Catherine (#27) is right. Corporate culture in the U.S. is totally f-ed up. It's a delusion of grandeur for a Chief Officer of a company to think he/she deserves compensation equivalent to $5,000-10,000 *per hour* -- even if times are *good*. That kind of income is made only on the backs of the hundreds or thousands of people who are doing real work in the organization.
Yet we tolerate companies which keep overpaying their officers while they lay off people who've spent 20-30 years at the company. We seek out to hire executives (*cough* Bob Nardelli *cough*) who ran their companies down and still left with millions. We believe it when we're told that this kind of pay is necessary because otherwise the organization won't be able to keep that kind of talent. Look around -- how many jobs are there which would pay $5,000 an hour? Especially to lose buckets of money and capital? Damn few, I'll bet. So where are these hot shots going to go? Strange how the officers at huge companies like Toyota and Sony and Nokia and Bosch, with headquarters outside the U.S., don't stand up on pedestals and proclaim that they won't work until they're paid what Vikram Pandit and Carly Fiorina have been paid.
And it's ironic that these same "heads-I-win-tails-I-win" clowns have convinced American workers that "pay for performance" is the only fair way to compensate people.
They're fools, but we're chumps for going along with this nonsense.
Here is one AIG’s letter of resignation that was published in the New York Times yesterday. Worth a look as he addresses some of the stuff that we’re all commenting about.
My understanding is that CCFA does not use its resources to pressure recipients to convert to Christianity, and I would be very disappointed if they did. This is from their core values statement: "Relationships of mutual respect require acceptance of the equality of all persons. Equality of all persons comes from their essential dignity and is reflected in relationships that are without religious or other prejudice, that are multicultural, reciprocal and empowering."
You may want to update that since it is South Daktoa, not North Dakota that Sanford resides. Sioux Falls and Sanford (formerly Sioux Valley) Health is in the lower eastern corner of South Dakota.
Here's a worthy cause for those of us who not only don't have enough money to support themselves but also don't have time to volunteer because looking for a job has become a full-time unpaid job. (I've been there, just like so many college grads are or soon will be.)
The World Community Grid is a brilliant online scheme that allows people to volunteer the spare capacity on their home computers to researchers. The object is to speed up number-crunching in research projects such as AIDS, cancer, clean energy, and dengue.
Information on the grid, and the links to download the necessary software, can be found at: www.worldcommunitygrid.org
Legacy costs are a part of the Big Three's problems, it's true.
And they have legacy costs because, you know, they've had a very successful business here for many, many decades. All those foreign companies don't have legacy costs -- yet -- because they are relatively new to the US market.
But the legacy costs are a problem now only because the Big Three decided that instead of setting aside some the money they made decades ago when times were good to pay for future contractual obligations to their workers, they'd rather give big fat bonus checks to the executives and dividends to the shareholders.
In fact, major corporations like the Big Three spent many millions to buy legislation from congress that made it legal to steal from retirement accounts.
So boo-fucking-hoo for their complaints about legacy costs. They have legacy costs because they were very successful for most of the last century.
You also wrote: "If I was a top dog at AIG's insurance dept. I would take my bonus and definitely not give it back. I earned it."
For the record, there isn't a single executive at any major corporation in American that has "earned" the millions of dollars they make. Not saying they don't work hard, but just that they are vastly overvalued for their efforts. Their ratio of compensation to contribution is way out of whack.
This is not terribly surprising--for awhile now, downtown Chicago has been home to an ING Direct coffee shop that sells ING-branded goods (like the ones you describe above) while also providing a space for people to attend finance-related seminars, sign up for savings accounts, etc. This just looks like a transition to selling those goods to a broader audience (my favorite item they were selling was a fold-up bike that you could carry around the city).
Michael, the FDIC loans are covered by bank insurance fees, but lately the FDIC is running dry. Who do you think will pick up the bill when the FDIC can't handle the volume of failed banks and these loans?
Enraged, about a company -- even if it is a bank, in these troubling times (insert eye roll here) -- selling branded goods to its customers? Or heck, even throwing in a few unbranded useful things at reasonable prices?
This is big fail from a human point of view. Indian cities barely enforce traffic rules. Cars and motorcycles shoot in an out of throngs of pedestrians without regard for what side of the road they are driving on.
