Thursday, March 19, 2009

Did you get a $1m bonus?

Everyone is talking about the bailouts at AIG. Everyone thinks it's ridiculous. I didn't get a $1m bonus, how about you?

But with all the talk, there comes down some very specific facts. So far, the best article I've seen is by The Motley Fool (seen here). Now for those who don't know, The Motley Fool " is a multimedia financial-services company dedicated to building the world's greatest investment community." For financial matters, it's a good magazine. It's not political, it's financial.

The Fool says that the outrage over the bailout is bogus. It says that it's all a "distasteful combination of a populist pandering and lack of diligence." According to the article, the bonus plan was developed last September and filed with the SEC. That means anyone in the government could have read it. Also, "back in December AIG's CEO sent a letter to Congressman Elijah Cummings, a senior member of the House Committee on Oversight and Government Reform, walking him through the bonuses and the reasoning behind them." Where was the outrage then?

But more importantly, if the government is going to continue to hand out big checks ($170Billion for AIG), shouldn't it at least KNOW about this stuff?

Now congress is looking at ways to tax the bonuses. I saw an article today that said they were looking at a 90% tax. Well another Fool article (here - free registration required) explains the ramifications of this action. See, AIG was legally bound to give out the bonus. They had contracts to fulfill. But it's a scary thing if congress can effectively voids these contracts with the stroke of a pen. And to retroactively tax an activity, well, what taxes will come about next?

One more note on the AIG debacle. Many people are suggesting that the people should return the bonuses. I haven't looked at the details to know if I agree with that or not. One thing I will say, is I agree with Chuck Thinks Right, the politicians need to lead by example. Any politician that received any contribution from AIG should return the money to AIG, who can then return it to the government (not the politician).

4 comments:

4simpsons said...

Great point about politicians returning AIG money!

Brooke said...

Obama's Congress pushed this bill through and NOW they act shocked and outraged?

Good lawrd.

"The Edge" said...

Again folks, this is all a smokescreen....why are we all worried about one-tenth of 1% of the total money given to AIG? They send most of it to other banks....

AIG isn't the problem here...if they fail, who cares???? -- Capitalism ensures that others will jump into the market if there is a market for a given product, which in insurance, there definitely is...

The flaw is the bailout in the first place....

If you are drinking the kool-aid about these bonuses being the REAL problem, then Obama, his media cronies, and his teleprompter have you right where they want you...in their back pocket.

He promised reform. We (as a country voted) for him. We got what we wanted. Except that now the only thing he's reforming is his original promise......

Randy said...

Thanks Neil & Brooke,

Edge, don't be so subtle - tell me how you really feel. :)

I still wonder what would have happened if AIG failed. I saw a report (I consider unconfirmed) that the taxpayer now owns 80% of AIG. We have to consider that a "sunk cost". But how much more will it take to keep them afloat? The ROI on future investment could be very large once you ignore the past cost.

Bottom line is still the same. We should be outraged over the (late) outrage.