they were initially bailed out?
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ExpectedValue on March 19, 2009, 02:29:19 PM
I wish they were more concerned with the imminent P&C losses from them writing Florida homeowner's policies way/$3,000 cheaper than everyone else among other travesties that wouldn't surprise me.

They and the public are up in arms about $150M when it's a ~trillion dollar company and they own 80% of it!  Shouldn't they be more concerned with the ongoing operations (or at least mention them every once in a while?!?!?

Why wasn't AIG put into runoff the day after they were initially bailed out?

Why would a tax payer want $160M of their money go to pay bonuses to the group who nearly crashed the financial system? It's their money that's bailing out the company, they should have some say in the matter.
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericopoly on March 19, 2009, 02:30:05 PM
Bonuses should only be given out if the business is profitable. In this case, it clearly is not.


So if GenRe had blown up then the managers as See's Candies don't deserve a bonus?
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ExpectedValue on March 19, 2009, 02:36:05 PM
Bonuses should only be given out if the business is profitable. In this case, it clearly is not.


So if GenRe had blown up then the managers as See's Candies don't deserve a bonus?


Would Berkshire Hathaway be 80% taxpayer owned? If so, it would be the taxpayer's decisions, as in that case, they are the true owners of the business (not the executives).

Executive compensation should be something controlled by shareholders -- read Icahn's speeches on this issue if you feel otherwise.

Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: Parsad on March 19, 2009, 02:41:43 PM
I have no problem with Congress trying to do anything to get the bonuses back.  The U.S. government owns it, and they should treat it like they are the owner.  I have a problem with the moral outrage that they show, in particular the shellacking Liddy took, when he's working for peanuts to turn this thing around after being brought in specifically to do so.  How about each Congressman take a pay cut for missing the boat too, as well as Chris Cox, Alan Greenspan, Hank Paulson, Ben Bernanke, Sheila Bair, etc. I believe the taxpayers pay their salaries as well.  What about Bush & Cheney?  Cheers!
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: Uccmal on March 19, 2009, 02:47:25 PM
I see nothing wrong with what congress is doing in this case.  They are doing their best to correct an earlier oversight.  

If AIG had gone bankrupt then all of the bonus receivers would be out of a job, with no severance, no bonus, and no prospect of a job for the foreseeable future in the financial services industry.  Buggers should be grateful to have a 6 figure salary right now.  

I for one dont believe that anyone is indispensible to an operation.

You can be assurred that the rank and file at AIG have been taking hits to their perks such as free coffee, raises etc.  You can also be sure that all of their workloads have risen due to hiring freezes.  No one in any organization receiving government bailout money should be getting a bonus.  

I for one think the company should have been put into runoff, the same as Lehman Bros, rather than being bailed out.  Then a proper house cleaning could have been done and the pain contained, without this ongoing bullshit, and perpetual begging at the government coffers.  

Interview of former senior CDS department person from AIG at ORH:
Q: What is your greatest accomplishment in your former job?
A: Well, We sold so many bad risks that we destroyed a 200 Billion dollar company over a 3 year period.   :P
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: Uccmal on March 19, 2009, 02:51:31 PM
I agree that Liddy is getting a bum rap.  I am surprise he didn't just say:

F-u, I am doing this to help out the good old USA.  You, either want my help, or you dont. 

He should have shunted it back to Congress and said:  You guys bought the company, not me.

Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: JAllen on March 19, 2009, 02:53:06 PM
I wish they were more concerned with the imminent P&C losses from them writing Florida homeowner's policies way/$3,000 cheaper than everyone else among other travesties that wouldn't surprise me.

They and the public are up in arms about $150M when it's a ~trillion dollar company and they own 80% of it!  Shouldn't they be more concerned with the ongoing operations (or at least mention them every once in a while?!?!?

Why wasn't AIG put into runoff the day after they were initially bailed out?

Why would a tax payer want $160M of their money go to pay bonuses to the group who nearly crashed the financial system? It's their money that's bailing out the company, they should have some say in the matter.


