Obama’s Proxy War On AIG
President Obama, along with his Democrat and Republican cohorts, are economic morons.
Joining a wave of public anger, President Barack Obama blistered insurance giant AIG for “recklessness and greed” Monday and pledged to try to block it from handing its executives $165 million in bonuses after taking billions in federal bailout money. “How do they justify this outrage to the taxpayers who are keeping the company afloat?” Obama asked. “This isn’t just a matter of dollars and cents. It’s about our fundamental values.”
OK, let’s discuss a bit about capitalism.
The people who are getting these bonuses are getting them because of contracts negotiated as part of their employment. They earned the bonuses on the terms of their contracts and AIG is contractually obligated to pay them their money. Let’s imagine, for example, that the Milwaukee Public Schools decided to withhold 1/3 of the teachers’ salaries because 1/3 of them failed at their jobs. Would that be OK? Or would we be obligated to stick with the contract? Yeah, I thought so.
Furthermore, bear in mind that many of the folks who earned these bonuses did so because they brought in revenue for AIG. Remember that the government pushed billions of dollars into AIG because they were “too big to fail.” Well, if they are too big to fail, shouldn’t we want them to succeed? And if we want them to succeed, shouldn’t we want them to incent their top performers to bring home the bacon? Of course, if we were living in a rational time.
In this case, we have a President who wanted to bail out AIG, but then turns around and bashes them - thus making them weaker. If I were a bit more cynical, I’d say that Obama is waging a war on business.
Oh, wait… I am that cynical.
The quote I heard from President Obama was ‘will do all I can legally to keep them from getting that money’ or words to that affect.
If AIG is contractually obligated to pay - and I think they are, but I am no expert - then the man has a clear out: he will indeed do all he can legally, which isn’t much.
The rest is noise and pandering to the masses. He’s a politician, remember?
Posted by Brian Dunbar on March 17, 2009 at 0055 hrs
Don’t you generally argue that labor unions need to regenotiate their contracts for the good of the company Why is the contract suddenly inviolate when the employee in question a corporate executive?
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 0604 hrs
Economic moron?
What about the people at AIG who expect bonuses who drove the company into the group so spectacularly that is one of the worst collapses in American business history.
So this is your idea of success?
And your example of teachers with MPS does not compare. Your priorities. Wow!
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 0605 hrs
That’s the thing, RS, I thought we wanted this company to succeed? I thought that this company was too big to fail?” If that’s the case, then isn’t Obama, the minority leader of the Senate, and the other AIG bashers shooting all of us in the foot by slamming them? Do they not think that vilifying AIG might further hurt the company? Won’t those bonuses be circulated back into the economy? Isn’t that what we want?
I was against the bailouts all along for exactly this reason. We don’t need politicians with alternate agendas dictating the business practices of American industry.
Posted by Owen on March 17, 2009 at 0703 hrs
Leave AIG alooooone!!
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 0717 hrs
I hate to distill things down to utter simplicity, but it would be so pro forma to come up with a incentive package that would reward AIG employees for pulling them out of the muck.
These people on the other hand were getting bonuses not just for performing below par but spectacularly bad. Where your MPS example doesn’t work is these teachers were not getting millions of dollars, and that they have to work with what they’ve got. The American financial industry on the other hand took outrageous risk.
In the coming months everyone is going to have to make sacrifices and buckle down. When we create this two tiered arrangement this country drifts away from being America.
You want an entire class of workers in the auto industry to essentially fry for the bad decisions of their management, but when it comes to people who truly made bad decisions that might have cost you money, they somehow get a pass.
And it is your money—80% of AIG at this point. I think they have to listen to us.
I’m not grooving on the idea of torch lit pitch forked mobs. But these bonuses send a bad message of entitlement—massive entitlement—at the far end of the scale.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 0728 hrs
Keith - how do you know that the people getting these bonuses are those who ran AIG into the ground. I want a list of people and the problems they caused. AIG is a huge company and not everyone there is part of the problem.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 0734 hrs
Keith,
If you allow the government to arbitrarily void a contract because “it doesn’t like it”, you open yourself up to the possibility of government voiding *any* contract for any reason whatsoever. Good luck with your rule of law at that point.
