A.P. reports:
The Associated Press has learned the Obama administration is in talks with the remote South Pacific island nation of Palau (PA’-lau) to resettle some or all of 17 Chinese Muslims now held at the Guantanamo Bay detention facility. . . The officials spoke on condition of anonymity due to the delicacy of the negotiations. They said the U.S. is prepared to give Palau up to $200 million in aid to accept the Uighurs. Palau is an independent nation about 500 miles east of the Philippines that has close ties with the U.S.
Left unsaid is what security will be provided so that they can’t simply grab the next canoe and paddle off (or someone can’t paddle in and do them harm). But really, what is the point? Why are the taxpayers supposed to pay hundreds of millions of dollars to move the Uighurs from a Caribbean Island to a South Pacific Island? Well, so everyone will think so much better of us. Once the terrorists stop convulsing with laughter (“Hey — get captured, get a cabana from those crazy Americans!”) I am sure they will conclude we have ceased to be serious about national security and have become obsessed with “image.” And they will be right.
The lesson from “bonus-gate” is that private firms will suffer under government management. You will lose your compensation and get burnt at the state by incompetent government officials, and you may lose the employees you needed to succeed.
The problem is getting the financial institutions to start lending money again. Whether its through pumping them with additional liquidity or buying the toxic assets or any other reason – the one thing that is most definitely NOT a problem is that their so-called star employees are in danger of leaving.
If one believes that AIG must not fail (And that is one heck of a big IF) and must be bailed out by us then the money MUST be used to fix the problem. And the star employees of AIG, just like the star employees of every other struggling business, large and small, will have to make financial sacrifices.
It was first Bush’s and then Obama’s fault for not using the leverage of the bailout money to force AIG to renegotiate those contracts BEFORE they received any bailout money.
Now its too late.
But to make the claim that AIG needs to keep the current staff of their derivatives department because no one else can do the job as well is ludicrous. Let them walk if they don’t like it. There are hundreds of out of work Lehman Brothers and Merrill Lynch star employees that would be happy to work right now.
John Harltand – you are absolutely correct.
That is the much larger scandal.
Do the American people really believe that the U.S. government should retroactively confiscate hard-earned money from fellow citizens? Now all you no-nothing, jealous, ignoramuses might think no one in this world should earn more than you do, but that is not the way this country works (at least not until B.O. became president). Charles “Mr. West Indies” Rangel decides that, because he represents only the “downtrodden” in Harlem, that he’s going go downtown and snatch all that money away from those rich greedy bastards on Wall Street, with the entire Congressional lap-dog contingent following in his footsteps?
What Congress did today was one of the most outrageous, illegal, and anti-American actions I have ever witnessed in my life. Our nation is built on laws. This action, besides being a direct contravention of section 9, clause 3 of the U.S. Constitution (Bill of Attainder) shows the worst side of our legislature; their petulance, their small-mindedness, and their vengeful hearts.
God help us all.
What financial institutions aren’t lending now? Identifying it as “the problem,” that financial institutions must be gotten to start lending again, doesn’t compute with me. The four I deal with regularly are all lending.
I continue to get credit card solicitations in the mail. The mortgage refi/HELOC solicitations have dried up, but that’s because property values have fallen so dramatically in my area. Many homeowners are upside-down on their mortgages, and even if they’re making their payments, mortgage lenders aren’t all over them in a rugby scrum, the way they were two years ago, to get them to refinance. Even borrowers with good credit and payment histories don’t have property assets that would justify soliciting their refi business.
BUT — the lenders are still making NEW mortgage loans. People with good credit are having no trouble getting them. The mortgage lenders would love to bring on more new borrowers with good credit, to help cover the costs they are absorbing in losses on defaults, and the declining value of the mortgaged-properties behind them.
My credit card companies bombard me with checks (“just like cash!”) and balance-transfer offers. If I thought they had feelings, I’d suspect them of being discouraged at how much of my available credit keeps going unused.
Local news sources ‘fess up that small businesses are having no trouble getting the kinds of loans they have depended on for routine operation — unless the businesses are in financial trouble, and look less likely than before to pay the loans back. It’s not that businesses can’t get credit; it’s that FAILING businesses can’t get credit in this iffy economy. And infusions of credit won’t help them anyway: it’s not lack of credit that’s driving their sales down, it’s lack of consumer demand.
Local auto dealers assure us, in commercial after commercial, that PLENTY of financing is available for qualified applicants! I don’t think I’ve seen or heard a single “Bad credit? No credit? No problem!” type ad, though, for quite some time.