I'm not saying that they deserve bonuses.  I just wished someone might mention the current activities of the business which dwarf the bonuses in importance and provide a much much much larger threat to the wallet of American Taxpayers if the future losses are being increased by AIG writing policies at $.30.

Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericopoly on March 19, 2009, 02:58:49 PM
Bonuses should only be given out if the business is profitable. In this case, it clearly is not.


So if GenRe had blown up then the managers as See's Candies don't deserve a bonus?


Would Berkshire Hathaway be 80% taxpayer owned? If so, it would be the taxpayer's decisions, as in that case, they are the true owners of the business (not the executives).

Executive compensation should be something controlled by shareholders -- read Icahn's speeches on this issue if you feel otherwise.





Thing is, it's got nothing to do with percentage of ownership.

Is Wells Fargo 80% owned by taxpayers?  No, it isn't.  So why does it also apply to them?

People seem to forget that this wasn't a bailout of the companies, but rather a bailout of everyone (averting a systemic collapse).  I can see Buffett's point about shipbuilders in WWII -- they made millions in profits from taxpayer dollars, but we needed them to win the war.



The bill would impose a 90 per cent tax on bonuses given to employees with family incomes above $250,000 (U.S.) at American International Group and other companies that have received at least $5-billion in government bailout money.
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: Uccmal on March 19, 2009, 03:09:41 PM
I can see Buffett's point about shipbuilders in WWII -- they made millions in profits from taxpayer dollars, but we needed them to win the war.

Yes but, you dont need the individuals or AIG to win the war.  You only need to clean the mess up in an orderly fashion. 

A better analogy would be the Exxon Valdez, where uncounted volunteers, and some clean up companies (externally provided and payed for by Exxon's insurers), did the dirty work while Exxon staff stood by, or in one case were fired and CHARGED for negligence.

Using the analogy of war... perhaps the AIG executives should be charged with Treason instead of getting bonuses.
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ExpectedValue on March 19, 2009, 03:14:54 PM
"Thing is, it's got nothing to do with percentage of ownership.

Is Wells Fargo 80% owned by taxpayers?  No, it isn't.  So why does it also apply to them?"


They don't have to keep the money that was given to them, they can pay it back and those restrictions would be lifted. If they didn't need the money in the first place, they should be able to pay it back rather promptly.
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericopoly on March 19, 2009, 03:17:42 PM
I can see Buffett's point about shipbuilders in WWII -- they made millions in profits from taxpayer dollars, but we needed them to win the war.

Yes but, you dont need the individuals or AIG to win the war.  You only need to clean the mess up in an orderly fashion. 

A better analogy would be the Exxon Valdez, where uncounted volunteers, and some clean up companies (externally provided and payed for by Exxon's insurers), did the dirty work while Exxon staff stood by, or in one case were fired and CHARGED for negligence.

Using the analogy of war... perhaps the AIG executives should be charged with Treason instead of getting bonuses.


This sounds more like the Stalin method of war -- just shoot all the officers in a great purge.

My method of war is to fire the ones responsible for the disaster but continue to offer incentive/retention bonuses to the executives that are outperforming.  Merit based pay, in other words.
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericopoly on March 19, 2009, 03:21:03 PM
"Thing is, it's got nothing to do with percentage of ownership.

Is Wells Fargo 80% owned by taxpayers?  No, it isn't.  So why does it also apply to them?"


They don't have to keep the money that was given to them, they can pay it back and those restrictions would be lifted. If they didn't need the money in the first place, they should be able to pay it back rather promptly.



I don't think I would want to do business with anyone that can add restrictions to a deal months after it was struck.

Would you treat me that way if I had taken a personal loan from you?  Is that your ethics?
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericd1 on March 19, 2009, 03:25:40 PM
I find it difficult to believe the derivatives were so specialized that "managing them" was required. Another firm, or new employees could have been "managed" the run-off.  The Fed could have hired Buffett, he has experience doing just that!

Am I missing something?

Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ExpectedValue on March 19, 2009, 03:28:19 PM
"Thing is, it's got nothing to do with percentage of ownership.

Is Wells Fargo 80% owned by taxpayers?  No, it isn't.  So why does it also apply to them?"