If you wanted to limit the bonuses that should have been specified *up front* before the money was offered to AIG. As it is, there were no strings attached. The bailout was a terrible idea from the beginning, but now people are seeing why.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 0741 hrs
If the bonus were for At-Will employee’s, easily remedied, you just don’t pay it, or you fire the employee. Issue is the contracts. Depending on the contract, a bonus doesn’t have to be paid based on profit, or performance, could be that they showed up 1/2 the time, they wore blue shoes, whatever. Did any of the Packers that earned bonuses last year give them up because the team went 6-10?? They are still getting taxpayer money? It is what it is, both sides signed it. I would hope that the contract employee’s, seeing that the bad publicity is going to hurt their ongoing business, would be open to re-negotiating, but they don’t have to.
Is Obama pandering? Probably, but also probably more along the lines of not having all the information before yelling and screaming. Like it is quoted, he will “legally” do what he can do, but unless they are going to nationalize the company, or that their were some strings attached to the bailout money that we are not aware of yet, not a whole lot he can do except say “please”.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 0745 hrs
Note, I said set bonuses up as incentive packages, not entitlements.
And yes I agree. There should be a lot more strings attached starting here.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 0750 hrs
The selected outrage is kind of funny. What about those bonuses for the the big libs from Fannie Mae and Freddie Mac? Obama???? Frank????? Oh, it’s a liberal on the receiving end, so it must be ok. How about all the bonuses government employees get. Figures say that up to 2/3 government employees get government bonuses and the Feds have been doing such a great job, haven’t they? Any complaints about that? Pretty sure that the bonuses out do AIG’s. Nah. It’s really about petty jealousy and a time for policitical cheap shots.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 0759 hrs
Like so many issues our government creates, we are left to quibble over the results and the implications of bad governing instead of dealing with the bad governing itself.
Bailing out a private industry is bad governing. Bad governing results a whole bunch of ramifications and spin-off issues that are IMPOSSIBLE to justify or make heads or tails of. The water of right or wrong has been so muddied that there is no agreeable answer.
Without bonuses, companies might lose valuable producers and do worse because of it. Then again they MIGHT NOT. The job market for mid and upper level financial services executives who were part of failing companies may not be all that great.
I have no sympathy for anyone who jumped in bed with a prostitute and woke up with an itchy crotch. AIG can cry me a river. They should have never been bailed out in the first place. If not for bad governing we wouldn’t be asking ourselves if or WHO deserves a bonus.
As a lesson to AIG and a deterent to ANY other company who might think “free government money” is a great idea, I am GLAD to see the government digging its dirty little controling hands into private industry. Learn your lesson boys. Learn em good. If all this government money came NSA (no string attached) the line of beggars at the government tit would only grow.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 0914 hrs
The bonuses have to be paid. It’s part of their contract. If you had a bonus coming to you that was stipulated in a contract - and you didn’t get it - you would sue and you would win.
The thing that people don’t understand is that AIG is basically a very solvent company. The only reason for the “bailout” was that on paper they looked like they were doing poorly. The bulk of the company is very profitable. When you get upside on things (like your house) you look a lot poorer than you really are.
This whole “outrage” over AIG is just show-boating for the cameras. Obama knows there isn’t anything he can do but pander to the media..
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 0914 hrs
The bonuses have to be paid.
Pardon my simplicity, but it appears that this past-tense: the bonus monies _have_ been paid.
What the government is talking about doing getting the money back.
Regardless of how you feel about AIG- do you really want the government to get into the business of confiscating money from Group A, merely because they are unpopular?
Posted by Brian Dunbar on March 17, 2009 at 0923 hrs
The bonuses have to be paid. It’s part of their contract. If you had a bonus coming to you that was stipulated in a contract - and you didn’t get it - you would sue and you would win.
Agreed… And with a phone call Obama just needs to have his pawns introduce legislation in congress that any company that accepts government funding accepts restrictions which might include the ability to cancel contracts and the law would change.
The thing that people don’t understand is that AIG is basically a very solvent company. The only reason for the “bailout” was that on paper they looked like they were doing poorly.
Great… Give the money back…
This whole “outrage” over AIG is just show-boating for the cameras. Obama knows there isn’t anything he can do but pander to the media..
Oh there is PLENTY he can do. You are way underestimating the power of legislators who have no principle.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 0931 hrs
Regardless of how you feel about AIG- do you really want the government to get into the business of confiscating money from Group A, merely because they are unpopular?
