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Chaos at AIG

 
 
Reply Tue 17 Mar, 2009 09:05 am
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/16/AR2009031602961_pf.html

Quote:

A tidal wave of public outrage over bonus payments swamped American International Group yesterday. Hired guards stood watch outside the suburban Connecticut offices of AIG Financial Products, the division whose exotic derivatives brought the insurance giant to the brink of collapse last year. Inside, death threats and angry letters flooded e-mail inboxes. Irate callers lit up the phone lines. Senior managers submitted their resignations. Some employees didn't show up at all.

"It's a mob effect," one senior executive said. "It's putting people's lives in danger."

Politicians and the public spent yesterday demanding that AIG rescind payouts that they said rewarded recklessness and greed at a company being bailed out with $170 billion in taxpayer funds. But company officials contend that the uproar is scaring away the very employees who understand AIG Financial Products' complex trades and who are trying to dismantle the division before it further endangers the world's economy.

"It's going to blow up," said a senior Financial Products manager, who spoke on condition of anonymity because he was not authorized to speak for the company. "I have a horrible, horrible, horrible feeling that this is going to end badly." ........
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Type: Discussion • Score: 13 • Views: 4,018 • Replies: 68
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Cycloptichorn
 
  1  
Reply Tue 17 Mar, 2009 09:39 am
Serve's em right.

AIG ought to be firing these chumps and daring them to sue; not supporting their pay bonuses and acting as if they can't do anything about it.

Here's Krauthammer on this issue - I know you guys love him -

Quote:
Well, I think the difference with AIG and the auto companies is that AIG has its tentacles and its loan and obligations in so many places, so many other financial institutions, so many countries, that there's really a threat to the world economy.

That's why it's being rescued, not because there is a virtue or goodness among the dealers and the bankers among them. And that doesn't apply to the auto companies.

But look, this is not so much an economic issue as a psychological and a political issue. Economically, if you add up all the bonuses, it's less than 1/10 of one percent of the bailout to AIG alone, so it's lunch money.

Psychologically, it's important because there's outrage in the country, and, as Mort indicated, unless there's an appeasement in the anger in the population who are going to have to support the next bailout, which is going to be a trillion dollars, the money won't be made available, Congress will deny it.

So that's why you get the president heaping opprobrium on these miscreants who made the bad deals and now are getting the bonuses.

I'm all in favor of keeping this heaping opprobrium. I would deny them the bonuses if possible. I would be for an exemplary hanging or two. Have it in Times Square, invite Madame Defarge. You borrow a guillotine from the French and we could have a party.

If that's what it takes to maintain popular support, let's do it. But it's not going to change anything economically.


Cycloptichorn
Linkat
 
  1  
Reply Tue 17 Mar, 2009 10:13 am
@gungasnake,
"But company officials contend that the uproar is scaring away the very employees who understand AIG Financial Products' complex trades and who are trying to dismantle the division before it further endangers the world's economy."

Well you stupid boneheads - you should have thought about that before giving out such bonuses. What the h*ll did they think was going to happen? Everyone would sit back and be passive about it?

"It's going to blow up," said a senior Financial Products manager, who spoke on condition of anonymity because he was not authorized to speak for the company. "I have a horrible, horrible, horrible feeling that this is going to end badly
0 Replies
 
Linkat
 
  1  
Reply Tue 17 Mar, 2009 10:17 am
@Cycloptichorn,
"But look, this is not so much an economic issue as a psychological and a political issue."

Of course in a couple of ways it is psychological. A good portion of the stock market is confidence in the financial system. A failed company paying out taxpayer money in the form of bonuses is not going to instill much in the way of confidence.

And rewarding immoral behavior and bad performance in the form of bonuses also has a psychological issue.
0 Replies
 
spendius
 
  1  
Reply Tue 17 Mar, 2009 10:18 am
@Cycloptichorn,
Quote:
AIG ought to be firing these chumps and daring them to sue; not supporting their pay bonuses and acting as if they can't do anything about it.


