The other side of the AIG bonuses debacle

While many of us lean right here at Mod-Blog, we try to tell both sides of the story whenever possible. So, it was with great interest that I saw the NYTimes had posted a resignation letter from an AIG executive who was in the middle of the bonuses scandal. It gives an eloquent defense of the bonuses and is worth a read.

The profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money. I did, however, like many others here, lose a significant portion of my life savings in the form of deferred compensation invested in the capital of A.I.G.-F.P. because of those losses. In this way I have personally suffered from this controversial activity — directly as well as indirectly with the rest of the taxpayers...As most of us have done nothing wrong, guilt is not a motivation to surrender our earnings. We have worked 12 long months under these contracts and now deserve to be paid as promised. None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house.

Many of the employees have, in the past six months, turned down job offers from more stable employers, based on A.I.G.’s assurances that the contracts would be honored. They are now angry about having been misled by A.I.G.’s promises and are not inclined to return the money as a favor to you.

Does "Too big to fail" mean we're already living in a Socialist America?

Reading thru an article by Elliot Spitzer this morning, I was stricken again by the phrase "too big to fail" which has been flung around by protectionists and internationalists alike, of late. The phrase has been applied to multiple financial institutions and to the Big 3 car-makers, with the claim that if they went bankrupt that the economic ripples would become a tidal wave. Those looking to save the institutions are clear to say that they do not advocate socialism or nationalization as a cure.

But really, if we're even using the phrase "too big to fail" aren't we already socialized? A fundamental tenet of capitalism is that failure is a good thing. The ability to fail allows corrupt or inefficient companies to be eliminated without the need for outside influence. It punishes bad decisions (with bankruptcy) and rewards good decisions (with wealth). By saying a company is "too big to fail", we are (1) not allowing the market to work for us and eliminate failed companies, and (2) we are encouraging ALL companies to become "too big to fail". We have socialized our economy by deciding which companies deserve to live and die, and governmentally-enforcing which companies are on top.

It is time to start calling this "too big to fail" mentality what it is. And it is time to start thinking about allowing companies like AIG to fail. Some cancers can be treated. But others can only be cured by cutting them out, despite the pain and recovery time that the body must go thru.

Obama seeks to regulate ALL bank CEO's pay

We're all familiar now with the AIG bonuses debacle. A group of AIG employees ran their business into the ground, sought a taxpayer-funded bailout, and then walked away with millions of dollars. This is clearly an injustice, which numerous government agencies and authorities are now looking to rectify.

But now the administration is looking for authority to regulate the pay of all bank executives. This means that the government could mandate the maximum amount that your bank - whether a one branch shop or a multinational corporation - can pay the people most responsible for how your money is protected. Presumably a bg part of this will be keeping salaries to "reasonable" levels.

What will this mean? One of two things. Either (1) the smartest people leaving banking for less regulated and thus more dangerous industries (energy conglomerates, perhaps) or (2) the people really running your bank leaving "executive" positions to places on the org chart with equal power but far less accountability. Do either of these options sound good for your future financial safety?

Who is responsible for this?!

From here.

Obama tries to block AIG Bonuses

It is no surprise that the President wants to take a stand against AIG's unreasonable bonuses. But now, he apparently has ordered the Treasury Secretary to prevent payment altogether.

“In the last six months, A.I.G. has received substantial sums from the U.S. Treasury,” Mr. Obama said. He added that he had asked Treasury Secretary Timothy F. Geithner “to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole.”

Later in the day, a White House official disclosed that the administration would use a pending $30 billion installment for A.I.G. to recoup the $165 million in retention payments to A.I.G. employees in the business unit that brought the company to the brink of collapse last year.

I'll say it again. It is time to stop trying to make corrupt banking executives do the right thing. It is time to start PUNISHING these executives for what they did wrong. Pay them their millions, and then start taking it back in fines and civil lawsuits. Who would want $6.5 million, if the cost is to have to pay back $20 million?

AIG proves why they crashed - No common sense or judgement

There is a saying that was popular a few years ago: "Common sense isn't common." And you can certainly see it at AIG, where even now, millions of dollars are being paid to executives of the division which caused AIG's collapse despite unrelenting public outcry.

The bonuses will be paid to executives at A.I.G.’s financial products division, the unit that wrote trillions of dollars’ worth of credit-default swaps that protected investors from defaults on bonds backed in many cases by subprime mortgages.

The bonus plan covers 400 employees, and the bonuses range from as little as $1,000 to as much as $6.5 million. Seven executives at the financial products unit were entitled to receive more than $3 million in bonuses.

Clearly, it is time for the Federal government to stop simply playing the "carrot" of bailout money. It is time to also bring out the "stick" and begin prosecuting executives who caused these monumental collapses. If they want million dollar bonuses and AIG can't stop them, fine. But they had better be ready to pay out the bonuses as fines and in civil lawsuits.

Release the hounds, Mr. President.

We're bailing out a sinking ship

From here.

AIG hungry! Want more bailout!

Sigh. What more can be said? Sigh.

The government agreed late Sunday to provide $30 billion more to American International Group as the company prepares to report a $62 billion loss today, people involved in the discussions said.

The insurer’s quarterly loss would be the biggest in history.

The intervention marks the fourth time that the federal government has been forced to step in to help AIG avert bankruptcy.

I hate to ask as a Conservative, but would it be cheaper to just let AIG go bankrupt and promise to fund all the displaced people for 5 years via the unemployment system, when the Recession will likely have passed?

FYI, you now own AIG

It is not as crazy as it sounds. Yesterday the Fed made an $85 billion loan to AIG and now owns 80% of the company. Taxpayers own the Fed. So, you own AIG. (Yeah, I know it is more complicated than that.) I have to say that I am very uncomfortable with this approach to governing. Under a supposedly Republican administration, we now have a government takeover of one of the largest insurers in the world. Are we headed for a future with universal health care, simply because the government owns a major insurance company and decides to crush all competition? It is not as crazy as it once would have sounded.