Recently House Financial Services Committee Chairman Barney Frank received a letter from New York Attorney General Andrew Cuomo. In that letter Mr. Cuomo had the distasteful duty of informing Congressman Frank that the American International Group Inc. (AIG) had granted retention bonuses of $1 million or more to 73 people in its AIG Financial Products subsidiary, including 11 who no longer work at the company. Cuomo said the top 10 bonus recipients of the retention bonuses combined received $42 million, with the top recipient getting more than $6.4 million. He also said that 11 people who had already left the company received retention bonuses of $1 million or more, with one person getting $4.6 million.
Cuomo has blamed the unit for the insurer's near collapse last year and said these payments were all made to individuals in the subsidiary whose performance led to crushing losses and the near failure of AIG," Cuomo said in the letter. "Thus, last week, AIG through these retention bonuses made more than 73 millionaires in the unit which lost so much money that it brought the firm to its knees, forcing taxpayer bailout. Something is deeply wrong with this outcome."
I've been seeing a lot in the news regarding bonuses being given to employees of Wall Street companies that are receiving bail out money. And I realized how it just proved how far from Main Street these people are. Personally I fail to see how any individual could do anything that would warrant compensation of this nature. I mean seriously, who "needs" that much money? Is that all mankind is about, the pursuit of wealth. And they don't even hide their greed. You heard them say things like "the thrill of the deal" and "take no prisoners." These selfish asses treat our economy like a giant Monopoly game. I say enough is enough.
If these companies can pay out hundreds of millions of dollars in bonuses then I have to concluded there are a lot of workers being underpaid in order to pay for those bonuses. And that's the core problem with our economy. We hear a lot about wealth "Redistribution." But it is the disparity of "original" distribution of wealth that is out of balance. Too much of the wealth generated in this world economy is retained by the money handlers and not enough is shared with the workers. And you'd think they'd realize that this is a self defeating habit. The less workers have to spend the slower the engine of the economy runs.
But alas, these Wall Street miscreants and their retention bonuses have never gotten it. But I think they are about to get a great big wake up call in the form of a giant kick in the ass from President Obama.
*************
Devin Barber, Politics Correspondenthttp://gather.com/leftoftheright
Devin's column, "Left Of The Right" published weekly or more to Gather Essentials: Politics is a Blue Collar Democrats take on current political news.
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Comments: 53
If I perform badly at my job, I get fired. What world are they living in, anyway??
I liked the movie, "The Pursuit of Happyness", but I think that man's experience isn't typical. It was pretty obvious that his colleagues in the internship program had their day-to-day expenses covered, most likely by their parents or working spouses. The idea that one can "make it" from the mean streets to Wall Street in one fell swoop is a nice one, but to most of us it remains a fantasy. It's true that "the exception proves the rule", but it still remains an exception, not the norm.
As to "retention bonuses" for people who no longer work for the firm: What part of "retention" didn't they understand? If you go to work elsewhere, you lose the bonus. And there should NEVER be a bonus paid, at any level, for losing the company's money. For that little stunt, at every level, the person should get a pink slip, not a bonus.
http://www.foxbusiness.com/story/markets/industries/finance/dodd-cracks-aig---time/
"While the Senate was constructing the $787 billion stimulus last month, Dodd added an executive-compensation restriction to the bill. That amendment provides an “exception for contractually obligated bonuses agreed on before Feb. 11, 2009” -- which exempts the very AIG bonuses Dodd and others are now seeking to tax."
Dodd though it was OK a month or so ago.
I wonder why?
"Separately, Sen. Dodd was AIG’s largest single recipient of campaign donations during the 2008 election cycle with $103,100, according to opensecrets.org. "
From Wikipedia, so it HAS to be true
Fannie Mae and Freddie Mac
In September 2003, Frank, then the ranking Democrat on the Financial Services Committee, opposed a Bush administration proposal for transferring oversight of Fannie Mae and Freddie Mac from Congress and the Department of Housing and Urban Development to a new agency that would be created within the Treasury Department. The proposal reflected the administration's belief that Congress "neither has the tools, nor the stature" for adequate oversight. Frank stated, "These two entities...are not facing any kind of financial crisis.... The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."[44]
Conservative groups have criticized Frank for campaign contributions from Fannie Mae and Freddie Mac ($42,350 between 1989 and 2008). They further claim the donations influenced his support of their lending programs, and they have partially blamed Frank for not playing a stronger role in reforming Fannie Mae and Freddie Mac in the years leading up to the Economic crisis of 2008.[45][46] In addition, Frank's former partner, Herb Moses, was an executive at Fannie from 1991 to 1998, where Moses helped develop many of Fannie’s affordable housing and home improvement lending programs. In 1991, Frank pushed for reduced restrictions on two- and three-family home mortgages.[47] Frank and Moses' relationship ended around the same time Moses left the company; Frank's support of Fannie and Freddie predated and continued past that relationship.[48]
Frank has responded that he "opposed right-wing efforts to put Fannie Mae and Freddie Mac out of business, while simultaneously supporting strong regulation" and "voted against the [2005 reform] bill in protest of those restrictions, while making it clear that I was for the reforms it otherwise contained."[49] Lawrence B. Lindsey, former chief economic adviser to then-President Bush, states that Frank "is the only politician I know who has argued that we needed tighter rules that intentionally produce fewer homeowners and more renters."[50]
I'd say that the Obama administration and Congress SHOULD have the ability to juggle the plug on AIG. The government supposedly holds 80% of AIG's shares thanks to a deal made under 43. 80%... isn't that a controlling interest?