That's very silly Cyclo as the article gunga posted explained. Why are you suggesting things to make matters worse? We need them to provide as soft a landing as possible. It would be like making a congressman captain of a shuttle flight with no training.

Are you bidding for leadership of a lynch mob?

High intelligence combined with evolutionary cunning will get round any set of rules. Even Constitutions. Always have and always will. It's the price we pay for our modicum of what is called freedom.

Aren't you one of those who wishes to see lessons in evolutionary cunning brought into our classrooms where the highly intelligent masters of the global financial system of the future are soaking up info like sponges even if most of the class are letting it all go in one ear and out the other. The swots.

You have to laugh. The only kids interested in evolution are the quick learners so bringing it into the classroom is just for them.

Far better surely to inculcate the Christian values in the hope that some of it might rub off on those few.

Mort and Krauthammer are in the entertainment business. The more intelligent and acumenical on financial affairs they can make you feel the more you buy their outpourings. A sort of symbiosis like that bird which picks stuff out of rhinos teeth. You get to sound commanding and authoritative in social gatherings.

Apart from ones in my pub I mean.
0 Replies
 
Woiyo9
 
  1  
Reply Tue 17 Mar, 2009 10:36 am
All the govt had to do when they first bailed out AIG was condition the bailout to avoid these payments.

Geitner, Paulson and everyone involved in the initial bailout, came from the same "country club" and had to know these payments existed.

This is just further evidence that Obama and Geitner just may be in over their head.

The politicians now screaming were not heard when they all approved the initial bailout.

Your Govt "inaction".
0 Replies
 
boomerang
 
  2  
Reply Tue 17 Mar, 2009 10:39 am
I'll admit I'm a dim bulb when it comes to economics but I really don't get this:

Quote:
scaring away the very employees who understand AIG Financial Products' complex trades


Am I to believe that there is only a few people, out of all the people in the world, who understand this stuff and that they all already work for AIG? That if these few people are scared away that nobody else anywhere will be able to make sense out of it?

I have pretty serious doubts that these people knew what they were doing anyway but now we're all supposed to be held hostage by them and sit quietly until our abductors save us.
Linkat
 
  1  
Reply Tue 17 Mar, 2009 10:41 am
@boomerang,
I work in the investment industry - there is certainly many others that understand (not me) these complex investments. And considering the demise of Lehman Brothers and other investment companies, I am sure there are many waiting to be hired.
0 Replies
 
Linkat
 
  1  
Reply Tue 17 Mar, 2009 10:47 am
@boomerang,
Its they don't want everyone else to know how royally the f*cked up. Bring in some one that knows and understands these products and clean up the mess they made.

Like Boom said - I wouldn't have the strongest confidence in the individuals that screwed this up are the right ones to resolve the problems (must less reward them for screwing us all).
Woiyo9
 
  1  
Reply Tue 17 Mar, 2009 11:33 am
@Linkat,
Based upon the performance of Obama's team, how much confidence do you have in them to fix this.
boomerang
 
  1  
Reply Tue 17 Mar, 2009 11:58 am
@Linkat,
Quote:
Its they don't want everyone else to know how royally the f*cked up.


That's certainly the impression I get, and I'm sure the impression all the other Mr. and Ms. Average gets. It just seems like they're hiding something.

I'm curious too as to how contractual bonus' work. Wouldn't they be based on preformance? It doesn't seem that these employees rate any kind of bonus.