They don't have to keep the money that was given to them, they can pay it back and those restrictions would be lifted. If they didn't need the money in the first place, they should be able to pay it back rather promptly.



I don't think I would want to do business with anyone that can add restrictions to a deal months after it was struck.

Would you treat me that way if I had taken a personal loan from you?  Is that your ethics?

Banks depend on confidence. If confidence dries up they're in no position to bargain.
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericopoly on March 19, 2009, 03:30:44 PM
They don't have to keep the money that was given to them, they can pay it back and those restrictions would be lifted. If they didn't need the money in the first place, they should be able to pay it back rather promptly.

The whole point of giving a company like Wells Fargo money was to encourage them to lend.  They claim to have increased their lending by about $80b because of the new TARP capital.

So, you say they can just give it back right?  How?  Are they going to force their customers who borrowed money to return it to them?

This is outrageous.  A deal is a deal.
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericopoly on March 19, 2009, 03:32:49 PM
"Thing is, it's got nothing to do with percentage of ownership.

Is Wells Fargo 80% owned by taxpayers?  No, it isn't.  So why does it also apply to them?"


They don't have to keep the money that was given to them, they can pay it back and those restrictions would be lifted. If they didn't need the money in the first place, they should be able to pay it back rather promptly.



I don't think I would want to do business with anyone that can add restrictions to a deal months after it was struck.

Would you treat me that way if I had taken a personal loan from you?  Is that your ethics?

Banks depend on confidence. If confidence dries up they're in no position to bargain.


So people are confident today now that this bill has passed?  Who is more confident?  Barney Frank's re-election manager?
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ExpectedValue on March 19, 2009, 03:37:39 PM
(http://www.grabup.com/uploads/e56e5da069cf8d180061b1a0cc3e936a.png?direct)

judging from the TED spread, yes, there is more confidence.
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericopoly on March 19, 2009, 03:50:44 PM
(http://www.grabup.com/uploads/e56e5da069cf8d180061b1a0cc3e936a.png?direct)

judging from the TED spread, yes, there is more confidence.


I can see the TED spread narrowed right after the big bailouts.

It didn't spike upwards as a result of AIG's bonuses.

So what is your point?


Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: dealraker on March 19, 2009, 04:40:58 PM
I love watching Larry Kudlow say, "They are going to run all that talent off and who then will run the business?"

Exactly what "talent" is this manic/depressive man talking about?

Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: benhacker on March 19, 2009, 04:54:56 PM
I'm with Eric 100% on this.

Are the bonuses to AIGFP personal crazy?  Yes.  Should they be refunded or have been stopped... I'd definately lean to 'yes'.

Does this Bill cause more than $180m in collateral damage. YES.  Think about this, they enacted legislation in the tax code to address a very tiny issue.

Seems insane.  If we want to change the landscape of banking forever, that's fine, but you are going to have to acknoledge that some little stuff is going to slip through teh cracks.  $180m is little stuff, there are bigger fish to fry.

In the end, I think this won't do horrible things, but the principle is getting scary, the government is making pretty fast reactionary moves to respond to perceived public opinion and this is really not the way a government should be run.

I hope we can get out of this funk soon so our country doesn't go down the drain... tired of seeing so much irrationality at all levels. :(

Ben
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: Uccmal on March 19, 2009, 04:59:23 PM
I love watching Larry Kudlow say, "They are going to run all that talent off and who then will run the business?"

Yeah well, Seems to me any agency with basic computing skills and people trained in forensic accounting could clean up the mess pretty rapidly.  Just ask Microsoft when the DOJ subpoened all their communications.  Say, what about the FDIC, or the NAIC.  Dont they have those skills that they put to use on a continuous basis?
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: Uccmal on March 19, 2009, 05:06:59 PM
Well, Ben, It is probably time for all governments to stop reacting and start thinking about long term planning.  They have mostly stopped the bleeding, and kept the patient concious.  Now they should be looking at long terms solutions.   

The problem is that everyone wants to be seen to be doing something when perhaps the best thing is to do nothing at all for awhile. 
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: Zorrofan on March 19, 2009, 05:29:13 PM
 "I love watching Larry Kudlow say, "They are going to run all that talent off and who then will run the business?"