Something I'd really like to hear is where the Capitalists are on this retention bonus issue.
Like, where are they, or why aren't they, standing up for their principle: that success is rewarded and failure punished?
It makes America's Capitalist leaders seem selfishly hypocritical towards the meritocratic system that is instilled in our nation.
How DO meritocratic capitalists justify giving outrageous bonuses to lousy leaders and poor workers?
Dear Friends,
It is difficult to quantify the outrage that taxpayers - AIG's new shareholders - have regarding the bonuses paid to AIG executives. I have included my thoughts in a video statement above. I've also included the letter I sent to AIG CEO Edward Liddy demanding answers. AIG must reverse course and do the right thing and forego the bonuses or face legislative action. Please don't hesitate to communicate your opinion on this issue with me by using the link on the sidebar. You can access my official press release by clicking here.
Sincerely,
------------------------------------------------------------------------
March 17, 2009
Mr. Edward M. Liddy
Chairman and CEO
American International Group, Inc.
70 Pine Street
New York, NY 10270
Dear Mr. Liddy:
I write today to convey my outrage over American International Group’s (AIG’s) payout of $165 million in bonuses to executives in its Financial Products division. As you know, this unit wrote trillions of dollars of credit default swaps, leading to the near collapse of AIG and necessitating the infusion of $170 billion in federal assistance. Under these circumstances, it defies all logic that these executives deserve to receive millions of dollars in performance-based bonus payments.
As the company faced imminent collapse, the government assumed an 80 percent stake in AIG. Accordingly, its new owners- namely taxpayers- have a right to know how their money is being spent. Therefore, I ask you to provide detailed information regarding the performance of all executives in the Financial Products division receiving bonuses, including specific information about their involvement with credit default swaps and other risky derivatives. Echoing the requests of the New York Attorney General, I believe AIG must provide a list of payment recipients, position, job description and summary of performance at AIG financial products.
Let me be clear—given AIG’s reported a loss of $61.7 billion for the final quarter of 2008, I find it inconceivable that these bonuses could be warranted based on any fair or rational metric of executive performance. However, I also understand that contracts are in place that may require these bonuses to be paid notwithstanding AIG’s recent dismal financial performance.
While it is questionable whether AIG exercised reasonable judgment when it entered into these contracts in early 2008, I recognize this is now water over the dam. It is unquestionable however that payment of these bonuses would lavishly reward some of the very individuals responsible for the near collapse of AIG. This action would be a direct insult to taxpayers who have contributed $170 billion to avert this collapse and are now the company’s owners.
Considering these facts, I think it appropriate that executives in AIG’s Financial Products division be asked to forgo their bonuses. If they are unwilling to do so, they should be fired. The taxpayers cannot trust those who profit from their own poor decisions to effectively turn around the company.
Thank you for considering my requests. I urge you to act quickly. AIG’s survival is contingent on the support of the American people. Without swift action on your part, I fear that we will no longer be in a position to provide future assistance.
Sincerely,
Robert P. Casey, Jr.
United States Senator
There are posters right here on Gather that will tell you that those rich guys have EARNED those big pay checks and bonuses. What evidence do you think will convince them otherwise?
It isn’t about “Main Street” it is about inside the “beltway” in DC.
Are the President and Harry Reid whining about the AIG bonuses for all of us? NO, we need to show how the little big numbers upset us so we won’t worry about “mortgaging our kids futures.”
Wasn’t it the Congress with the President’s signature of approval protected those bonus contracts? NO, all the Congress and the President did was give them billions more without asking how they would spent it.
When are we going to start holding the elected officials accountable? Never, they have good intentions so why should we care what they do.
