dagblog - Comments for "The Congress AIG Bonus Bill: Bravo! (Seriously...)"

Is it really reasonable to

Deadman — Sat, 21 Mar 2009 21:44:48 +0000

Is it really reasonable to think that ALL of the U.S.'s largest banks were going down the tubes?

Not all, but most. Many more than was initially apparent, that's for sure. The rot infected an enormous amount of the financial system. Trillions of dollars of near-worthless derivatives were created, and AIG insured a lot of them. It's clear by following the money from the AIG bailout that even institutions considered 'healthy' had a lot of exposure to the crisis. Even the most conservative financial institutions employ a significant amount of leverage. it doesn't take many losses to bring any bank down. I agree letting the free market decide for itself 'the winners and losers' in theory would have been so much better, but what if the virus was so pervasive that it would have brought down the entire system.

Does anyone think that if these lenders had known how the government would punish them for actually agreeing to take the money, they would have done it?

Uh, I do. Even when they took the money, there was concern over how it would mean these institutions would have to answer to their government masters. Funny that even the banks who have been harping about giving the TARP money back a) haven't done so and b) benefited a great deal from the AIG bailout. Do you really think these lenders were so naive to believe that this money wouldn't come with strings attached? And what exactly do you mean by punish - it's a loaded word, and I'm not sure it applies. Government only reacted because many of these institutions have acted poorly since taking the money.

How, though, does that apply to the senior executive of a bank that MADE A PROFIT last year, whose job had nothing to do with highly complex financial tomfoolery?

Well, I'm not sure how you are defining profits (i.e. are you talking accounting profit, or positive cash flow from operations) but there were very few institutions that made money last year (esp. at banks that were 'forced' to take TARP money). No one is saying these companies shouldn't continue to compensate their workers appropriately, but I for one question the sagacity of doling out multimillion bonuses when your company overall is losing billions of dollars and requires the largess of the U.S. government to stay afloat.

All in all, you make a decent case, and I certainly appreciate the respectful manner in which you presented it. thanks for participating!

I agree with you that AIG is

Michael Wolraich — Sat, 21 Mar 2009 21:25:47 +0000

In reply to I don't disagree with the

I agree with you that AIG is being held up as an example and that innocent people will be penalized if the bill is passed, but the profitable companies aren't without blame. They may not have plunged into sub-prime loans with as much enthusiasm as AIG, but there's a reason that they're insolvent. Even without AIG, the banking industry would be in serious trouble.

Nor do I have any difficulty with stringent requirements on bailout money. If the banks can afford to survive without the bailout money, it suggests that their need is not dire enough to merit a bailout.

That said, I've argued that the goal should not be to punish wrongdoers but to discourage future wrongdoing, any bailout requirements, as well as related legislation, should be designed for that end.

As an aside, I judge from your username that you lean to the right of most of those writing here, and I want to thank you for commenting and urge you to keep writing. While dagblog is a pretty moderate place, there's always a risk of an echo chamber, and we could use more reasoned dissent. Also, I'm curious about why you seem open to the bailouts and government takeovers given your implied anti-socialist beliefs.

I don't disagree with the

AntiSocialism — Sat, 21 Mar 2009 19:14:45 +0000

In reply to Deadman: Your riposte to AIG

I don't disagree with the general sentiment of these posts; however, most people are making a classic fallacious "straw man" argument in favor of the tax. Of course it is offensive to any right thinking individual that someone would take government money and pay bonuses to poor performers (or, worse, undue risk taking poor performers). Almost nobody would argue that point. Therefore, AIG is a great example to use to hammer "greedy conservatives" that are just trying to protect an unfair compensation system that got us into this mess. The problem is, not every person working for one of these banks falls into that category. There is a reason that AIG is the only financial institution discussed when the outrage is expressed!

Consider, though that many of these TARP fund receiving banks were profitable and would have survived the crisis even without the government's money. Is it really reasonable to think that ALL of the U.S.'s largest banks were going down the tubes? In fact, the government all but forced many lenders to take the money because they were afraid to "pick winners and losers" when Lehman and WAMU were going down the tubes. Some lenders were profitable enough that the government virtually strong armed them into buying failing banks (Wells-Wachovia, JPMorgan-WAMU, PNC-National City) because they didn't want to do it. The government money was marketed as cheap capital during a time when the capital markets were frozen. It was even offered up as extra incentive to purchase the bad banks and help out the financial system.