I love to say to Larry - "lets see, these folks ran the business so well it needs $180 BILLION in government bailouts to stay operating. You call that TALENT?" IMHO the shareholders should demand they go.....

my $0.02

cheers
Zorro
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericopoly on March 19, 2009, 05:47:22 PM
I love watching Larry Kudlow say, "They are going to run all that talent off and who then will run the business?"

Exactly what "talent" is this manic/depressive man talking about?


How are you going to find the best candidates to replace them if you refuse to offer any kind of incentive based pay?

I am actually impressed that Barney Frank didn't amend the bill to require executives to punch in and punch out everyday to make sure that taxpayers can see these guys are putting in a 40 hour week.  Not!  They have done a good job of ensuring that nobody will put in more than 40 hours, that's for sure.  I hate work environments like that -- the guy sitting in the next cubicle surfing the web all day gets the same pay as the guy busting his ass.  Welcome to the government... oh wait, it's a shame that Government Employees Insurance Corporation  (GEICO) has already been taken, because it would be so fitting a name for the new AIG.


Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericopoly on March 19, 2009, 05:51:04 PM
"I love watching Larry Kudlow say, "They are going to run all that talent off and who then will run the business?"

I love to say to Larry - "lets see, these folks ran the business so well it needs $180 BILLION in government bailouts to stay operating. You call that TALENT?" IMHO the shareholders should demand they go.....

my $0.02

cheers
Zorro


What the hell?  Why should we demand Wells Fargo executives be let go?  The bill covers all firms who took more than $5b in capital -- and that's Wells Fargo.

Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericopoly on March 19, 2009, 05:54:31 PM
I'd have to say, maybe the Stalin comment was a bit rash -- I think the French Revolution sounds more appropriate.  Let's just drag out all high paid executives and cut their heads off.  This is a populist mob.
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: Partner24 on March 19, 2009, 06:36:35 PM
Frankly, yes it might sound a little bit like the French revolution. French people were tired that their royalties was being used to compensate the very few. I'm not saying that it is the case, but we face some huge deficits and us and our children will ultimately have to pay this debt and pay million of bonuses to now federal employees is shocking.

Shareholders can decide what they want and just rubber stamping abusing compensation packages if they want, but now some troubled companies have to deal with taxpayers money. If they complain about taxpayers being more sharp about expenses, I have a suggestion for them: why not find private capital to save you instead?

You would not have this very long thread if some companies wouldn't have asked for taxpayers money to survive.




Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericopoly on March 19, 2009, 06:55:51 PM
You would not have this very long thread if some companies wouldn't have asked for taxpayers money to survive.


Yes, but they didn't ask. 

Wells Fargo should have just said, F**k you, I'm not going to help you (America) out.


http://albuquerque.bizjournals.com/albuquerque/stories/2009/03/16/daily12.html?ana=yfcpc
 

Kovacevich also expanded on earlier news reports that indicated he had initially resisted taking $25 billion in a federal direct-investment under the Troubled Asset Relief Program. He said he opposed the programís structure requiring Wells and other major banks to take the money, saying that regulators hoped requiring all banks to take the money would lift public perception on the troubled banks to the level of the nationís healthiest banks. Kovacevich feared the reputation of the nationís strongest banks would sink.

Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericopoly on March 19, 2009, 07:27:18 PM
Kovacevich essentially says that they took the money to help out the country, not the other way around.

Now do you guys get it?  Somebody helps you out and you turn around and call them a bastard and that they don't deserve a bonus?

I am disgusted.
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericopoly on March 19, 2009, 07:57:41 PM
I wish too that the American public better understood that AIG's chief executive works for free.

No, not really.  He makes $1 per year salary, and no bonus.

Even a panhandler makes more than AIG's CEO.

That wasn't the headline I saw though.  It doesn't hype, it doesn't outrage, it doesn't sell.
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: scorpioncapital on March 19, 2009, 08:15:44 PM
Is it just me or has the reaction to the AIG bonuses resulted in AIG giving back MORE than the actual bonus?

