Tuesday, March 17, 2009

AIG Bonus BS

AIG is handing out bonus' that were part of worker's compensation packages. Politicos and the population are outraged. They are outraged at AIG and not the Bush/Obama spending spree that put essentially no strings attached on receiving the money. Most of the outrage heard is interesting.

Bill Kristol:
The AIG moment feels like a big one. Public distaste for both the Bush and Obama administrations' handling of the financial crisis seems to be crystallizing in response to the reports of bonuses for executives at the AIG financial products subsidiary, whose derivatives trading helped contribute to AIG’s bankruptcy.

Well, the executives had contracts, we’re told. The firm would risk a lawsuit not to pay up.

Really? Can't risk a lawsuit! A fine business like AIG would never do that! Shareholders have been wiped out, tens of thousands of people have lost their jobs directly or indirectly because of AIG's activities, taxpayers are out tens of billions -- but it would be too hard to change those promised bonus payments, even though the promises were of course made in very different circumstances?

What’s more -- AIG says it won't be able to retain talented staff "if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury.” Sure. Those employees would be snapped up -- there's a boom market right now for derivatives traders! And certainly no one else in the U.S. has had his compensation "subject to continued and arbitrary adjustment" by their employers -- no else in the country has had to take pay cuts, forego promised bonuses, and the like!

Sure AIG could wade into all those lawsuits, but why should they? Personally, I think they should have fired most of these bastards for tanking the company. Kristol is right that they should be happy to have a job in this economy, which they helped create. But on the other side, why should AIG waste it's time fighting something that will definitely be lost in the courts due to that little thing called a contract. I listen too a lot of people yelp about how it's wasting tax payer dollars and share holder funds, but they seem to miss that the law is on the side of the contract holder. If the contract has an out for performance than AIG should be using it, but I haven't seen any reports stating that.

And along that line about arbitrary adustments to your pay by the Treasury department, we have some political morons bellowing to tax them to death.
As public and political outrage grows over $165 million AIG paid as bonuses to executives while taking billions in taxpayer dollars, an idea is germinating in Congress. If you cannot get the money back, tax the bonuses.

"It's an idea very much at the embryonic stage," said Senate Banking Committee Chairman Chris Dodd, D-Conn., "You can write a tax provision targeted specifically at 98 percent of the taxable proceeds."

Dodd said that "doesn't violate the terms of the contracts," referring to legally-binding agreements that appear to preclude government action.

Senate Finance Committee Chairman Max Baucus, D-Mont., says his staff is reviewing such a proposal. He called it a "worthy" idea but said he needs to know more about how it would work.

Dodd says this is something that "could happen fast. We could write this tomorrow."

Rep. Carolyn Maloney D-N.Y, the chair of the Joint Economic Committee, is also calling for a 100 percent tax on bonuses not related to commissions.

In a letter she distributed to fellow legislators for co-sponsorship, Maloney introduces legislation that will instruct the Treasury and the Internal Revenue Service to develop guidelines that tax at 100 percent any bonus compensation that is not directly related to a commission for any recipient of TARP funds where the government is the majority owner of the company.

Fascinating. If this isn't arbitrary, I'm not sure what is. These are the same jack-asses that approved the bailouts with no considerations and no strings. Maybe we should demand their paycheck since they were too stupid to be responsible.

And of course there is the head cheerleader as noted by McQ at QandO:
No one with any sense is going to argue that AIG should be doing what it is doing or that the insurance giant isn’t absolutely tone-deaf to the dirge playing within the economy. But the effort and the PR agenda to reclaim the bonus money pursued by our new president just underscores the “confusion and contradiction” his actions and words engender.

President Obama vowed to try to stop the faltering insurance giant American International Group from paying out hundreds of millions of dollars in bonuses to executives, as the administration scrambled to avert a populist backlash against banks and Wall Street that could complicate Mr. Obama’s economic recovery agenda.

We’re talking “hundreds of millions” of dollars here. But when confronted by a omnibus spending bill with hundreds of billions of dollars in 9,000 pork projects, meh, no biggie - “last year’s business.”

If the car companies had to renegotiate contracts with the unions, wouldn't it have been wise for the financial companies to have done the same? No doubt the people running AIG don't think so. And by hurling cash at them so that they would survive their own malfeasance didn't help them do the right thing either. Worst of all is blaming the people with the contract and punishing them when the jack-asses that put the whole scenario together is just pathetic.

What Dodd and his ilk are trying to do is called in the Constitution (Article I, section 9, clause 3) a Bill of Attainder.
No bill of attainder or ex post facto Law shall be passed.
Wonder how these wizards of legislation are going to manage that bit.

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