You are mis-stating the crux of the issue here.
This is not about being unpopular. Its about freedom. And the lesson to be learned which EVERYONE is overlooking because they want to bitch about Obama or play the “greed” card against big companies, is that WITH GOVERNMENT MONEY comes STRINGS ATTACHED.
So to the people who are bitching about Obama and his plebian understanding of economics, YOU ARE MISSING THE POINT.
To the people who are bitching about greedy companies and playing the class warfare card. YOU ARE MISSING THE POINT.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 0935 hrs
xxpilot,
Yeah, there are strings…Too bad the government didn’t specify what they were before they handed the money out.
If they try and do anything about the money, I’m pretty sure that legally there’ll be hell to pay.You’ve heard the advice before I’m sure, but “get it in writing”. That goes for the government too.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 0941 hrs
Too bad the government didn’t specify what they were before they handed the money out.
To anyone who didn’t have the foresight to know that you give up your freedom when you kneel down in front of the government tit, shame on them, and I hope they learned a lesson.
There is no free lunch, everything has a price.
Bailouts come with a price.
Free healthcare comes with a price (monitarily and freedom wise)
The question is what do people value more… their freedom or a handout.
Would Americans rather “support themselves” and enjoy freedom, or would they rather “be supported” and willingly sacrifice freedom for it.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 1002 hrs
xxpilot,
Oh, we’re in agreement.
The first thing that I thought when I heard about all this is “well, what did AIG expect?”.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 1005 hrs
Yeah, to be honest, I think Obama is unkowningly going to ‘open people’s eyes’ to just what happens when you suck the government tit.
He thinks he’s scoring political points with his base dropping “king obama’s fist” down on these companies but I think people will realize there is no free lunch.
Even little companies like Associated Bank that had to cancel an employee “reward” trip because of public outcry… I have a strong feeling from the top down, ALL the people at Associated Bank from the execs to the loan officers or whomever was going on that little reward drip have a new appreciate for how government will control you when you take their money. (and associated bank didn’t even need the money from what I read)
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 1012 hrs
Crainer
Firing an at will employee, does not terminate that employees right to recieve any bonuses they have earned to date. It would be a really sad world if you could fire your way out of your obligations.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 1032 hrs
Doesn’t the government now own 80% of AIG? Then, as with anyone who owns 80% of any company, the government can and should be able to throw its weight around.
If AIG is “too big to fail” then it’s probably too big, period, and should be broken up. Sell off the parts that owed bonuses to employees who probably aren’t worth keeping anyway.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 1144 hrs
They earned the bonuses on the terms of their contracts and AIG is contractually obligated to pay them their money.
This doesn’t mean jack. What they are obligated to pay isn’t always what is actually paid. When a compahy’s in trouble, there’s renegotiation all around. Unions. Creditors. People take less than they were contractually obligated to all the time. ALL the time. Besides, we’re talking insurance, here. These guys are experts at stiffing people out of what they are “contractually obligated” to pay. Gimme a break.
You want to make an argument that they shouldn’t renegotiate? You want to make an argument that it’s counterproductive to the future success of the company? Fine. But don’t give me the contractually obligated BS. That I don’t accept.
Posted by scott on March 17, 2009 at 1153 hrs
scott,
I’m pretty sure that unless the employees think it’s worth renegotiating, that you won’t get anywhere. If they’re denied their contractual pay, then they sue. If they sue, they win and in Conn. it’s up to 2x the amount owed. So, you know, good luck with that.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 1306 hrs
I could be wrong here, but didnt Senator Chris Dodd, but an amendment to the 2nd half of the TARP bill that bonus contracted to before receiving the TARP funds would be honored? I will try to find a link to this.
I am a conservative, and I think it is double standard to say that the AIG people taking bonus had to be paid because of a contract but then we want the UAW unions to change theirs. AIG should not have been allowed to pay out bonuses, period.
This fake outrage by Obama is amusing. If he did not know that this could happen then he is more of an idiot than I thought he was, as most of the other outraged congress people in Washington.
This is just another reason why all of these government bailouts are a mistake. Obama is just as culpable as Bush regarding these.
