My feeling is that these "mental giants" are going to make things worse . . . they should just let us take our medicine (a recession) and then move on, but instead I think they will only magnify the problems . . .
No there is no such thing as risk free investing. There is no reward without risk or opportunity costs incurred (even savings accounts, money market accounts, or CDs).
All of these big banks are having the same issues, new executive office suites, new planes, big bonuses. No business that fails so horribly that the govt. has to come in and rescue them should be purchasing new assets or paying bonuses. AIG could and should have renegotiated those contracts just like the auto makers did theirs. Yes, AIG isn't the only one doing this. The others we bailed out have been doing the exact same thing but just didn't get the media attention. There is way too much nepotism between these big banks, the fed and Congress. A blanket policy stopping the excesses needs to be there, trying to go back and tax it was more stupidity.
@Bucky You don't think those legacy costs had anything to do with the Big three failing? Come on, giving in to those kinds of terms is crazy.
But back to the subject at hand, let me make one thing perfectly clear: of course I believe that the ones who caused this problem shouldn't get bonuses. But the whole point is that AIG is a great insurance company. Those great employees that had nothing to do with the derivative side of things shouldn't be punished.
Right?
Or should they because their company is in trouble and did bad things? 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.
As for the ones giving it back, we'll never know if they were the "good," "the bad," or "the really bad."
>It's simple: we're all angry when we see a company that's >getting bailed out paying out huge bonuses to the very people >we believe put them in that mess.
It is simple. People who made mistakes - consciously or not - should take responsibility i.e. get fired or "punished" in some other way e.g. should get their pay docked or whatever seems appropriate. That's the basic law of the free market economy - those who make mistakes fall behind those who do not. It's not the other way out...
>Should these people have their bonuses taken away when they >were contractually obligated to receive them?
No one may be obligated to receive benefits. You may be entitled to it but as far as I know you cannot be obligated to it. The company is obligated to pay, not the CEO's to receive them, or are they ?
>And if somehow they were taken away, why would these >(presumably great) employees stay at the company? Why wouldn't >they all take off, leaving AIG devoid of all the good talent >that's left?
If those good talents got the company in a difficult situation in the first place, should they be still considered worth keeping ?
>Part of AIG's business (insurance) is a great company and does >great work.
Well made point. The company should distinguish between effective and ineffective employees. If the ineffective group is being paid large bonuses it may be branded as an action detrimental to the company's health and as such is punishable under U.S. law, isn't it (I'm not an U.S. citizen, so I don't know for sure)?
>These bonuses were in their contract, so if you want to be >upset then direct it at the people who wrote the contract
>(AIG). The law says AIG has to pay them.
Yes, the people who drafted contracts that award certain people bonuses regardless of their financial results (while managing company) are to blame.
As there is not simple answer to your question I would say that the company owners should try to question the validity of the aforementioned contracts in court. If the court determines that the contracts are invalid or faulty in some respect the owners would gain a legal argument in the dispute and a legal basis for taking another legal action in order to take away the bonuses from people who didn't deserve them.
Another question is how the U.S. government secured it's aid. When providing money for a company to bail it out, it should state some conditions regarding inteded use of this money, right ?
The entire economic crisis started with subprime mortgages and was continued by people investing in securities structured around them. However, this is just another untested investment vehicle and will probably go down as another investment fad.
Sure your investment is "guaranteed". Even though you won't lose anything, you face the very likely risk of not gaining anything. What's lost is opportunity.
I don't know when anyone would invest in something untested when blue chips are almost half off. Keep it simple and stick to the tried and true: buy high quality stocks, bonds and mutual funds with long histories of gains and dividends.
You seem to be confused about he bonus issue. Have you been paying ANY attention to this?
"I think more people need to put themselves in the shoes of these employees, not the big CEOs, but the little worker bees at the bottom of the totem pole."
Frugal G, the little worker bees aren't getting the million dollar bonus checks and the little worker bees aren't in danger of losing any "bonus" they might get.
I'd recommend a Google search perhaps, to read up on the facts. It's been covered in most every newspaper of record. http://www.google.com just in case you don't know how to do a Google search.
I'm sure that you and your hubby have been having a disagreement over this. He might actually be dealing with facts, while you are obviously confused. But then, he married you.
"Those contracts to autoworkers were what was drowning them..."
Ummmmm. NO.
That's just GOP talking point bullshit. The actual hourly wage differential between the Big Three and foreign competition southern plants is inconsequential to the price of an auto.
Big 3 are actually cheaper in price, mostly.
The problem for Detroit is that they've been selling inferior product for decades. They completely and consistently misread the market.
Unions aren't the problem, management is.