As to Obama -- I'm not a member of his fan club but I certainly don't think this all happened in the last two months and I certainly didn't expect him to fix it in a couple of days.
DontTreadOnMe
 
  1  
Reply Tue 17 Mar, 2009 12:12 pm
@Woiyo9,
Woiyo9 wrote:

Based upon the performance of Obama's team, how much confidence do you have in them to fix this.


far more than i ever had in the last administration to get anything done correctly. and not without reason.

you and some of your pals are still more interested in seeing obama hung out to dry than you are seeing things get better.

but you cannot muster up an iota of anger towards the previous administration and party that just sold your ass down the river to the multinational deregulated freemarket crowd that couldn't give a rat's fuzzy about you, me or the united states.

that kinda sucks.

but be of good cheer. maybe obama will fail and then you can rejoice in america's new, "special" relationship as a wholly owned subsidiary of the republic of china.

hope ya like noodles...
DontTreadOnMe
 
  1  
Reply Tue 17 Mar, 2009 12:18 pm
@boomerang,
boomerang wrote:

Quote:
Its they don't want everyone else to know how royally the f*cked up.


I'm curious too as to how contractual bonus' work. Wouldn't they be based on preformance? It doesn't seem that these employees rate any kind of bonus.


i think it is similar to a signing bonus. "come with us and we guarantee that you will get this amount each year above salary".

"contracts be damned. you come and scuttle my company and still want a bonus? fine. consider it a bonus that i don't take ya up to the roof and throw you over, ya mutt."

i dunno, from my experience with corporations, if the big boys were on performance based pay, most of them would be living in an old refrigerator box.
Woiyo9
 
  1  
Reply Tue 17 Mar, 2009 12:50 pm
Bonuses an $1.2B Outrage, But Bailouts of AIG's Trading Partners 1000 Times Bigger
Posted Mar 17, 2009 02:02pm EDT by Aaron Task
Related: GS, AIG, BAC, C, DB, BCS, XLF
As outrage over the AIG bonus scandal continues to grow, it's dawning on a number of Americans that the real outrage is the backdoor bailout of AIG's counterparties, including Goldman Sachs, Bank of America/Merrill Lynch, Citigroup and a host of European banks.

As discussed here yesterday, while the $1.2 billion of AIG bonus money is offensive, it pales in comparison to the over $100 billion of bailout money that went in the front door of AIG and right out the back door to its counterparties.

I don't often or always agree with The Wall Street Journal's opinion page but they are on to something here: "President Obama joined yesterday in the clamor of outrage at AIG for paying some $165 million in contractually obligated employee bonuses. He and the rest of the political class thus neatly deflected attention from the larger outrage, which is the five-month Beltway cover-up over who benefited most from the AIG bailout."

"Cover-up" is a strong word but I would agree the outrage over the AIG bonuses has served as a convenient distraction to this weekend's revelations about which AIG counterparties benefited from the bailout, and to what levels.

The whole sordid episode raises several questions that need to be addressed by politicians and policymakers:

* It's about six months since the first AIG bailout; why has it taken this long for the names of these counterparties to be revealed? (Related: Is Barack Obama really being more transparent than his famously secretive predecessor?)
* Why wasn't it explained clearly to the American people that "rescuing AIG" really meant "bailing out its counterparties"? And, if so, why didn't we just give the money directly to AIG's trading partners?
* Why is the U.S. government continuing its policy of "making whole" counterparties and institutional bondholders of bailout recipients, instead of requiring those investors (who entered into those deals freely and without a government guarantee) to at least take a "haircut" and share in the taxpayers' pain?
* Why didn't former Treasury Secretary and former Goldman Sachs CEO Hank Paulson disclose that his former firm would be one of the prime beneficiaries of the AIG bailout?
* When is Tim Geithner, reportedly the prime architect of the AIG bailouts (among others), going to take responsibility for this disaster?

http://finance.yahoo.com/tech-ticker/article/210269/Bonuses-an-1.2B-Outrage-But-Bailouts-of-AIG%27s-Trading-Partners-1000-Times-Bigger?tickers=GS,AIG,BAC,C,DB,BCS,XLF
0 Replies
 
Woiyo9
 
  1  
Reply Tue 17 Mar, 2009 12:52 pm
@DontTreadOnMe,
Why are you binging up Bush?

I am very interested in Obamas success but exactly what has he and his team done to give me any confidence he can put the right people in place to fix this mess?