My in-laws just returned from visiting family in Gujurat, India and relayed news that my their niece and her husband were AGAIN in the hospital and were severely injured in an auto-related accident. Two years ago that same niece was hit in auto-related accident and was in physical recovery for week.
The death toll from auto-related accidents in India is very high statistically. Imagine what it will be like with even more poorly trained drivers showing off their Tatas.
great article! I am a converted agent (captive to independent) and focus on term insurance for my clients. What I see though with the idea, "buy term and invest the difference," is that NOBODY seems to invest the difference... I am a huge proponent of this IF you invest the difference
This date will be referenced in future college texts on the economy and on history. (If people keep reading, that is.)
It's the date when the government began to monetize the debt. And, it's only the beginning - when the process begins, you can't stop it.
The man and woman on the street has no idea. We are buying our own debt. How is that possible? I mean, can I buy up my own debts?
Well, no, but the government is doing it by printing (hey, they don't even have to physically print that stuff anymore - just an electronic entry in a computer). Yes, manufacturing out of thin air.
When you have too many of any thing, what happens? The thing that you have too much of is cheapened. We're talking the greenback here. All paper currency is trash and it will be a race to the bottom. When one currency is devalued, another will look to devalue as well. It'll be more fun than watching NASCAR racing!
With the debt now exploding (if you liked what Bush did to the economy, you'll love Obama!) - going over 5% of GDP, we'll end up with two choices. Either we'll renege on the debt (oh, China won't like that!) or heavy, heavy inflation. (Can you say hyper!)
This is great news for Tata Motors, as well as for those whose incomes didn't allow for their own car in the past. The Nano is going to make a big difference in the lives of a lot of people, not only for the freedom of movement, but also in increasing the potential for additional commerce (taxis, hauling products longer distances, etc.).
This might be an investment opportunity,but it sucks royal for the U.S.A.. The geniuses now running the economy (government) have no idea what the unintended consequences will be, but they won't be very good.
Sure, the government offers to loan up to 95% of the cost to a private entity to enable them to buy up some of the toxic junk. Why wouldn't you do it - you only have 5% exposure? What got us into this fine mess in the first place is that those playing didn't have SKIN IN THE GAME!
What will they pay for these poor, much maligned assets? That's the the crux of the whole plan. The banks don't want to accept what they're really worth, nearly worthless. The government says - and if you believe them, you truly are foolish - they don't want to pay too much. Ha! The taxpayer is going to get reamed because the big banks are calling the shots. Meet the new boss, same as the old boss. Obama no different than Bush.
Hey, Wake Up!
The Fed, the congress, the administration is trying to inflate the bubble ... again. They are desperate.
Will it work? No. It stands no chance. The national debt is soaring past 5% of GDP. Only two things can happen now: we renege on the debt or hyperinflation. Take your pick.
I really think it will be the latter - the dollar will be trashed and inflation will rage.
I'm officially scared. I really like ING and like your initial concerns, I'm wondering if this might be the beginning of the end. Look, I understand that trowing up a site like this with branded products probably too little real effort. However, I can't help but wonder if that time/energy would have been better doing what they already do best.
I'm not sure this type of thing helps keep their brand consistent with consumers. It certainly has me having second thoughts!
It seems that the FDIC loan is covered by the usual fees paid by banks (not regular folks).
I'm not saying that if this thing falls apart that the FDIC will be fine and we'll all be happy--just that as it stands now, we're only on the hook for 7%.
How did the food coloring work? I was thinking about buying the colored street chalk and some sandpaper, and replacing 1:1 the colored street chalk dust in place of the same amount of white sand. To me it makes since because this is how colored sand is made at the carnivals.
Thanks for a great explanation of a very complicated program.
I'm sure people would like to know (I sure would) how individuals can learn more and/or participate or is this only for very large investors. Do you have any information on that?
My understanding is that the bonuses are being paid to the derivatives' traders (who may already have annual salaries of $500k+) not the insurance folks, and that internal obligations were being honored but not external commitments (which were critical to sustaining the global financial system).
DDFD is right. I totally agree with his take on this whole mess. With the (huge) exception of those who have been laid off from their jobs, those who are suffering most in this crisis are the ones who created it by living well above their means and those whose greed overcame their intelligence.