To the bigger issue of the bonus payouts ... if I got (won) one, I wouldn't give it back. That would be stupid. But there is no reason to pay them in the first place. Yes, AIG has a contractual obligation to pay. But contracts get broken every day (see: union autoworker contracts). Contract disputes happen all the time. In fact, AIG has refused to pay their contractualy obligated bonus payments to employees for years because of performance issues. And I think we can all agree this is a huge effing performance issue.
So don't pay and let the injured parties sue. Let's all go to court and see how a jury of our peers feels about the bonus payout issue.
I love this post and kudos for writing it. My husband and I have been having the exact same disagreement.
I think it's funny how everyone thinks the receivers of these bonuses should give the money back. It's always easy to give away someone else's money isn't it? I think more people need to put themselves in the shoes of these employees, not the big CEOs, but the little worker bees at the bottom of the totem pole. I don't think many people in that same situation would honestly give away their hard earned money.
Interesting responses people...so far I guess it just goes to show that it is best determined on a case-by-case basis. My getting frustrated with a customer service rep the other day trying to find information I'd found online was testament to Trevor's observation that if you know what you're signing up for, tis best to just do it yourself online.
16 years ago I bought a PC for the first time. It had Win3.1 with DOS underneath. The DOS had QBASIC as a feature for old time hobbyists. So, one fine night I banged out some code to make a math model of a 401(k) with the needed formulas and inputs for the variables.
So, I innocently put in figures (I was age 30 at the time) and assuming no Social Security, I found that unless you put in starting at age 18 at a good job the full amount, you run a serious risk of outliving your money - even with a generous interest rate.
The model was incomplete: It lacked inflation devaluing the earliest dollars and failed to take into account TWO stock market crashes, 1999 and now! If it was no good starting at age 30 with no inflation and no bubble crashes, it is a sick joke with the added data of the inflation and two crashes making it a "201k" and now a "101k".
Boy, did the working class get duped. Wait until the rest of the working class realizes what I've known since 1993 when it's more than too late. 401(k) plans are not retirement plans! The only retirement plan is once you run out of money you have the ultimate retirement plan: a suicide plan!
in my opinion although its saves a lot money,it will not get a huge buzz outside India.Why? becoz people nowadays goes for image and driving the world cheapest car certainly not going to be in your facebook album.
I agree. I have no idea where this story about a young boy comes from. Parrotsecrets and many other sites are owned by SEO "specialist" Sumantra Roy who has been publishing on the internet for 10 years, and who currently also tries to run a legitimate business "Conversion Multiplier." But that business isn't doing too well, it seems.
@Gimble: Good analogy there, that's a great point and I totally agree. Those contracts to autoworkers were what was drowning them and so they needed to be addressed.
Here's my problem: AIG is an insurance company (as the President reminded us tonight). A very good one at that. Do we know whether the executives that are getting these bonuses (some of them are returning them already) were from the profitable, insurance part of the business? If so, do they deserve to be punished like this?
I don't know, maybe I'm not being consistent, but all this outrage just doesn't make sense to me.
And by the way, I loved how President Obama answered that nonsensical question about why he didn't come out on TV to complain about the AIG bonuses right away.
"Because I like to know what I'm talking about before I speak."
There is a little caffiiene in some decaf drinks. Regulation requires that it be reduced by at least 97.5 percent. If you are very sensitive to caffeine, your best bet is to avoid anything that has to be decaffed at all. Good luck!
If the Fed just goes on boosting the money supply even as the recession ends, then yes--we'd just get inflation. I don't think that's in the cards, though. As soon as the recession threat fades, the Fed will try to undo enough of the money-supply growth to rein in inflation.
If they see that through--producing another recession, but hopefully one that doesn't have the same danger of economic collapse that this one does--then we'd just see one burst of inflation followed by one more recession. But I don't think that's in the cards either.
What a silly argument. For all intents and purposes, AIG went bankrupt last summer. Had the government not intervened, all those "good employees," would have received no bonus... so why should they receive one now at the taxpayer's expense?
(The preceding was not a legal argument)
From a more legal standpoint, I believe the law will stand. Retroactive taxes have been Constitutionally upheld, and by wording the legislation to include any company that receives more than $5 billion in bailout money, it should apply to enough people that it is not considered a punitive tax. Harvard law professor Laurence Tribe says it should be considered Constitutional.
Tough call, but I usually prefer to click . . .
Great post!
The price isn't always the price . . .
My feeling is that these "mental giants" are going to make things worse . . . they should just let us take our medicine (a recession) and then move on, but instead I think they will only magnify the problems . . .
These AIG bonuses were disgraceful, but not surprising.
No there is no such thing as risk free investing. There is no reward without risk or opportunity costs incurred (even savings accounts, money market accounts, or CDs).