Tell me ????

Woiyo9
 
  1  
Reply Tue 17 Mar, 2009 12:57 pm
Lawmakers outraged at bailed-out American International Group's move to pay $165 million in executive bonuses are turning their fire on the Obama administration, asking why top officials didn't act to prevent the pay-out earlier.

Though President Obama pledged last month to crack down on executive pay for companies that take "exceptional" amounts of federal bailout money, the administration now seems to be struggling to take action to retrieve the bonuses AIG says it is contractually obligated to pay.

This, despite the fact the government, with its $170 billion in assistance, holds about an 80 percent stake in the company, and just pledged another $30 billion.

"It seems like they are an administration in disarray," House Minority Whip Eric Cantor, R-Va., said Tuesday.

Sen. Richard Shelby, R-Ala., suggested Treasury Secretary Timothy Geithner does not have a handle on the AIG matter.

"We need to find out when these bonuses were approved and more than that, when they were contracted for. And who knew this?" said the ranking Republican on the Senate Banking, Housing and Urban Affairs Committee. "Did Secretary Geithner know and look the other way?"

The senator, a harsh critic of the Treasury's bailout program known by its acronym "TARP," or Troubled Assets Relief Program, said members who voted for the program bear some blame, but he put much of the fault at Geithner's feet.

"There's either competence or incompetence going on here, and it looks like a lot of incompetence," Shelby said, adding: "I think this is the tip of the iceberg."

"I think Secretary Geithner does not have his hands around the details of this, and if he does, then there's a lot more questions to be asked," he said.

Shelby, interviewed on CBS' "Early Show," raised the possibility of resignation, saying: "I don't know if he should resign over this. That's up to -- you know, he works for the president of the United States."

http://www.foxnews.com/politics/first100days/2009/03/17/lawmakers-turn-obama-administration-aig-bonuses/
0 Replies
 
McGentrix
 
  1  
Reply Tue 17 Mar, 2009 01:02 pm
@Cycloptichorn,
*sigh*

I agree with Boortz, whom I also like...

Quote:
The American people have $165 billion invested in AIG. We don't have the money, so we are going to have to borrow it. From who? Well, perhaps from China! Maybe China will buy the treasury notes issued to back up this newly printed currency. So ... who do you want to pay this money back? How about your children and grandchildren? That would be just swell, wouldn't it? AIG fails, the $165 billion is shot to hell, and there's nobody around to pay it back except for future generations of Americans through increased taxes.

There is another option. Why don't we let AIG pay it back? Why don't we stand back and let AIG take reasonable steps to turn its fortunes around and once again become a profitable financial powerhouse? Certainly you see no problem with that! The question, of course, is just how do they do that? They do it with management expertise, that's how. They do it by retaining the best minds they can and putting those minds to work on solving AIG's problems. There is no shortage of competition for the type of business minds that can change the fortunes of AIG. There are other companies out there who could use that help .. and who aren't under Barney Frank's thumb. Maybe it's just me, but I don't see the efficacy in allowing the best financial minds out there to gravitate toward companies that haven't received TARP funds while the companies that have borrowed so heavily from the taxpayers make do with second-rate executive talent. So how do the companies with the bailout funds keep the executive talent that will likely lead them to profitability? Well, they pay them! That's how. They live up to their contractual obligations. If they don't pay them, someone else will.

The issue here is not that AIG paid bonuses ... bonuses that amounted to less than 1/10th of one percent of the bailout money it received. The issue should be to whom those bonuses were paid. If they were paid to the perps who put AIG into this mess - and that's supposing the mess was caused by AIG execs and not by the federal government essentially forcing AIG investors and subsidiaries into making and buying hideously bad mortgages - then we have a problem. If the bonuses were paid to people who are working hard to solve AIG's problems and achieving some success, then no problem.