You know what makes me mad about the bonus situation? I worked for a Fortune 500 company during a time when they made record breaking profits. It was $11 billion in one year, if I'm not mistaken, and I was part of the team of "foot soldiers" that helped them make those profits. The employment contract read that bonuses would be paid "as business conditions permit." What actually happened was that management got bonuses and the little guys like me got coffee table books. We have a really sick corporate culture in this country. I actually heard an AIG representative refer to the people receiving bonuses as "talent" and he insisted that the bonuses were necessary to "retain" the talent before they get hired away. (Presumably, there are other global insurance companies on other planets whose economies have not been destroyed that are eager for this kind of "talent.")
As long as we insist on believing that corporate execs are supermen and -women with extraordinary powers, they will continue to be paid obscene salaries. We all need to GET OUR HEADS back and let it be known that if a senior-senior-senior vice president is at the helm of the ship when it sinks, NO, he does not get a big bonus while he is riding the coast guard helicopter to shore. It is QED a proved fact that these people did NOT do "excellent" work last year because they contributed to a crash of the world economy. Each and every one of those "talented" execs could be replaced by at least ten other people who could do the job just as well and are currently working in banks and accounting firms for sane salaries.
To answer the question, hell yes I would give the bonus back, even if I felt i was not directly to blame for the company's problems. It is ridiculous and shameful to accept such a large bonus at a time when people are living in their cars because of my company's actions. And remember, these guys are rich already. It's not as if they are choosing to give up shoes for their children. They might have to sell that fourth vacation home, but they'll be okay. Should the government take that money back? Sure. If they can. AIG is basically owned by the government, now, so why not?
Catherine (#27) is right. Corporate culture in the U.S. is totally f-ed up. It's a delusion of grandeur for a Chief Officer of a company to think he/she deserves compensation equivalent to $5,000-10,000 *per hour* -- even if times are *good*. That kind of income is made only on the backs of the hundreds or thousands of people who are doing real work in the organization.
Yet we tolerate companies which keep overpaying their officers while they lay off people who've spent 20-30 years at the company. We seek out to hire executives (*cough* Bob Nardelli *cough*) who ran their companies down and still left with millions. We believe it when we're told that this kind of pay is necessary because otherwise the organization won't be able to keep that kind of talent. Look around -- how many jobs are there which would pay $5,000 an hour? Especially to lose buckets of money and capital? Damn few, I'll bet. So where are these hot shots going to go? Strange how the officers at huge companies like Toyota and Sony and Nokia and Bosch, with headquarters outside the U.S., don't stand up on pedestals and proclaim that they won't work until they're paid what Vikram Pandit and Carly Fiorina have been paid.
And it's ironic that these same "heads-I-win-tails-I-win" clowns have convinced American workers that "pay for performance" is the only fair way to compensate people.
They're fools, but we're chumps for going along with this nonsense.
Here is one AIG’s letter of resignation that was published in the New York Times yesterday. Worth a look as he addresses some of the stuff that we’re all commenting about.
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Thank you for the North/South correction! I will fix that.
Catherine Shaffer
Wise Bread Contributor
My understanding is that CCFA does not use its resources to pressure recipients to convert to Christianity, and I would be very disappointed if they did. This is from their core values statement: "Relationships of mutual respect require acceptance of the equality of all persons. Equality of all persons comes from their essential dignity and is reflected in relationships that are without religious or other prejudice, that are multicultural, reciprocal and empowering."
Catherine Shaffer
Wise Bread Contributor
You may want to update that since it is South Daktoa, not North Dakota that Sanford resides. Sioux Falls and Sanford (formerly Sioux Valley) Health is in the lower eastern corner of South Dakota.
Here's a worthy cause for those of us who not only don't have enough money to support themselves but also don't have time to volunteer because looking for a job has become a full-time unpaid job. (I've been there, just like so many college grads are or soon will be.)
The World Community Grid is a brilliant online scheme that allows people to volunteer the spare capacity on their home computers to researchers. The object is to speed up number-crunching in research projects such as AIDS, cancer, clean energy, and dengue.
Information on the grid, and the links to download the necessary software, can be found at: www.worldcommunitygrid.org
Legacy costs are a part of the Big Three's problems, it's true.
And they have legacy costs because, you know, they've had a very successful business here for many, many decades. All those foreign companies don't have legacy costs -- yet -- because they are relatively new to the US market.
But the legacy costs are a problem now only because the Big Three decided that instead of setting aside some the money they made decades ago when times were good to pay for future contractual obligations to their workers, they'd rather give big fat bonus checks to the executives and dividends to the shareholders.
