Tuesday, March 17, 2009

I'm With Obama On Blocking The Bonuses At AIG

Wow that was a painful title to type. I have to stop, take a deep breathe, and compose myself before I go on.

As most readers of my blog know, I do not very often agree with Barack Obama. This is mostly because he is virtually always wrong. I am big enough though to admit that I can be a little partisan too.

As far as this issue with AIG, Obama Says Administration Will Try to Block AIG Bonuses, I agree.

I am a very strong advocate of the free market system and I am not at all comfortable with the governement setting compensation for employess in the private sector.

I further am a strong believer in the 'slippery slope' theory in that if we allow something "just this one time", it will be easier to do it again. My concern therefore being that if we set compensation for the execs this time, then in the future it will be easier to set salaries, then future bonuses, etc. If we were to let this continue we could go as far as price controls and the logical conclusion would be governmental control of the private sector. Not a guarantee, possibly even unlikely, but a risk we should always guard against.

With this said, we need to do something to stop Wall Street and the rest of the financial sector from raping us. We have had too many instances of these companies getting billions from us and then throwing their employees lavish parties, giving out big bonuses, and flying around the country on private jets.

I have never been in favor of the bailout plans, neither the ones during Bush's last year or the new ones under Obama, but we did it. It's time to draw a line in the sand and tell these companies that if we are going to loan them money to stay afloat, they need to use our money wisely and use it to strengthen the economy, not as their own little slush fund.

Part of the argument for leaving the companies alone and not attaching stipulations to the money is that the amounts they are spending are but a fraction of what the stimulus money is. This is true but $165 million is a lot of money. If they were to send that money back out into the private sector as loans to businesses, we would create jobs.

The other argument put forth is that these companies have to compensate their staff well or they will leave. WTF? These staff have run the company into the ground. Let them leave and hire more incompetent people for less money.

So, for once, Obama is right and I agree with him. Don't worry though, it probably won't happen again. The doctors are adjusting my meds, I should be back to normal soon.

14 comments:

Frazzled Mom said...

Usually I agree with you. I'm a regular lurker but don't post often. This time, I must respectfully disagree with you.

Don't get my wrong, I understand your moral outrage, and I'm not saying these employees deserve their bonuses. But please don’t forget, the government, not AIG is the real culprit here. The government gave AIG all of our money without doing their homework, and without putting any conditions on the money, and now there are unintended consequences. I strongly feel these unintended consequences do not justify breaking these contracts AIG put in place prior to the buyout. If our government can justify breaking these contract just because it "feels right" then the government can justify breaking any contract on a whim, and all contracts will become worthless.

I feel my position was so articulately explained by Judge Nepolotano (butchered his last name) on Fox and Friends just a few minutes ago. I would love to post a You Tube link, but I doubt it would be available just yet. I'll try to paraphrase. Basically he said the government brought AIG warts an all, and did not place any provisions in the TARP legislation in regard to these bonuses. Therefore the only legal option our government has would be to sue AIG, and the Federal Judge would likely side with AIG, resulting in the government paying AIG damages plus legal fees ultimately costing us tax payer even more than if AIG just honored their contracts and gave out bonuses.

Think about this the next time you enter into any contract Chuck. We must never fix one mistake (government bailouts) with more mistakes (throwing out the rule of law). The unintended consequences would be devastating to us all.

My Daily Rant said...

Obama has a really big problem when it comes to negotiating: He doesn't know what the hell he's doing
Notice how nothing is ever his fault?

LASunsett said...

Chuck,

I agree with Frazzled Mom. I see your side of it and if the AIG execs had an ounce of integrity, they would not accept these bonuses. They are the bottom of the barrel when it comes to leaders and the epitome of avarice.

But, do we really want the government selectively asserting itself into another area of the private sector, where it has absolutely no business whatsoever?

mksviews said...

I agree that government should have a say in the affairs of private companies, but only if those companies are taking taxpayers money. If they don't like it, they can refuse the money and do their own thing, it's quite simple really.

AP said...

I'm middle way about this, Chuck.

On one hand, they shouldn't be reaping rewards when all the rest of us are suffering.

On the other hand, I've never been a fan of blocking people from being successful...and employee bonuses? That's gonna help the economy, no? Especially when they pay taxes on them, right?

On yet another hand (I guess I have 3?) - I'm not signing some petition from moveon.org. :-)

Larry T. Durham said...

Oh hell no, bonuses for these losers are ridiculous. However, Barry looks a little stupid up there bloviating about the AIG bonuses when it was the hurry, hurry, crisis, crisis mode he employs so well that handed them all those bucks with nary a string attached.

More evidence that perhaps he is in way over his head.

Larry T. Durham said...

By the way Chuck, C. U. in the first round of the NCAA tournament. Should be a good game.

Go Tigers!

Flavor Country said...

Wow, looks like this post should belong on my blog, you agreeing with Obama, Wow!

Then I read the comments and some are against you on this, what's going on.