Is this any different than when the auto executives had to set and be abused about their company planes and Nancy Pelosi is bitching because she doesn’t have a 42 passenger jet at her personal disposal? NO, the company jet is only for the security and convenience of the CEO and other executive, Pelosi needs the personal seats for family and “friends” doing government business.
Should guys in DC start reading what they vote for? NO, the Democrats are in control and are writing the laws and signing them and they say all the right things.
Absolutely!
Amen. This is not simply in the financial industry, Devin. Many other corporations have boosted salaries and share value by exporting jobs to other countries where they can pay crap wages and no benefits. It has nothing to do with taxes. They move there to avoid employment costs. In doing so, there are less jobs that pay a living wage in this country, and people have less disposable income with which to purchase products.
There is absolutely NO reason why executive pay has risen so dramatically in this country in relation to average worker pay. None. And it will kill this economy for good. Everybody in exec management at these firms is so concerned about 1) themselves; and, 2) the short-term gains.
These, IMO, are the real terrorists. Not the 9/11 guys. They did not succeed in taking down an entire country and wiping out 20 years of economic growth.
This whole AIG anger driven rage is a total smoke screen. Obama and his fellow leftist are using this outrage as a distraction to what they are really doing.
165 BILLON, in bonuses outrageous- 4 trillion dollar budget that will put our grand kids in total debt- Obama spending more money than America has spent since it became a nation.ACORN THE Marxist street thug outfit is now being put in charge of the census- China, telling Obama, that our country is out of control, borrowing trillions we do not have the ability to pay back.
My state NY, has a 14 billion dollar budget deficit-Kalifornia is bankrupt-Detroit is in worse shape than a third world country- Detroit public schools graduate 30% of it's kids, Obama wants to give the Failed, horrid Detroit school system 550 million more!!!
And we the people are arguing and going ballistic over bonuses- bonuses that were known about long before they were paid.
Trillions of dollar debt being put on the backs of the innocent American people is what we should be going ballistic about.
Stop allowing the corrupt politicians to divert your attention from what they are really doing to harm our country.
The government is going to suck the life out of capitalism.
Dodd, Chris (D-Conn) $281,038
Bush, George W (R-Texas) $200,560
Schumer, Charles E (D-NY) $111,875
Obama, Barack (D-Ill) $110,332
McCain, John (R-Ariz) $99,249
Check out more at http://www.opensecrets.org/orgs/recips.php?id=D000000123&type=P&state=&sort=A&cycle=A
AIG is a non-opportunity campaign donator. If you are going to go after just the Democrats in this list, then you are being a foolish, bigoted partisan idiot.
Don (Thank you, President Bush!) H., Mar 18, 2009, 4:59pm EDT "
That's simply ridiculous. The government doesn't pay millions to send lobbyists to DC to get votes for their causes. Companies do.
If you really want to do something productive for your country, instead of showing one side of the story in a partisan whine, then write your representatives and demand campaign reform. Be willing to donate a small amt of money on your tax return and take the money power away from campaign donators. The more someone can afford to donate and influence government, the more they will. Money talks.
Added bonus: your reps will actually not have to spend 1/3 of their time raising money for elections. They can actually spend that time working for YOU!
Thanks for mentioning my name.
Like, where are they, or why aren't they, standing up for their principle: that success is rewarded and failure punished?"
That suggested to me that you only those who make the system work as a problem and you don;t want to admit that the politicains like Dodd and Obama didn;t make a conscious effort to protect the bonuses. Maybe you can explain how a law written that specifies the this protection of bonuses and signed by Presidnt Obama didn;t contribute to this "outrage?"
Rich Kaye as usual is clueless
Here is the line from the Capitalist/Conservatives.
We MUST let the bonuses be paid, we can't have government interference in contractual agreements. . . .
No mention of the Bush/Paulson purchase of 80% of AIG last fall on behalf of you,
dear citizen.
Capitalist/Conservative head nodding at that time. . . It is necessary.
On this issue of salary and bonus limitations being taken out of the bail out bill being the Democrats doing. What a load of bull. Chris Dodd and Barney Frank took the limitations out at Obama's request. And why did Obama make such a request you ask? Because he was trying to reach across Party lines and it was something the "REPUBLICANS" were demanding you idiots. You see, that's what Obama gets for trying to be inclusive with the bone headed GOPs.
Sounds like you've developed a raw nerve about accepting the fact that IT WAS your guy Bushy boy who set the table for this colosal pig sty of a mess that Obama has to clean up. But the clueless GOPs keep right on chanting deregulation and tax cuts for the wealthy, deregulation and tax cuts for the wealthy, deregulation and tax cuts for the wealthy. Therefore Obama has no choice but to keep reminding people that "deregulation and tax cuts for the wealthy" is what got us in this mess in the first place.