In fact, major corporations like the Big Three spent many millions to buy legislation from congress that made it legal to steal from retirement accounts.
So boo-fucking-hoo for their complaints about legacy costs. They have legacy costs because they were very successful for most of the last century.
You also wrote: "If I was a top dog at AIG's insurance dept. I would take my bonus and definitely not give it back. I earned it."
For the record, there isn't a single executive at any major corporation in American that has "earned" the millions of dollars they make. Not saying they don't work hard, but just that they are vastly overvalued for their efforts. Their ratio of compensation to contribution is way out of whack.
This is not terribly surprising--for awhile now, downtown Chicago has been home to an ING Direct coffee shop that sells ING-branded goods (like the ones you describe above) while also providing a space for people to attend finance-related seminars, sign up for savings accounts, etc. This just looks like a transition to selling those goods to a broader audience (my favorite item they were selling was a fold-up bike that you could carry around the city).
The CFCA sounds very intriguing to me, but I'm wondering how much evangelizing is paid for with donated dollars. What has your experience been?
Xin Lu:
You're right, of course, about the National Debt compared to GDP.
What I should have said Obama's new Federal Budget compared to GDP.
Michael, the FDIC loans are covered by bank insurance fees, but lately the FDIC is running dry. Who do you think will pick up the bill when the FDIC can't handle the volume of failed banks and these loans?
Kelja, the national debt is actually nearly 40% of GDP now and the total debt is over 60%. If it were only 5% then this country isn't really doing that bad. See http://en.wikipedia.org/wiki/United_States_public_debt
At first I was annoyed and enraged.
Enraged?
Truly?
Enraged, about a company -- even if it is a bank, in these troubling times (insert eye roll here) -- selling branded goods to its customers? Or heck, even throwing in a few unbranded useful things at reasonable prices?
Why, I never... ;)
This is big fail from a human point of view. Indian cities barely enforce traffic rules. Cars and motorcycles shoot in an out of throngs of pedestrians without regard for what side of the road they are driving on.
My in-laws just returned from visiting family in Gujurat, India and relayed news that my their niece and her husband were AGAIN in the hospital and were severely injured in an auto-related accident. Two years ago that same niece was hit in auto-related accident and was in physical recovery for week.
The death toll from auto-related accidents in India is very high statistically. Imagine what it will be like with even more poorly trained drivers showing off their Tatas.
http://www.india-server.com/news/india-has-highest-number-of-road-4241.html
http://www.iht.com/articles/2007/04/12/asia/letter.php
great article! I am a converted agent (captive to independent) and focus on term insurance for my clients. What I see though with the idea, "buy term and invest the difference," is that NOBODY seems to invest the difference... I am a huge proponent of this IF you invest the difference
Thanks!
This date will be referenced in future college texts on the economy and on history. (If people keep reading, that is.)
It's the date when the government began to monetize the debt. And, it's only the beginning - when the process begins, you can't stop it.
The man and woman on the street has no idea. We are buying our own debt. How is that possible? I mean, can I buy up my own debts?
Well, no, but the government is doing it by printing (hey, they don't even have to physically print that stuff anymore - just an electronic entry in a computer). Yes, manufacturing out of thin air.
When you have too many of any thing, what happens? The thing that you have too much of is cheapened. We're talking the greenback here. All paper currency is trash and it will be a race to the bottom. When one currency is devalued, another will look to devalue as well. It'll be more fun than watching NASCAR racing!
With the debt now exploding (if you liked what Bush did to the economy, you'll love Obama!) - going over 5% of GDP, we'll end up with two choices. Either we'll renege on the debt (oh, China won't like that!) or heavy, heavy inflation. (Can you say hyper!)
This is great news for Tata Motors, as well as for those whose incomes didn't allow for their own car in the past. The Nano is going to make a big difference in the lives of a lot of people, not only for the freedom of movement, but also in increasing the potential for additional commerce (taxis, hauling products longer distances, etc.).
I read a great article about the Nano, though it is actually part of a series of articles. The latest one is titled "Tata Releases the Nano, No Thanks to Mamata Banerjee" and it is found at http://economicefficiency.blogspot.com/2009/03/tata-releases-nano-no-tha...
Apparently, the politics behind building this car is out of this world.