- AIG employees to pay back the bonuses.
- Congress to tax 90% of the bonuses.
- Geithner to deduct it from the $30 billion loan installment

Are they getting back 2-3x the bonus amount???
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericopoly on March 19, 2009, 08:51:15 PM
Is it just me or has the reaction to the AIG bonuses resulted in AIG giving back MORE than the actual bonus?

- AIG employees to pay back the bonuses.
- Congress to tax 90% of the bonuses.
- Geithner to deduct it from the $30 billion loan installment

Are they getting back 2-3x the bonus amount???


That's right, they are trying to punish AIG by making them repay some bailout money (the size of the bonuses) and also withholding some bailout money (again, the size of the bonuses) that they have yet to give AIG.

Do you realize how stupid that is? 

Punish AIG?

Umm... let's really stick it to the people who own AIG right?

Umm... wait, no that's the taxpayer.  Oh... I get it, let's really make those 20% minority shareholders pay!!

I have a vision of a monk walking along flogging himself in penance -- the monk is the government, the owner of AIG exactly a punishment on himself.

It can't get any more bizarre, can it?  Why punish the American public for the bonuses?  What did they do?  And how is it punishment just to repay bailout money back to yourself? 

This is about as strange as a shareholder lawsuit (owners suing themselves).

Perhaps Buffett should give them a lesson on thinking like owners, now that they hold 80% of the common stock.
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: Packer16 on March 19, 2009, 09:18:59 PM
Has anyone noticed that a less publicized but much larger payment to AIG's CDS counterparties of hundreds of billions of dollars which then flow to Hedge Funds (speculative CDS buyers)?  This was in yesterday's WSJ.  So you have taxpayer paying off AIG's bad bets to hedge funds (speculative CDS buyers) with no negotiation with CDS purchasers with the CDS being paid off at par.  Once this settles in the bonus issue is going to be a sideshow. 

Packer
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ExpectedValue on March 19, 2009, 11:06:38 PM
I can see the TED spread narrowed right after the big bailouts.

It didn't spike upwards as a result of AIG's bonuses.

So what is your point?


My point is that before the TARP, the confidence behind our banking system was shaken - to the point where they were very susceptible to bear raids. We had Bear Stearns, we had Lehman Brothers, and it's likely that we would have had more. In order to stem that off, we had to lend these companies money because their business models DEPEND upon confidence.

This is not your usual value investor situation where you can ignore the lack of confidence and have faith that these companies could thrive without confidence.

So Wells Fargo can call these additional restraints asinine and you may think that they're unethical, but that's the price that they are going to have to pay for the confidence that comes with US taxpayers backing them. Because without it, they might not be able to operate. That's the price that comes with being a Bank and having to make sure that every day the public is confident about you.

Don't like it? Don't invest in those types of companies.
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericopoly on March 19, 2009, 11:39:47 PM
So Wells Fargo can call these additional restraints asinine and you may think that they're unethical, but that's the price that they are going to have to pay for the confidence that comes with US taxpayers backing them. Because without it, they might not be able to operate.

You spin this as though the banks might not be able to operate without the capital, so therefore they can kiss your ass.  First off, Wells Fargo didn't need the capital -- but with it they were able to expand their lending and quite possibly contribute to TariqAli still having a job today, depending on who you work for.

Do you have a rough idea of how many companies would not be able to operate without banks to lend to them?  Don't they all depend on the confidence of the banking system?  So by your logic the government has the right to heavily tax their executive pay too, to repay the taxpayers for the bailout of the financial system.

That's a chain reaction of companies falling like dominoes that was averted with this TARP capital -- so they all owe the taxpayers something.  They were all bailed out, not just the banks.

Buffett is right.  This is Pearl Harbor and it isn't time to blame the Navy senior officers, we need to get busy winning the war.
















Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ExpectedValue on March 20, 2009, 12:42:48 AM
You spin this as though the banks might not be able to operate without the capital, so therefore they can kiss your ass.  First off, Wells Fargo didn't need the capital -- but with it they were able to expand their lending and quite possibly contribute to TariqAli still having a job today, depending on who you work for.