It’s not that the financial institutions aren’t lending. It’s that (a) they have tightened their risk threshold, (b) property sales are sluggish and real estate trends are hard to read, and (c) a whole lot of people don’t WANT to borrow right now. That’s OK. You can’t convince me that economic recovery depends on the practice of high-risk lending coming back, and millions of people going way back out on a debt limb again.
RobertG,
That begs the question: Why bail out this failed corporation in the first place?
If my tax dollars are being used to prop up firms that “cannot fail” according to the smartest individuals in government (tax cheats and liars all), the government should be able to make rules as they wish.
The issue with bonuses paid is symptomatic of the real illness: government intervention.
My opinion is the government can bail out any corporation that feels it requires taxpayer cash infusions to stay solvent. I also believe the said corporation will obtain just what it wanted: a government-run organization. Prior contracts for executives and unions should be null and void upon receiving such funding. As the government applies more ridiculous regulation for what was once a private entity, that bailed out firm will continue to decline. Welcome to the vicious cycle of government intervention.
For those seeking bailouts, make them so onerous to the recipient that they give a second thought. Watch as AIG might fail in spite of our tax dollars. A horrible lesson, but we need it. Government is not the solution to the excesses of capitalism.
I would be popping popcorn in anticipation of watching the coming disaster movie – but it is real life and has me checking my bunker stock instead.
I have no problem letting the chips fall where they may; just don’t start changing the rules around once you make a bailout decision. And if this congressional action today only pertained to one company that is already moribund, thats one thing. It applies to alot of other institutions that did not make the errors that AIG made, and were guilty of nothing more than trying to be good citizens by taking TARP money that they did not need to survive.
Well David, if you can identify those stars, why not retain them and to hell with the rest?
Fuster,
Obviously, I cannot identify the stars and I am sure that few can who are not part of AIG. But the point is that if the government wants that corporation to continue, and deems that corporation a candidate for federal money, then the government should let the managers run the corporation. If, however, the managers are the problem, then those managers should have been replaced at the outset. As others have noted, the government cannot micro-manage corporations.
I thought Jennifer Rubin made a good point earlier today in saying that contractual obligations would be nullified (if that’s the right word) in bankruptcy court so that bonuses need not be paid. So, if the bonuses were such a big deal, why didn’t the government let AIG seek bankruptcy protection? I would be most interested in the answer to that question.
the “star employees”"? are you freaking kidding? these geniuses ran their companies into financial ruin so devastating that We the People had to bail them out with billions of OUR dollars.
tell you what, AIG: if your superstar employees leave my friends and I will take their jobs for a fraction of their salaries and we can run the company just as poorly as they did. you won’t even have to pay us a bonus.
michiganruth – “these geniuses ran their companies into financial ruin”
One particular specialized division ran AIG to ruin under the leadership of the former CEO. I suspect that the vast majority of the bonus recipients at AIG are the best performers in the other divisions that potentially had real value until the other day when Barney and the other grandstanders on his committee treated the new CEO (the completely innocent CEO who earns nothing if he doesn’t succeed in turning the company around) like a criminal and made it obvious that anyone with a choice should bail out of the TARP recipient companies ASAP. For myself I have to give Liddy credit for his calmness. I’d have told Barney to F off and resigned in the committe meeting.
Any of those bonus recipients who return the money voluntarily are fools. At the very least they should demand that all the politicians return all of their “contributions” from AIG contributions with interest before considering that course.
Also, you and your friends may well be competent to handle jobs at AIG; but the real world process of replacing key specialized employees, let alone whole staffs takes considerable time and can involve a great deal of business disruption, even in calm times, let alone a time of rapid change and stress. That sort of effect is why people still say “you don’t change horses in midstream.”
David , it’s not an either/or requirement about having to let the company do as it pleases or immediately firing the managers.
Please try to comprehend that the bonus money should not be paid. The part already paid was wrong.
The next billion contemplated would be wrong.
You want to know why the government didn’t sent AIG into bankruptcy? it was because they thought that it would not benefit the people of the United States and the people of the United States surely do not want to put one billion dollars into bonuses for AIG managers.
If you can give an actual reason for paying that money out, rather than speculate about how the deserving stars of AIG simply wouldn’t be motivated to do their jobs, the American people would be interested.
(The bullsit about contractual necessity is well-punctured and needn’t be re-inflated.)
Mr. fuster, what you’ve just written is one of the most insanely idiotic things I’ve ever read. At no point in your rambling, incoherent response was there anything that could even be considered a rational thought. Everyone in this thread is now dumber for having read it. I award you no points, and may God have mercy on your soul!