On another, note, didnt Obama laugh at McCain for saying that the economy is fundamentaly strong. Sunday, one of his top economic advisors says the same thing that McCain said. I thought Obama was against taxing health care benefits, but now I guess it is okay as long as congress iniates it.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 1441 hrs
I don’t see the double standard at all. The unions wanted the bailout of GM because the alternative was a bankruptcy under which their contract could be renegotiated. I’m sure the employees of AIG felt the same way, as witnessed by their accepting the bonus.
Neither company should have been bailed out and neither company is on a firm legal footing for unilaterally renegotiating contracts. The acceptance of government funds by the companies doesn’t change this. The employees, after all, are not signatory to any agreement between GM or AIG and the government.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 1457 hrs
I also don’t see the double standard. They can and certainly should renegotiate future salary and bonuses with the AIG folks, just like GM is doing with the auto makers. But no one is asking the UAW to return their inflated benefits and wages from prior years, which is what these bonuses are. Do I think they are excessive…probably….do I think corporate bonus structures need some sanity, certainly. But all of that aside, you can’t change someone’s employment rules after the fact. I’d certainly sue if my employer decided they paid me too much for 2008 and wanted some back. They have every right to change those terms going forward, and I can either accept that or move on.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 1508 hrs
I still think there is a double standard, but we can agree to disagree. I do agree that the government cannot and should not go back and try to get the money back, unless the money was paid illegally or fraudentally. Since the government owns an 80% interest in AIG they may have a standing to try and prove that.
If I worked at AIG in an upper management position, I do not think I could look in the mirror everyday if I took the bonus.
I think all of this “so called” outrage is a distraction by Obama. I think he knew damn well that these bonuses were going to be paid, as did Chris Dodd and the other jokers in congress. Obama is sure not the same person that we saw on the campaign trail as we see now. He is not some new political figure, with a goal of changing how Washington does business. Can we do the election over again?
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 1527 hrs
This is political pandering no matter how you slice it. When the fed did the bailout they bought the who cow, contracts and all. This is akin to conservatives asking for union contracts to be torn up, even if the dollar amounts are astronomically different. Contracts are contracts. This is what the fed took on, playing to the masses doesn’t solve anything.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 1533 hrs
If Obama and his cohorts are economic morons, I assume that most of the rest of the AIG apologists here are economic geniuses. Multi-millionaires maybe.
You guys really know your stuff!
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 1706 hrs
The AIG people are the ones getting the bonuses from the government - I’d call them the geniuses…
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 1823 hrs
Those of you who blame both parties in Congress have a point.
But there are two questions:
1) There is good reason to believe that AIG made these “contracts” when they were in no financial position to honor them, short of a bailout. Does that mean that since the bailout was intended to giveth, the government can taketh away?
2) Why is are these contracts sacrosanct, while some of you were talking about tearing up UAW contracts as part of a much tinier bailout, except of course irrational union hatred?
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 1918 hrs
Keith,
First Owen posts positive things about political compromises, then you suggest perhaps the Democratic party may be at fault for something.
I guess our warm weather must be the result of heat escaping from hell, resulting in signifiant cooling there.
Anyway I agree with your point about the seeming inconsistency regarding these cotracts vs. auto union contracts, however I seem to remember that conservatives generally wanted contract changes going forward, which would be different than changing a contract provision already granted.
Small difference but important nonetheless.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 2027 hrs
There is no particular reason to believe these bonuses were promised at a time AIG was in no position to honor them, nor do we know the terms of the particular bonuses.
The contracts are sacrosanct because the bailout has already occurred and the conditions of the bonus were achieved.
The government has no contract with AIG employees. It’s agreement is between it and AIG. It has no more authority to take these bonuses away or to undo them than it has to rob people on the street.
The process by which these agreements can be broken is called bankruptcy. The reason AIG was bailed out, and the reason GM was bailed out was to avoid bankruptcy and the likelihood that bonuses like these and union contracts would be voided in the bankruptcy. Note that when the possibility of a bailout conditioned on a renegotiated contract was mentioned the union quickly soured on the idea of a bailout.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 2030 hrs
Owen said,
If I were a bit more cynical, I’d say that Obama is waging a war on business.
This is patently absurd and you know it. If he were waging war on business, he would have immediately nationalized AIG and several other firms that are on the brink. His choice of treasury secretary wouldn’t have been the first choice of Wall Street.