If Wells Fargo didn't need the capital they would have given it back. They wanted to keep it so that they could be better capitalized and possibly lend out to make some more money (nothing wrong with that, that's what a bank is supposed to do). However, if lending really did come to a standstill there would  have been some kind of government program created to put loans out there. Nobody should be thanking Wells Fargo for its lending and thinking that their jobs were saved by it. Their jobs were saved by the American taxpayer's money flooding into banks.

Since they (Wells Fargo and other banks) essentially owe their ability to operate due to the taxpayers, they should be OK with taxpayers having some influence over things like compensation.

Also, keep in mind that this bill still has to pass in the senate and it's likely that it will be watered down or modified. It's not even a law yet. The fact that this bill focuses on bonuses means that banks may simply have to adjust base-salaries upwards to make up for the reduced bonuses. I doubt this is going to turn into the "Stalinist" / French Revolution scenes that some of you seem to be evoking.
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: Uccmal on March 20, 2009, 05:35:22 AM
Well said Tariq, 

Eric, You do know how this works... Roughly speaking:
- last week the press got hold of the bonus story
- Congessmen, Senators etc. got hundreds of thousands of E-mails from a bailout exhausted public, many of whom undoubtably have had their pay frozen, or lost their jobs.
- they reacted - There was no choice!
- They crafted a bill that does minimal economic damage to the individuals involved - a handful might actually still get the untaxed bonus.

The public is clearly burnt out from seeing the huge numbers they are going to be paying down for years, expecially with AIG.  I lost count, but that company has been given at least its peak market cap in money so far - More money then they have ever earned in their 100 or 200 years of existence.  So no bonuses - you still get a 250,000 dollar family salary.

Populist yes, Symbolic yes, Fair - probably not - but then its not going to be fair when the taxes of all Americans go sky high to pay down this all down - Believe me, as a Canadian, I know how paying back a deficit works. 

This sends a very clear message to anyone receiving bailout government money whether they wanted it or not.  IMO that is a good thing. 

Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: Zorrofan on March 20, 2009, 07:54:25 AM
What the hell?  Why should we demand Wells Fargo executives be let go?  The bill covers all firms who took more than $5b in capital -- and that's Wells Fargo.

Eric, if Wells Fargo executives cost the company $180 Billion then yes let them go. Otherwise we are using tax dollars to reward poor performance! Why should the executives that ran AIG get huge bonuses when the company needs a taxpayer funded bailout? To call it a reward to retain talent is laughable.

cheers
Zorro
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericopoly on March 20, 2009, 07:59:48 AM
You spin this as though the banks might not be able to operate without the capital, so therefore they can kiss your ass.  First off, Wells Fargo didn't need the capital -- but with it they were able to expand their lending and quite possibly contribute to TariqAli still having a job today, depending on who you work for.

If Wells Fargo didn't need the capital they would have given it back.

I heard Barney Frank say that and had to laugh.

Suppose you are running a bank and I ask you to take some TARP money in order to stimulate lending.  So you take it, and you lend it out, in good faith.


Then I later say, well I can pretty much tell you to hop on one foot and if you don't like it then just give the money back. 

Clever.
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericopoly on March 20, 2009, 08:10:16 AM
What the hell?  Why should we demand Wells Fargo executives be let go?  The bill covers all firms who took more than $5b in capital -- and that's Wells Fargo.

Eric, if Wells Fargo executives cost the company $180 Billion then yes let them go. Otherwise we are using tax dollars to reward poor performance!

cheers
Zorro

They didn't cost their company $180 billion, they stayed away from the exotic finanicial stuff, so why do you want to punish them?

That's what I don't understand.  You are out to hang Wells Fargo executives, and your supportive reasoning is that AIG lost $170b.

Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: Zorrofan on March 20, 2009, 08:15:29 AM
No, you are misunderstanding me. I have nothing against Wells Fargo. AIG executives did cost their company $180 billion. Thats why I don't support them getting bonuses. What I said was that IF Wells Fargo execs had done the same thing then I would hold them to the same standard. My whole point was/is that I am against tax dollars paying bonuses for what I consider poor performance.
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericopoly on March 20, 2009, 08:18:44 AM
What the hell?  Why should we demand Wells Fargo executives be let go?  The bill covers all firms who took more than $5b in capital -- and that's Wells Fargo.