Pretty much all that #13 deserved.
At this point the employees of AIG should quit en masse, and find some really good legal sharks to aim at the U.S. government. These “bonuses” are essentially a yearly lump-sum retention payment, part of their salary, not a performance-based bonus. These are not indentured servants, now owned by the government, they are employees.
Did we bail out AIG to make it successful again? If so, then screwing the employees is not the way to go about it, and only an utter moron would suggest it is. If not, why the hell did we bail them out?
“the “star employees””? are you freaking kidding? these geniuses ran their companies into financial ruin so devastating that We the People had to bail them out with billions of OUR dollars.”
This appeared in the Washington Post (not known for its steadfast defense of bloated plutocrats) yesterday:
(http://www.washingtonpost.com/wp-dyn/content/article/2009/03/18/AR2009031804104.html?sid=ST2009031801503)
Inside AIG-FP, Feeling the Public’s Wrath
By Brady Dennis
Washington Post Staff Writer
Thursday, March 19, 2009; C01
WILTON, Conn., March 18 — A solitary flat-screen television hangs on the back wall of the trading floor inside the headquarters of AIG Financial Products here. Wednesday afternoon, the most-talked-about employees in America huddled around it to find out just how despised they have become.
They watched quietly as members of Congress referred to them as greedy and incompetent. They heard more than one demand that their names be released to the seething American public. They heard the chairman of American International Group, Edward M. Liddy, tell lawmakers that people, in e-mails sent to AIG-FP, suggested that the firm’s leaders “should be executed with piano wire around their necks.”
The evening before, the firm’s chief operating officer, Gerry Pasciucco — whom Liddy recruited in November from Morgan Stanley to shut down Financial Products before it could do more harm to the economy — had gathered them together in the same spot.
Pasciucco urged them to keep their heads down, to act professionally and to continue working to extricate Financial Products from its more than $1.6 trillion in outstanding derivative contracts. He acknowledged that the past few days have been like being “inside the piñata.”
In reply, they told him that they worried mostly about getting shot, despite the guards now patrolling the parking lot, the front door and some of their homes.
A sense of fear hung in the room — the palpable, unsettling kind that flashes across people’s eyes. But there was anger, too. No one would express it publicly, of course. Who wants to hear a wealthy financier complain? And yet, within those walls off Danbury Road lies a deep sense of betrayal — first by their former colleagues, now by their elected leaders.
The handful of souls who championed the firm’s now-infamous credit-default swaps are, by nearly every account, long since departed. Those left behind to clean up the mess, the majority of whom never lost a dime for AIG, now feel they have been sold out by their Congress and their president.
“They’ve chosen to throw us under the bus,” said a Financial Products executive, one of several who spoke on condition of anonymity, fearing reprisals. “They have vilified us.”
They say what is missing from this week’s hysteria is perspective. The very handsome retention payments they received over the past week were set in motion early last year when the firm’s former president, Joe Cassano, was on his way out the door. Financial Products was already running into trouble on its risky credit bets, and the year ahead looked grim. People were weighing offers from other firms, and AIG executives feared that too many departures could lead to disaster.
So AIG stepped in with an offer to employees of Financial Products. Work through all of 2008, and you’d get a lump payment in March 2009. Stick around through 2009, and you’ll get paid through 2010. Almost all other forms of compensation — bonuses, deferred payments and the like — have vanished.
“People are trying to do the right thing,” the same Financial Products executive said. “Guys have worked their [tails] off to try to get value for the taxpayer. This isn’t money that’s being advanced to us. People have performed the work and done it exactly as we asked them to do.”
Pasciucco cringed at the notion, articulated by many lawmakers and even President Obama, that Financial Products is a firm of nearly 400 reckless and greedy derivatives traders.
In actuality, he said, nearly all the troublesome sectors of the business — namely, the risky credit derivatives written on mortgage-backed securities — are now out of the equation, as are the people who worked on them. That leaves a small number of employees to untangle the remaining trades in four main areas: commodities, interest rates, currency and equities — most of which were fully hedged and have caused little problem. The effort also requires a sizable number of “back office” staff, such as systems, computing, accounting, human resources and legal teams.
“Everybody, including my secretary and including the guy down the hall that serves lunch, gets a payment,” said Pasciucco, who added that he received no retention payment and has no contract.
But what about the argument made by top AIG officials that the people receiving retention bonuses have unique skills and knowledge that make them indispensable?
“They are replaceable,” Pasciucco acknowledges. “If we were running a long-term business, we could probably replace them over time, not all at the same time.”