You said rightly in your rant about the letter on the school referendum that disagreement on a policy issue doesn’t equate to outright hatred. Consider the argument you made in that thread and then check for a bit of wood in your eye.
He’s guilty of pandering, just like every other yahoo on the Hill. At least when Grassley does it, he does it with real flair.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 2032 hrs
I think we should be looking into what happened to the billions of dollars that was sent to AIG that went to foriegn banks, not about these stupid bonuses. It is hear were the Government failed to be a watch dog. The WSJ had a great article about this.
Posted by .(JavaScript must be enabled to view this email address) on March 17, 2009 at 2118 hrs
War on business. LOL!
Designing a crappy economy has was done over the past eight years. Now you’re talking.
Did you also notice that a lot of the piling on was coming from GOP members of Congress. They know tar and feathers when they smell it. But over here, irresponsibility and entitlement only applies to minorities and the poor. I’d like to find out from Charlie why the 50 rules and other
Posted by .(JavaScript must be enabled to view this email address) on March 18, 2009 at 0816 hrs
I’ve been watching off and on the “grilling” of Liddy on Capitol Hill today. I’ve worked in the insurance industry for 30 years and almost went to work at one time for AIG. I’m not surpirsed at ANY of this.
AIG has always had a corporate culture based upon arrogance, greed and deception. “Cooking” their corporate results is nothing new, going back to the early nineties. This situation will continue to get worse until AIG is finally forced to disclose their actual exposure/losses and how they have used the money previously received from the government.
As far as their “contractual” obligation to pay these bonuses; that’s pure bullshit. AIG is notorious for denying or delaying payment of claims to or on behalf of their insureds, basically invalidating their own contracts. I find it amusing that they now want to hide behind the veil of legal obligation.
This is a train wreck in slow motion.
Posted by .(JavaScript must be enabled to view this email address) on March 18, 2009 at 1433 hrs
Dodd is not the only Democratic senator denying any culpability. Sen. Max Baucus of Montana is the chairman of the Senate Finance Committee and an appointed conferee on the stimulus bill. But on Tuesday, he said the bill was written mostly by Senate and Treasury staffers, who were responsible, he said, for changing the language.
“This was a huge bill,” Baucus said. “We agreed on structure. Then when staffs and Treasury get in the room and actually write it, that’s where it got dropped. And frankly, it was such a rush, talking about the stimulus bill right now, to get it passed, I did not have time, other conferees did not have time to address many of the provisions that were modified significantly. We do the best we can, but we missed that stuff as a result.”
http://www.abcnews.go.com/Politics/story?id=7121125&page=1
This is the root of our troubles today. A larger problem than the “R” tag or the “D” tag. The incompetence or lack of controls and processes/procedures that allow unelected staffers to draft legislation and then not be properly vetted before becoming law is disgusting. What are these officials doing with their time that they can’t do their jobs properly? I wish the media would dig into this further rather than end an article with it.
Posted by .(JavaScript must be enabled to view this email address) on March 19, 2009 at 1322 hrs
What are these officials doing with their time that they can’t do their jobs properly?
You’ve seen draft legislation? There is a lot of it. And it’s all dry and legalese.
If the Senator spent 12 hours a day doing nothing but reading everything he’s signing, he’d never do anything else. Plus he wouldn’t be able to read it all.
This isn’t to excuse the Senator for not reading it - but only pointing out it’s not possible for him to read anything but the staff prepared summary: there are not enough man-hours in the week for 100 senators to read and understand what they’re signing.
It’s our government, it’s out of control and we’re to blame.
Posted by Brian Dunbar on March 19, 2009 at 1406 hrs
It’s our government, it’s out of control and we’re to blame.
Absolutely. So lets fix it!
Posted by .(JavaScript must be enabled to view this email address) on March 19, 2009 at 1408 hrs
Absolutely. So lets fix it!
Yeah, but if we’re busy fixing the government, when will we have time to snark on blogs?
Posted by Brian Dunbar on March 19, 2009 at 1417 hrs
Yeah, but if we’re busy fixing the government, when will we have time to snark on blogs?
Maybe we should hire staffers to do that, with us only required to perform a cursory glance before clicking “Submit”?
Posted by .(JavaScript must be enabled to view this email address) on March 19, 2009 at 1432 hrs
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