(Sheryl O. please add your thoughts.)
Can you help me on this issue of the AIG bonuses (Rangle's new law), the bonuses for all the companies taking government money (of any kind), and pay in general?
What are your rules for deciding who gets paid what (how much money) and how (wages, salary, bonuses, incentives)?
Is pay to be based on value, public good, market value, or government authority?
Should people all be paid the same no matter what they do?
Should people have their moneys legally earned be confiscated by the government when people/media gets upset?
What are your rules for deciding who gets how much?
I don’t see the fifth point as all that impressive.
“Sach's fifth and final recommendation is to note that "while expertise is vital...it is not enough." Ultimately, he says "we can't leave...decisions to the scientists, though we want the scientists very close to the ultimate decisions, and to express their views strongly and publicly."”
It isn’t leaving the decisions to the exporters, it is about public debate. Everyone should enter the debate, and the decision should be based on weighing all of the discussions not simply some self professed “expert’s” findings. Scientists shouldn’t be simply to stand up for the science, they need to get engaged with the whole discussion and address the concerns of the non-scientists.
David K.,
“Scientists have to stand up for their science ”, are you suggesting they don’t should have to address the non-science concerns?
First off, I'm not sure how you got that suggestion from my comment. In my view, people who made the system work are certainly NOT the problem; it is the people who made the system NOT work that are the problem.
As for Dodd and Obama allowing the bonuses to be protected, I can see at least two reasons for this. 1) not paying the bonuses could have resulted in legal problems for AIG; and AIG already has enough problems. 2) Obama and Dodd are politicians that are used to having to accept small percentages of dicey provisions within bills, in order to achieve a bill's passage. By comparison, the 1% of the AIG bailout money that went to these bonuses is similar to the 2% of earmarks that made it through the budget bill. They are just used to letting a small percentage be shuttled off to other causes.
Allowing the bonuses certainly did add to the outrage, but the root of the outrage is that a failing company found it more important to honor those $165 million in bonuses, rather than put that money toward getting the company out of trouble. This seems very anti-capitalist.
Which leads me to what I am still very interested in hearing about; Where are our American Capitalists stepping up to defend their meritocratic principle?
Limbaugh makes a corporate themed argument, that the government shouldn't interfere with AIG's fulfilling of a contractual obligation; but since this AIG issue is about bonuses -- extra pay usually given only when exceptional services are rendered -- and the services given turned out to be so abysmal, then Limbaugh's argument seems fully dissociated from the "pay according to merit" concept that Free Market Capitalists champions.
On another note; I hope that the legislation being promoted to target these bonuses with a special tax, fails. Doing things this way is the totally wrong approach.
And what if the banks don't want to unfreeze. It seems to me that loaning them billions to ''lend'' out, and then them ''buying'' other banks with it, is not President Obama's fault either. It was bu$h that gave the ca$h with no strings attached. Funny how the ''free'' market works. I'd even venture to say that the ceo's don't want President Obama to succeed either. Probably a bunch of CONservatives. I hate CONservatives.
''In short, they want a president to know what the hell to do - and they dont have that.''
Question? What kind of time frame are you conservatives talking about giving President Obama. Another week or month or so. Why are you guys bashing the President after only 2 months. I guess that is plenty of time to clean up the mess that bu$h created in 8 years, huh? Funny, I didn't hear you guys screaming about that idiots out of control spending. But then, I wouldn't expect anything else from conservatives. A democrat can do nothing right to you guys. You wouldn't even admit if he did something that you thought was right.
Oh and BTW, I guess that McLame would have known exactly what to do if he had been elected.
The capitalist system usually allows companies that are screwed up by their employees fail. As far as your concerns for meritocracy, you surely are suggesting you believe in it or we would then be expected to apply it to our elected officials.
As for defending AIG, I don’t have enough information. However, if the plan was to unwind all of those swaps or whatever has AIG exposed to failure and to recover some of the money the taxpayer have put into AIG ($ 30 Billion more in February, who was in control then?) by those politicians you feel have no responsibility, then who do you think is best able to do the unwinding? Might it be the people that created them? Do you want to bring in people who have at best limited knowledge to learn them and then unwind them? If you want to keep the others with the knowledge and direct them to do the unwinding, then just maybe you want to retain them and in this world it might take a few more bucks than you or I make.