My wife was reluctant at first, but the landline is gone almost a year now-- no problem.
We too are considering Skype, but there is no rush . . .
All of these big banks are having the same issues, new executive office suites, new planes, big bonuses. No business that fails so horribly that the govt. has to come in and rescue them should be purchasing new assets or paying bonuses. AIG could and should have renegotiated those contracts just like the auto makers did theirs. Yes, AIG isn't the only one doing this. The others we bailed out have been doing the exact same thing but just didn't get the media attention. There is way too much nepotism between these big banks, the fed and Congress. A blanket policy stopping the excesses needs to be there, trying to go back and tax it was more stupidity.
@Bucky You don't think those legacy costs had anything to do with the Big three failing? Come on, giving in to those kinds of terms is crazy.
But back to the subject at hand, let me make one thing perfectly clear: of course I believe that the ones who caused this problem shouldn't get bonuses. But the whole point is that AIG is a great insurance company. Those great employees that had nothing to do with the derivative side of things shouldn't be punished.
Right?
Or should they because their company is in trouble and did bad things? 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.
As for the ones giving it back, we'll never know if they were the "good," "the bad," or "the really bad."
The Writer's Coin | Follow me on Twitter
>It's simple: we're all angry when we see a company that's >getting bailed out paying out huge bonuses to the very people >we believe put them in that mess.
It is simple. People who made mistakes - consciously or not - should take responsibility i.e. get fired or "punished" in some other way e.g. should get their pay docked or whatever seems appropriate. That's the basic law of the free market economy - those who make mistakes fall behind those who do not. It's not the other way out...
>Should these people have their bonuses taken away when they >were contractually obligated to receive them?
No one may be obligated to receive benefits. You may be entitled to it but as far as I know you cannot be obligated to it. The company is obligated to pay, not the CEO's to receive them, or are they ?
>And if somehow they were taken away, why would these >(presumably great) employees stay at the company? Why wouldn't >they all take off, leaving AIG devoid of all the good talent >that's left?
If those good talents got the company in a difficult situation in the first place, should they be still considered worth keeping ?
>Part of AIG's business (insurance) is a great company and does >great work.
Well made point. The company should distinguish between effective and ineffective employees. If the ineffective group is being paid large bonuses it may be branded as an action detrimental to the company's health and as such is punishable under U.S. law, isn't it (I'm not an U.S. citizen, so I don't know for sure)?
>These bonuses were in their contract, so if you want to be >upset then direct it at the people who wrote the contract
>(AIG). The law says AIG has to pay them.
Yes, the people who drafted contracts that award certain people bonuses regardless of their financial results (while managing company) are to blame.
As there is not simple answer to your question I would say that the company owners should try to question the validity of the aforementioned contracts in court. If the court determines that the contracts are invalid or faulty in some respect the owners would gain a legal argument in the dispute and a legal basis for taking another legal action in order to take away the bonuses from people who didn't deserve them.
Another question is how the U.S. government secured it's aid. When providing money for a company to bail it out, it should state some conditions regarding inteded use of this money, right ?
Theer is a resignation letter from an AIG honcho who will not be giving his million dollar bonus back, instead giving it all to charity.
The entire economic crisis started with subprime mortgages and was continued by people investing in securities structured around them. However, this is just another untested investment vehicle and will probably go down as another investment fad.
Sure your investment is "guaranteed". Even though you won't lose anything, you face the very likely risk of not gaining anything. What's lost is opportunity.
I don't know when anyone would invest in something untested when blue chips are almost half off. Keep it simple and stick to the tried and true: buy high quality stocks, bonds and mutual funds with long histories of gains and dividends.
@One Frugal Girl
You seem to be confused about he bonus issue. Have you been paying ANY attention to this?
"I think more people need to put themselves in the shoes of these employees, not the big CEOs, but the little worker bees at the bottom of the totem pole."
Frugal G, the little worker bees aren't getting the million dollar bonus checks and the little worker bees aren't in danger of losing any "bonus" they might get.
I'd recommend a Google search perhaps, to read up on the facts. It's been covered in most every newspaper of record. http://www.google.com just in case you don't know how to do a Google search.
I'm sure that you and your hubby have been having a disagreement over this. He might actually be dealing with facts, while you are obviously confused. But then, he married you.
@WC Porter
"Those contracts to autoworkers were what was drowning them..."
Ummmmm. NO.
That's just GOP talking point bullshit. The actual hourly wage differential between the Big Three and foreign competition southern plants is inconsequential to the price of an auto.
Big 3 are actually cheaper in price, mostly.
The problem for Detroit is that they've been selling inferior product for decades. They completely and consistently misread the market.
Unions aren't the problem, management is.