Well I agree with the government should have known about this from the get go, but AIG should have better business ethics when they have their hands out begging for billions. I hear these guys that got the bonuses were the same ones that caused AIG to get into this mess.

They were retention bonuses, yes to keep these guys at AIG they gave them a bonus. makes no sense.

cube said...

This is a thorny problem. I don't like the idea of AIG et al getting jiggy with our money, but this should've been stipulated before the money was handed over.

I find it far more disturbing
to think that the government can come in and break contracts at will.

Jake Hammell said...

I wholeheartedly approve the action to pull these bonuses. You know what my last bonus was? $50 at christmas. No staff party, no present, just fifty bucks. I'd rather do without it and see a raise in commission.

You said:
"Let them leave and hire more incompetent people for less money."

Or you could let them leave and hire young innovative people rather than old dinosaurs.

Mustang said...

Chuck ... The $165 million amounts to less than 1% of the total amount of taxpayer money that went to AIG.

In the first place, I don't think the government (even under a nationalized AIG and socialism) has a right to seize bonuses paid to executives.

Secondly, Congress authorized major corporations to pay bonuses as "tax write-offs." They are hardly in a position now to seize assets already paid. In any case, it won't be a cheap lawsuit.

Third, a Congress that didn't take the time to read, much less deliberate the bail out legislation, is hardly in a position now to criticize the company for doing what Congress allowed it to do.

Fourth, there is a more insideous issue with AIG. Please stop over to Social Sense tomorrow so that you know what the real outrage is.

Semper Fi my friend.

Chuck said...

Frazzled, thanks and thanks and thanks for commenting. I have a tendency to agree with you to some extent. I am not entirely comfortable with the government breaking the contracts and as I said, I do worry about mthe whole slippery slope issue but I feel that this is an extraordianry circumstance and we need to make a stand on them using our money for these bonuses. Maybe a solution is have AIG refund our money and they can run the business the way they want to.

Daily Rant, this is not as much a defense of Obama as an outrage at the blatant disregard for our money

LA Sunset, I see everybody's point and I am uncomfortable with government intrusion but I think the time for AIG to worry about interferance is before they took the money

MK, same here. It's kind of like it works both ways

AP, with three hands you should have been an economist, they're always saying "on the one hand" :-)It's not a clear cut solution

Larry, I agree fully on that point. Actually I was frustrated with Bush about the same thing. They give this 100's of billions of dollars away with no conditions, no accountability.

BTW, may the best Michigan team win lol, enjoy the game.

Flavor, don't worry, the real Chuck will be back. lol I think the government has to take a lot of responsibility for this and as I said above, Bush did the same thing. Couple of people here have talked about business ethics, I think the reality is that there is no such animal anymore.

Cube, I do agree that this should have been settled ahead of time. It is frustrating that we did one stimulus package and got screwed so we did the same thing all over again

Jake agreed although it's not about what I get for a bonus, I get nothing. But it is our money and there should be some ground rules

Mustang, I have a hard time disputing your logic and I'm not excusing Congress, they dropped the ball big time. I even realize it is not practical. This is just my opinion. Just needed to vent.

Z said...

My cuz has been on FOX Business twice talking about this..She says it's NOT a 'bonus'..it's a huge part of their salary. They are contractually obligated to pay them.

there are too many thinks that irk me to pick just one, but one of the biggest irks is that we bailed anybody out ANYWAY.....another irk is the gov't can say "We own you, now you do what WE say" and, for the first time in America's history, we have a president who thinks he can tell CEO's how much they can get paid because we OWN THEM. Rubbish.
Stock holders in this country need to be the ones to STEP up and demand more equitable pay, not OUR PRESIDENT. This is NUTS. But, he bought them......and many think "Well, we got them out of trouble, now they have to play ball with us"

Those here who said those people shouldn't take the money are partially right; most of their yearly income is IN that 'bonus' but, basically, morality should prevent them from accepting the bucks. But, then, who'd get it if THEY DON"T? US? No.

Some are saying this AIG media broohaha is to get America's attention off the outrage about soldiers and private insurance......they might have a point, since we're learning today that obama's outrage at the AIG bonuses can't be much outrage since he supposedly's known this since last Fall.

Randy said...

There are a lot of subtle nuances (spelling?) here.

First, these "bonuses" are actually part of the pay and should be called that, not bonuses.

Second, a lot of the "bonuses" were only $1000 and paid to non-executives. Kinda sheds a different light on things.

That said, there is something fundamentally wrong in our capitalist society. When a company like AIG has executives that can essentially vote themselves larger pay packages without any checks and balance, there's something wrong. The stockholders need to take action, but don't. Witness Home Depot, where the stock value went down and the Chairman got a nice severance package.

Stock-holders should sue the board of directors for approving such packages. Trouble is, at AIG, the government, nay, the taxpayer is the stock-holder.

I'm not sure how to fix this problem. More government intervention isn't the answer.