Does anyone think that if these lenders had known how the government would punish them for actually agreeing to take the money, they would have done it? AIG was involved in all manner of arcane engineering of financial risk instruments. They were not properly regulated or, for that matter, understood. In the end, they had made bets that were many multiples of the equity cushion that they had available to protect them and there shareholders. They are now 80% owned by the government. Fine. They will get what they deserved.

How, though, does that apply to the senior exectutive of a bank that MADE A PROFIT last year, whose job had nothing to do with highly complex financial tomfoolery? What about the woman who runs the ATM network for Wells Fargo (I don't know if it is a woman). Should she have her compensation capped because a group of knuckleheads made wild bets on derivatives at an insurance company in Connecticut? If you believe that, I respectfully disagree.

Excellent point

Michael Wolraich — Sat, 21 Mar 2009 17:26:38 +0000

In reply to This bill is a disaster.

Excellent point

This bill is a disaster.

Anonymous — Sat, 21 Mar 2009 17:12:40 +0000

In reply to The Congress AIG Bonus Bill: Bravo! (Seriously...)

This bill is a disaster. Geithner's plan for toxic assets is leaking out today, and it would have worked, except that now nobody will lay any money on the line to take down these toxic assets at any price, due to the demonstrable probability that Congress will confiscate the gains if it doesn't like how they were gotten.

amen

Michael Wolraich — Sat, 21 Mar 2009 15:03:53 +0000

In reply to Final thought for the night

amen

Final thought for the night

acanuck — Sat, 21 Mar 2009 07:22:51 +0000

In reply to The Congress AIG Bonus Bill: Bravo! (Seriously...)

Final thought for the night (could have gone on either Deadman's or Genghis's blog): We seem to be in broad agreement that Congress is pandering to its constituents, and that those constituents aren't concerned about the AIG bonuses themselves so much as what they symbolize.

That's why Congress had to pass the clawback bill, whatever its flaws or unintended consequences. The AIG bonuses didn't just come to symbolize culpable fat cats getting richer off the public teat, even after causing long-term harm to society. Crucially, by week's end, they had come to symbolize the government and the corporatocracy colluding to screw the public.

Dodd's initial compensation amendment was publicly touted as fixing an oversight in the bill as passed by the House. The fact it was gutted without fanfare at the conference stage could fairly be interpreted as deliberate deception.

Democrats had no choice but to scramble to make their error good. Even House Republicans were split on the clawback. Now, Senate Republicans are making noises about possibly denying the bill its needed 60 votes. Lord, please let them be that suicidally stupid.

I might want heads to roll. I

Orlando — Sat, 21 Mar 2009 02:29:23 +0000

In reply to I'll just add that it was

I might want heads to roll. I haven't decided yet. But I have a pitchfork in my shed, just in case.

Also, can we find a new name for Mr. Middle America? Joe is so 2008. How about Brady or Cody or Tyler? And while we're at it, I also think it's time to retire Jane in favor of Zoe or Kristin or Ashley.

Leave it to the house to move

Bluesplashy — Sat, 21 Mar 2009 01:07:43 +0000

In reply to a) you may be right that

Leave it to the house to move at the speed of light on something so meaningless that will end up being negated. Now they can all go back home and say see I did something, re-elect me. Where were these jokers hiding the first time in the TARP bill? They had a chance with the bonuses before. Did you hear anything then? The only time they have responded to the people is when it doesn't look like it will hurt their chances of re-election. This bill must have been so short they were able to stick it in between birthday wishes for seniors and naming of bridges. I reject, condemn, throw back and vomit up the little crumbs they just tossed our way.

Right on with this

Bluesplashy — Sat, 21 Mar 2009 01:06:35 +0000

In reply to The Congress AIG Bonus Bill: Bravo! (Seriously...)

Right on with this Deadman

Besides, you gotta find it laughable that we are worried about these 'best and the brightest', since it was in large part these very same folks with their fancy financial alchemy that created the monster which finally broke our system. Perhaps a thorough management cleansing at some of these companies would ultimately be helpful.

And all your concerns about the bill are mine also, but they have more weight my mind. I don't like giving congress a thumbs up on symbolism. They try to do as little as possible so they won't offend their voters and encouraging hollow bill passing is not appropriate with this age group.