You mention the politicians have to accept the small inefficiencies, well it your numbers are right and AIG has gotten over $160 Billion and the AIG bonuses are $160 Million isn’t that 0.1%? Does that meet your threshold of “small percentages of dicey provisions” for politicians? If so, then why shouldn’t the rest of us have that same threshold and quit whining about the money?
“First off, I'm not sure how you got that suggestion from my comment. In my view, people who made the system work are certainly NOT the problem; it is the people who made the system NOT work that are the problem.” Since you didn’t seem to feel people such as Senator Dodd (the number one recipient of AIG campaign contributions just ahead of President Obama) that suggested that not responsible for the system or how it works. I do wonder why Senator Dodd’s amendment to the latest bill was so specific exempting bonuses on of before February and now he claims he didn’t understand the impact of the language, until after he started ranting and raving about bonuses.
As for the legal concerns when has that stop a politician, it isn’t their money, and it is like the tort lottery go to court the worst that happens is the money has to be paid.
By all means available to me, I apply meritocratic analysis to our elected politicians.
"If you want to keep the others with the knowledge and direct them to do the unwinding, then just maybe you want to retain them and in this world it might take a few more bucks than you or I make."
The reported distribution of these bonuses indicates that almost half of the $165 million went to employees who no longer worked at AIG; so you can hardly call them "retention" bonuses.
Also, the people who wound this up should have been fired and replaced with other people. I hear Lehman and Behr Stearns recently let a bunch of people go. Some of them would probably do their best to figure out how to unwind AIG's mess; cause they'd be thankful for the job. Heck, they might even work for less.
"...isn’t that 0.1%?"
You are exactly right. Kudos to you for catching and correcting my mathematical error. Thanks!
"..that suggested that not responsible for the system or how it works."
Again with the suggestions? Again that's not anything I said; nor is that my focus. I would much rather hear about how our American Capitalist, Industrialist and Meritocracy idealists are outraged, shocked or sickened by these huge bonuses being paid to poor performers.
How could the supposedly best and brightest CEOs (the best that money could buy) sign contracts that awarded employees millions of dollars in bonuses for complete and utter failure?
It's just not right!
"..go to court the worst that happens is the money has to be paid. "
Not at all. In our American courts, lawyers have to be paid for the countless hours they will have claimed to have worked (and they are not cheap) as well as investigative and research and court filing fees. Also, if the government or AIG were the losers they would likely have to pay the winners attorney fees and costs; so that would add even more expense. Going to court is a LOT more expensive.
I wonder what criteria do you use to determine that the CEO and other executives are the bet and brightest? It surely can't be simply because they are paid so much money.
My use of "suggests" is to let people know that it is my perception and that I could be wrong. You being the source are in the best position to know if I am wrong. So all the "suggests" can offer is how what you say is being precieved by one person, who is not an authority.
Capitalists who see no value in something?? Bite your tongue my friend. That statement would be blasphemy. Capitalists attach a value to EVERYTHING.
"I wonder what criteria do you use to determine that the CEO and other executives are the bet and brightest? It surely can't be simply because they are paid so much money."
Actually, I am using that criteria; and I am only using it because that is the justification provided by companies (and pretty much every capitalist defender I have ever spoken to) that platinum compensation packages are what is required in order to get and keep the "best and the brightest."
Seriously, good management wouldn't pay "best and brightest" salaries to people who weren't, would they?
"...precieved by one person, who is not an authority."
That makes two of us.
I am astounded that people actually think that wages are a fair measure of value. I have seen where people (by contract) are paid the same wage and yet do perorm the same quality or amount of work. I must be unique to believe that.
Do you think that Bush and Obama recieve the same pay for the job of President because they provide the same level of perfromance? If not, then why would you think that all CEO's and executives receiving bonuses at AIG are the "best and brightest"?
The fact that wages are NOT an actual measure of the quality or quantity of work performed is a HUGE problem for a capitalist based society. It undercuts one of the fundamental premises of American capitalism, that working hard and doing good work will always lead to success.
As for outrage, capitalists might only see a diminishing return on this bailout bonus outrage, but they are fully aware that outrage can be capitalized on. They have done it in the past; and I can specifically point to the graphic arts industries who rake in money by pumping out t-shirts and coffee mugs that ping some currently hot issue.
Fortunes are, can be and have been made solely on outrage.
The concepts of capitalism and meroitocracy are to broad and the population to diverse to hold anyone accountatable. They just aren;t black and white and have no good meausres for so people can tell if sonehting like AIG is the exception of the rule.
These
Only advice I can give right now is best effective way to have more readers/viewers is when you send out a mailing about your piece, please have a clickable link. It makes things easier. Sorry, just trying to be helpful. :o)