Why should the executives that ran AIG get huge bonuses when the company needs a taxpayer funded bailout? To call it a reward to retain talent is laughable.

cheers
Zorro


Who are the executives that run AIG?  Let's start with the CEO -- his salary is $1.  He doesn't take a bonus.  The buck stops with him.

Now, have you ever worked at a big company?  I did.

At Microsoft there were divisions with sub-par level of talent.  And then there were strong divisions.  Now, let's say we give them all bonuses and you look at the performance of one division and say, "To retain sub-par level of talent is laughable".

That's fine, but there are still strong people at the company -- they don't all work in the division that blew up.

It's laughable that they are all considered weak employees.  Do you really believe that?  Seriously?
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericopoly on March 20, 2009, 08:20:32 AM
No, you are misunderstanding me. I have nothing against Wells Fargo. AIG executives did cost their company $180 billion. Thats why I don't support them getting bonuses. What I said was that IF Wells Fargo execs had done the same thing then I would hold them to the same standard. My whole point was/is that I am against tax dollars paying bonuses for what I consider poor performance.


The bill to tax the bonuses IS NOT an anti-AIG bill.

It is a bill that treats every executive the same way at EVERY company that took at least $5 billion in TARP money.

Wells Fargo took $25 billion.

So if you support the bill you are kicking sand at Wells Fargo.

That's why I'm so damned mad.
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: omagh on March 20, 2009, 09:27:32 AM
Al,

You'll like this tidbit...lots of footdragging in shutting down AIG's FP unit.
http://www.businessweek.com/investing/wall_street_news_blog/archives/2009/03/aig_means_busin.html?chan=top+news_top+news+index+-+temp_news+%2B+analysis

Cheers,
-O

I can see Buffett's point about shipbuilders in WWII -- they made millions in profits from taxpayer dollars, but we needed them to win the war.

Yes but, you dont need the individuals or AIG to win the war.  You only need to clean the mess up in an orderly fashion. 

A better analogy would be the Exxon Valdez, where uncounted volunteers, and some clean up companies (externally provided and payed for by Exxon's insurers), did the dirty work while Exxon staff stood by, or in one case were fired and CHARGED for negligence.

Using the analogy of war... perhaps the AIG executives should be charged with Treason instead of getting bonuses.
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: T-bone1 on March 20, 2009, 10:51:14 AM
If Wells Fargo didn't need the capital they would have given it back. They wanted to keep it so that they could be better capitalized and possibly lend out to make some more money (nothing wrong with that, that's what a bank is supposed to do). However, if lending really did come to a standstill there would  have been some kind of government program created to put loans out there. Nobody should be thanking Wells Fargo for its lending and thinking that their jobs were saved by it. Their jobs were saved by the American taxpayer's money flooding into banks.

Since they (Wells Fargo and other banks) essentially owe their ability to operate due to the taxpayers, they should be OK with taxpayers having some influence over things like compensation.

But Wells Fargo doesn't "owe their ability to operate" to the taxpayers. Yes they took TARP money, but they didn't need it or neccesarily want it. You say the government could just create a "program to put loans out there" . . . thats exactly what this is. They give $25 Billion to Wells, and Wells makes loans with it. This makes sense because Wells is a bank and is in the business of making loans! This is exactly the government program you mention.

Do you think a better government program would be to have a bunch of incompetant cronies dispense the loans rather than a proffessional bank? Isn't that part of the reason we are in this mess? How exactly do you propose the government make loans in a more effecient manner than coercing Wells to take the money and make the loans?

I understand that this is all a little silly . . . congress is grandstanding and it is unlikely a bill will ever be made law (it is still illegal in this country to punitively tax a small group). So this won't actually hurt a company like Wells, but I am a little offended by the suggestion that they deserve their share of the backlash for taking TARP money they didn't want.

Liddy is working for $1 a year - less than Buffett makes - so everyone should get off his back.
Wells is taking TARP and lending it because the FED told them it was for the good of the country - they shouldn't be blamed or insulted for this.