Let's take this angle. When was the last time you looked at the retirement plans for members of Congress? Some of these congressmen created the Community Reinvestment Act monster that coerced banks and lending institutions into making many of these subprime mortgages. These congressmen urged Fannie and Freddie to reduce their credit guidelines so that these quasi-government agencies to buy most of those bad loans. These congressmen and senators are going to retire with fat retirement funds that are completely safe while tens of millions in the private sector will retire with retirement funds decimated by this economic meltdown. Much of the problem was caused by the Barney Franks in Washington .. why aren't they paying the price like the rest of us?

New York Attorney General Cuomo wants a list of people who got those AIG bonuses. What? Now we have crimes being committed here? The attorney general is going to investigate people who receive payments pursuant to a contract? Cuomo - clearly playing to the political message here -- says that "we owe it to the taxpayers to take every possible action to stop unwarranted bonus payments to those who caused the AIG meltdown in the first place." Cuomo is going to investigate who received the bonuses and who developed the bonus plans.

What in the hell is going on around here? Are we going to adopt a standard where contracts are only enforceable if they're popular with political class and the public? If that contract is unpopular what are we going to do? Sic the attorney general after the parties if they live up to its terms? Do you know where this is going to go? Well, what if you were some sort of a financial genius, and AIG or some other institution receiving bailout funds wanted to hire you to help turn them around. You're going to think: "Hmmm ... sounds like a nice opportunity. I can help those people and make some pretty good change in the process .. but do I want to be the subject of a criminal investigation by the attorney general if I accept a bonus? Do I want the president calling me greedy and telling the congress to pull out all of the stops to take the money I have earned back? I think not. I'm going to stay right where I am."

A lot of what we're seeing here is the anti-capitalist, pro-government left seeing an opportunity to demonize the private sector. The same politicians who are so adept at getting the public whipped into a frenzy over these bonuses seem somehow unable to gin up any degree of outrage over taxpayer money being spent on lobster sex and tattoo removal. At least there's a chance AIG is going to pay the money back. Let's see if some gang-banger gone straight offers up the money spent to remove his tats.

I, for one, am a lot more curious as to what Barney Frank's lover was up to at Fannie Mae while he was busy protecting that institution from President George Bush's attempts at reform, than I am in sending the New York Attorney general on a witch hunt for executives who received bonus payments pursuant to a contract.


If we expect these companies to survive, and by giving them the money we did I would expect that to be the case, they need people to run the company. I don't really want the kind of people that will work for low pay in the jobs of fixing something that is very obviously broken. At the same time, I doubt the people that broke it will be the ones fixing it and I doubt they are the ones getting the "bonus" money.

Now, when you get a list of people that caused the problems at AIG, please post it. I'd like to see the list of names before I start demonizing every employee at AIG like you guys are doing.
Linkat
 
  1  
Reply Tue 17 Mar, 2009 01:03 pm
@Woiyo9,
There is no way to know for sure. I did not vote for him, however, I would prefer that new individuals (at least some) were hired for this job rather than keep the status quo of those who we at least know screwed this up.
0 Replies
 
Linkat
 
  1  
Reply Tue 17 Mar, 2009 01:05 pm
@DontTreadOnMe,
Wasn't this some sort of retention bonus? I thought it was paid to keep the same bozos in their jobs.

I could see keeping some - as you want to have details of what was going on and how the systems work, etc. But it would have been better to hire some additional new leaders.
0 Replies
 
Linkat
 
  1  
Reply Tue 17 Mar, 2009 01:10 pm
@McGentrix,
"The issue here is not that AIG paid bonuses ... The issue should be to whom those bonuses were paid. If they were paid to the perps who put AIG into this mess - and that's supposing the mess was caused by AIG execs and not by the federal government essentially forcing AIG investors and subsidiaries into making and buying hideously bad mortgages - then we have a problem. If the bonuses were paid to people who are working hard to solve AIG's problems and achieving some success, then no problem."

I agree with this, however, I thought (and I could be wrong) that the individuals receiving these bonuses were the same ones that caused the problem. That is what the uproar is about.
 

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