But it would be impractical at best, dangerous at worst, to get rid of everyone at Financial Products, according to AIG officials. If everyone leaves, Pasciucco said, “you don’t have people that really, truly understand the book [of business]. We’re still big enough that that matters.”
If they did walk out the door, who would volunteer to work at the Chernobyl of the financial world? And what would become of the mammoth portfolio that remains?
“It would become the biggest naked position on Wall Street,” one longtime Financial Products executive said, “and everybody would exploit it.”
Before he waded into the circus on Capitol Hill on Wednesday, Liddy e-mailed a letter to the employees of Financial Products, asking them to “step up and do the right thing.” He asked that anyone who received more than $100,000 in retention payments return at least 50 percent.
The Financial Products staff met twice Wednesday inside one of the firm’s large, glass-walled conference rooms to discuss the boss’s letter. Numerous employees indicated that they would be willing to return the money, but most wanted nothing more to do with the firm. It was a preview of the possible exodus to come, one that concerns Liddy himself.
“My fear is that the damage is done,” he told a congressional subcommittee. “That they will return [the money], but that they will return it with their resignations.”
There is little doubt within Financial Products that he’s right about that.
“Nobody is going to give it back and then stay,” said one of the firm’s employees. “If they give back the money, then they will walk. And they will walk into the arms of AIG’s counterparties.”
In the meantime, the e-mails from the public have continued to roll in, including death threats and calls to blow up the firm’s Wilton headquarters. Reporters and photographers have camped out in front of the offices in London and Connecticut. They have staked out employees’ houses. The New York Post identified one executive and labeled him “Jackpot Jimmy.” Another employee had to relocate his family after a London tabloid printed his address. A protest group is organizing an “AIG magical mystery tour” Saturday, loading up a 47-seat bus to stop at Financial Products and at the homes of some of its executives.
“People are really upset. Everybody’s calling them,” one Financial Products employee said. “College roommates are calling. In-laws, relatives, cousins nobody has heard from. Because people are reading this around the world and saying: ‘Oh, my God, you work for that place?’ “
By the way, it is good to see that Democrats in Congress have such respect for the Constitution that they have no problems abrogating two of its clear provisions by voting a bill to tax AIG bonuses at 90%. Yesterday I pointed out this was a Bill of Attainder, but, as the provisions of the bill are retroactive, it is also an Ex post facto law. A two-fer! But, of course, to a Democrat, civil liberties apply only to things one does with ones genitals, not to the protection of private property and contractual obligations.
It will take some time for Mr. & Mrs. America to come to the realization of the incredible damage inflicted upon capitalism the day before yesterday in the Liddy hearings. I am with Sully above. I would not have sat still for that ad hominem attack. If there ever has been a poster boy for the old adage that no good deed goes unpunished then Mr. Liddy is now him.
I am against AIG doling out bonuses because I was against government interceeding in the first place. Likewise, I am against taxing the bonuses as it is clearly unconstitutional (not that that means anything anymore) as well as being extremely poor public policy. Taxation as retribution? Good Lord! What are these Congressmen thinking?
Then to find out that Obama/Geitner knew of the bonuses, asked Dodd to include them in the stimulus bill that was so important to pass that we could read it first (cue Lewis Carroll) has me throwing my tin foil hat in the proper recycling bin. Cloward/Piven/Alinsky strategy of manufactured crisis and rules for radicals becomes a more plausible explanation for the conduct of the Obama administration as each day passes.
What seems to be lost on people who say the government should be able to make the rules is that the government is not throwing a lifeline to a pleading employer. The government is using AIG to protect the financial system. That may or may not be a good idea, but once that goal is acknowledged, all this quid pro quo nonsense about what Uncle Sam can demand of AIG evaporates. The government is doing NOTHING for AIG the company. The government is just using AIG’s infrastructure because it’s there.
The problem with Jen’s bankruptcy analogy is that if AIG had gone into bankruptcy in a timely fashion, any bankruptcy judge worth his salt would have approved retention bonuses to the people who stayed to clean up the mess. At this point only diligent ignorance can account for people’s thinking that these bonuses went to people who should have been sent packing. Rather, these are the people trying to hold the thing together.
Perhaps the saddest moment in the Liddy hearing occurred when Mr. Liddy told Rep Capuano that there is a cadre of people at AIG NOW who are working their butts off to save taxpayer money and that the Congressman would be proud of them. Capuano just sneered.
“Capuano just sneered.”
Well, what do Congressmen despise more than people working their butts off to save the taxpayer money?