If anyone has issue with the above two facts, I would be happy to argue them (i.e. arguments that Wells would have entually needed the money or Liddy will be paid on the back end), but please don't act like the pathetic US congress and make grandstanding generalizations like "you took TARP, now you have to pay"

end of rant.
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: Zorrofan on March 20, 2009, 11:09:01 AM
Eric et al

This is the way I see it. The whole AIG bonus issue is a prime example of what is wrong with corporate America today. I have no doubt that AIG is filled with many hard working, ordinary Americans. But I am highly sceptical that they are going to see any of this bonus money. Instead it goes to upper management, the same people who put AIG in the position of needing a taxpayer funded bailout.
You say you are mad that sand is being kicked in the face of Wells Fargo. Well, I am mad that corporate America seems to think it is okay to pay themselves huge bonuses for poor or mediocre performance (at best) while the shareholders get little or nothing in the way of dividends or share performance.  A few years ago WEB wrote in his annual letter about excessive executive compensation. To me this whole AIG debacle is a prime example of excessive compensation. Kick sand in the face of Wells Fargo, to me this incident is kicking sand in the face of every shareholder in America.  There are retention bonuses being paid to people who have already left AIG! This is fair or reasonable? Yes, I agree people should be compensated for the job they do but today it seems we read of executive after executive being paid tens of millions in bonuses, stock options and God knows what else while the stock performance of their company does nothing.  How about company layoffs while I renovate my office for $1.5 million? Not AIG but a prime example of the lack of accountability at the top. I see the integrity the WEB, CM and Prem demonstrate and ask why it is so hard to find examples of that today.

I donít want to argue, make this personal, or even pretend that I have all of the answers. Executive compensation is a sore point with me. No doubt Congrees is doing some grandstanding but there is a bigger issue here. We need to look at Executive Compensation and realize that it comes out of the pockets of ordinary shareholders. The AIG issue is one of taxpayers pockets being used, but in other cases it is shareholders who are footing the bill.

I have said my piece and wonít post on this topic any more.

Cheers
Zorro
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: ericopoly on March 20, 2009, 11:30:33 AM
Eric et al
I see the integrity the WEB, CM and Prem demonstrate and ask why it is so hard to find examples of that today.
Cheers
Zorro


I see that with Gates/Ballmer as well.  Neither of those guys ever took a stock option.  However, they did see the importance of pay and stock options to keep employees from wandering to another company who is offering them millions to leave.

I see that importance too.  Think of it like a nuclear arms race.  Golden handcuffs serve as a deterrent, but it leads to an escalating war.  The war escalated... and many of the key executives they wanted to retain would have walked to another company if their millions were taken away.

Professional sports has the same problem.  What, pay a guy $100m to throw a ball through a hoop?
Title: Re: Congress Passes Bill To Tax AIG Bonuses!
Post by: GaliPart on March 20, 2009, 11:37:01 AM
I happen to disagree with the way that Congress is going about getting the bonuses back.  There were opportunities to address this without changing the tax code; while it is true that the executive branch really botched their oversight on this one, this is an issue which should have been resolved in other ways.  We are talking about a $14 trillion economy, and Congress is focusing on passing laws that penalize a handful of people?  I can certainly think of better things for them to do. 

I am also afraid of the unintended consequences of this.  First, it applies to all companies accepting money more than $5 billion, including some (like WFC) that didn't even want to take the funds.  Second, they are giving all institutions that took TARP money a significant incentive to pay back the funds quickly--resulting in shrinking their balance sheets and cutting back further on lending--just the opposite of what we want them to be doing.  Third, they are retroactively changing the rules (again), giving people additional reason to hesitate before taking government funds (or even trusting the government to follow through with the programs that it says it will implement). 

We'll see what ends up happening with the Senate, but I do agree with the assessment of Mike O'Rourke (the chief market strategist of BTIG) that "this is nothing more than a short sighted, knee-jerk reaction to popular opinion which demonstrates that Congress is missing the forest (the economy) for the trees (bonuses) and the worst part is that the forest is on fire."