This might be an investment opportunity,but it sucks royal for the U.S.A.. The geniuses now running the economy (government) have no idea what the unintended consequences will be, but they won't be very good.
Sure, the government offers to loan up to 95% of the cost to a private entity to enable them to buy up some of the toxic junk. Why wouldn't you do it - you only have 5% exposure? What got us into this fine mess in the first place is that those playing didn't have SKIN IN THE GAME!
What will they pay for these poor, much maligned assets? That's the the crux of the whole plan. The banks don't want to accept what they're really worth, nearly worthless. The government says - and if you believe them, you truly are foolish - they don't want to pay too much. Ha! The taxpayer is going to get reamed because the big banks are calling the shots. Meet the new boss, same as the old boss. Obama no different than Bush.
Hey, Wake Up!
The Fed, the congress, the administration is trying to inflate the bubble ... again. They are desperate.
Will it work? No. It stands no chance. The national debt is soaring past 5% of GDP. Only two things can happen now: we renege on the debt or hyperinflation. Take your pick.
I really think it will be the latter - the dollar will be trashed and inflation will rage.
I'm officially scared. I really like ING and like your initial concerns, I'm wondering if this might be the beginning of the end. Look, I understand that trowing up a site like this with branded products probably too little real effort. However, I can't help but wonder if that time/energy would have been better doing what they already do best.
I'm not sure this type of thing helps keep their brand consistent with consumers. It certainly has me having second thoughts!
NPR's planet money covered this topic and why we're not actually on the hook for as much as is being reported.
http://www.npr.org/blogs/money/2009/03/on_the_hook.html
It seems that the FDIC loan is covered by the usual fees paid by banks (not regular folks).
I'm not saying that if this thing falls apart that the FDIC will be fine and we'll all be happy--just that as it stands now, we're only on the hook for 7%.
How did the food coloring work? I was thinking about buying the colored street chalk and some sandpaper, and replacing 1:1 the colored street chalk dust in place of the same amount of white sand. To me it makes since because this is how colored sand is made at the carnivals.
Thanks for a great explanation of a very complicated program.
I'm sure people would like to know (I sure would) how individuals can learn more and/or participate or is this only for very large investors. Do you have any information on that?
My understanding is that the bonuses are being paid to the derivatives' traders (who may already have annual salaries of $500k+) not the insurance folks, and that internal obligations were being honored but not external commitments (which were critical to sustaining the global financial system).
DDFD is right. I totally agree with his take on this whole mess. With the (huge) exception of those who have been laid off from their jobs, those who are suffering most in this crisis are the ones who created it by living well above their means and those whose greed overcame their intelligence.
You know what makes me mad about the bonus situation? I worked for a Fortune 500 company during a time when they made record breaking profits. It was $11 billion in one year, if I'm not mistaken, and I was part of the team of "foot soldiers" that helped them make those profits. The employment contract read that bonuses would be paid "as business conditions permit." What actually happened was that management got bonuses and the little guys like me got coffee table books. We have a really sick corporate culture in this country. I actually heard an AIG representative refer to the people receiving bonuses as "talent" and he insisted that the bonuses were necessary to "retain" the talent before they get hired away. (Presumably, there are other global insurance companies on other planets whose economies have not been destroyed that are eager for this kind of "talent.")
As long as we insist on believing that corporate execs are supermen and -women with extraordinary powers, they will continue to be paid obscene salaries. We all need to GET OUR HEADS back and let it be known that if a senior-senior-senior vice president is at the helm of the ship when it sinks, NO, he does not get a big bonus while he is riding the coast guard helicopter to shore. It is QED a proved fact that these people did NOT do "excellent" work last year because they contributed to a crash of the world economy. Each and every one of those "talented" execs could be replaced by at least ten other people who could do the job just as well and are currently working in banks and accounting firms for sane salaries.
To answer the question, hell yes I would give the bonus back, even if I felt i was not directly to blame for the company's problems. It is ridiculous and shameful to accept such a large bonus at a time when people are living in their cars because of my company's actions. And remember, these guys are rich already. It's not as if they are choosing to give up shoes for their children. They might have to sell that fourth vacation home, but they'll be okay. Should the government take that money back? Sure. If they can. AIG is basically owned by the government, now, so why not?
Catherine Shaffer
Wise Bread Contributor
Cool post. I especially liked the initial image-- very funny!