To the bigger issue of the bonus payouts ... if I got (won) one, I wouldn't give it back. That would be stupid. But there is no reason to pay them in the first place. Yes, AIG has a contractual obligation to pay. But contracts get broken every day (see: union autoworker contracts). Contract disputes happen all the time. In fact, AIG has refused to pay their contractualy obligated bonus payments to employees for years because of performance issues. And I think we can all agree this is a huge effing performance issue.
So don't pay and let the injured parties sue. Let's all go to court and see how a jury of our peers feels about the bonus payout issue.
Heh.
I love this post and kudos for writing it. My husband and I have been having the exact same disagreement.
I think it's funny how everyone thinks the receivers of these bonuses should give the money back. It's always easy to give away someone else's money isn't it? I think more people need to put themselves in the shoes of these employees, not the big CEOs, but the little worker bees at the bottom of the totem pole. I don't think many people in that same situation would honestly give away their hard earned money.
@Erica - fancy that...a world where we look internally for happiness instead of externally...is it even possible in our society?
Interesting responses people...so far I guess it just goes to show that it is best determined on a case-by-case basis. My getting frustrated with a customer service rep the other day trying to find information I'd found online was testament to Trevor's observation that if you know what you're signing up for, tis best to just do it yourself online.
16 years ago I bought a PC for the first time. It had Win3.1 with DOS underneath. The DOS had QBASIC as a feature for old time hobbyists. So, one fine night I banged out some code to make a math model of a 401(k) with the needed formulas and inputs for the variables.
So, I innocently put in figures (I was age 30 at the time) and assuming no Social Security, I found that unless you put in starting at age 18 at a good job the full amount, you run a serious risk of outliving your money - even with a generous interest rate.
The model was incomplete: It lacked inflation devaluing the earliest dollars and failed to take into account TWO stock market crashes, 1999 and now! If it was no good starting at age 30 with no inflation and no bubble crashes, it is a sick joke with the added data of the inflation and two crashes making it a "201k" and now a "101k".
Boy, did the working class get duped. Wait until the rest of the working class realizes what I've known since 1993 when it's more than too late. 401(k) plans are not retirement plans! The only retirement plan is once you run out of money you have the ultimate retirement plan: a suicide plan!
in my opinion although its saves a lot money,it will not get a huge buzz outside India.Why? becoz people nowadays goes for image and driving the world cheapest car certainly not going to be in your facebook album.
I agree. I have no idea where this story about a young boy comes from. Parrotsecrets and many other sites are owned by SEO "specialist" Sumantra Roy who has been publishing on the internet for 10 years, and who currently also tries to run a legitimate business "Conversion Multiplier." But that business isn't doing too well, it seems.
@Gimble: Good analogy there, that's a great point and I totally agree. Those contracts to autoworkers were what was drowning them and so they needed to be addressed.
Here's my problem: AIG is an insurance company (as the President reminded us tonight). A very good one at that. Do we know whether the executives that are getting these bonuses (some of them are returning them already) were from the profitable, insurance part of the business? If so, do they deserve to be punished like this?
I don't know, maybe I'm not being consistent, but all this outrage just doesn't make sense to me.
And by the way, I loved how President Obama answered that nonsensical question about why he didn't come out on TV to complain about the AIG bonuses right away.
"Because I like to know what I'm talking about before I speak."
Awesome.
The Writer's Coin | Follow me on Twitter
I understand the major componentes cant be taken out for servicing, built in obsolesance.
Surprise. I have heard of a case where the paper catalog prices were lower than the same item on a large department store's website.
There is a little caffiiene in some decaf drinks. Regulation requires that it be reduced by at least 97.5 percent. If you are very sensitive to caffeine, your best bet is to avoid anything that has to be decaffed at all. Good luck!
Linsey Knerl
@Dana:
If the Fed just goes on boosting the money supply even as the recession ends, then yes--we'd just get inflation. I don't think that's in the cards, though. As soon as the recession threat fades, the Fed will try to undo enough of the money-supply growth to rein in inflation.
If they see that through--producing another recession, but hopefully one that doesn't have the same danger of economic collapse that this one does--then we'd just see one burst of inflation followed by one more recession. But I don't think that's in the cards either.
Hence my forecast of stagflation.
I'd be pleased to be wrong, though.
What a silly argument. For all intents and purposes, AIG went bankrupt last summer. Had the government not intervened, all those "good employees," would have received no bonus... so why should they receive one now at the taxpayer's expense?
(The preceding was not a legal argument)
From a more legal standpoint, I believe the law will stand. Retroactive taxes have been Constitutionally upheld, and by wording the legislation to include any company that receives more than $5 billion in bailout money, it should apply to enough people that it is not considered a punitive tax. Harvard law professor Laurence Tribe says it should be considered Constitutional.