And all was right with the world

$50 Million in A.I.G. Bonuses Will Be Repaid

The New York State attorney general, Andrew M. Cuomo, said on Monday that he had persuaded nine of the top 10 bonus recipients at the American International Group to give the money back, as the Senate retreated on plans to tax such bonuses.

Mr. Cuomo said he was working his way down a list of A.I.G. employees, ranked by the size of their bonuses, and had already won commitments to pay back $50 million out of the total $165 million awarded this month. But in a reversal of the stand he took last week, he said he did not intend to release any names.
...
Mr. Cuomo said that he hoped eventually to recover $80 million in bonuses paid in March to A.I.G. employees in the United States. But he said an additional $85 million had gone to people outside the United States, and he did not believe his office had the legal standing to pursue them.

See these people aren't so bad. Sure they bankrupted the world, but when faced with the prospect of having their name revealed and having to face the triple stigma of working for AIG, working in the financial products division, and trying to pretend like they had done a good job, they buckled under to fear of peasants with pitchforks at their door what's right. It's amazing what massive barge loads of shame and scorn can do when dumped on the heads of social pariahs. Any chance of this working on our elected betters?

Cuomo didn't even need any fancy tax laws, which is good because none seemed forthcoming. The current "tax 'em all" plan had stalled, of course, in the Senate, where Senate Republicans asked for "more time to study the legislation". What's that? The guys that stopped bonus and wage legislation earlier aren't for taxing it either, even after spending almost an entire week pretending to care? Shocking.

Well in any event, almost all the money that can be recovered has been recovered and it seems the outrage of the day/week unfortunately came to an end without bloodshed. I'm sure something else will be along to make sure we don't pay attention to what's actually happening. Octomom being artificially inseminated with Charles Manson's seed while getting a bonus from Citibank or something. We'll all get really pissed.

The new Sophie's Choice

Oh these poor financial executives. Forced by their own incompetence to have the government fully fund their companies they are forced with a dilemma that is almost too difficult to comprehend. Do they accept government money and restrict bonus payments or do they give the money back and collapse? Truly a query that even King Solomon would have difficulty finding a solution to. It's just not as simple as sawing an infant in half.

Some bank executives warned yesterday that the government is forcing them toward a disastrous choice between accepting restrictions on compensation that could cripple their ability to compete with rivals, or returning billions in federal aid, which could retard lending and damage the economy.

The possibility of a newly weakened banking industry also raised concerns among businesses in the wider economy that already are struggling to find financial firms willing to lend them needed money.

"We're all going to lose on this thing," said an executive at a large bank that took federal aid. He and other bankers expressed shock at the rapid progress of legislation that could impose large pay cuts on thousands of workers, and dismay that the industry is at the mercy of an angry Congress.

It's a fair tradeoff, you're mad at all the mad people and government for deigning to judge you, we're mad at all the apes in suits who collapsed the world economy. You're mad that all your "talent" might leave if you can't hand out exorbitant bonuses with government money and you'll lose to competitors. Here's the good news: all your competitors are also failing and taking government money, so no worries. I think it's nice to know that after all the damage you've caused you're all still thinking about how your failures affect your own pay and not, you know, the collapsing world economy.

This article is one of my favorite types of new financial collapse journalism. It's one where we're repeatedly told that the only sensible way forward is to give financial companies free money but to also let them pay their employees exorbitantly and any restrictions and scrutiny is coached in fear about what chilling effect it will have. News flash: you've just enacted history's biggest financial collapse, the solution was never going to be 'let things go on as they were, only with the masses subsidizing the corporate elite". The faster you come to that conclusion the faster I can stop gouging out my own eyes every time I have to read one of these "Will no one think of our moneyed whore elite?" articles.

The plan to fix everything

Since everyone is angry at AIG for paying out bonuses to it's worst division, the financial products division which tanked the entire company, I figured there had to at least be one lawmaker who had a plan to cap the bonuses and got shot down. TUrns out Ron Wyden (D-OR) said not only did he have a plan to stop the AIG bonus mess, that it passed before it was taken out of the bill in conference committee. Right now blogs and the HuffPo are trumpeting this as some sort of smoking gun of governmental incompetence/malfeasance THAT COULD HAVE SAVED EVERYTHING! What was his plan?

Senator Ron Wyden said on Tuesday that the furor surrounding AIG's bonus payments could have been avoided had the Obama White House and members of Congress simply backed legislation that he and Sen. Olympia Snowe introduced more than a month ago.

In an interview with the Huffington Post, the Oregon Democrat noted that during the crafting of the stimulus package, he and his Republican colleague from Maine introduced a provision that would have forced bailout recipients to cap their bonuses at $100,000. Any amount paid above that would have been taxed at 35 percent. The language made it through the Senate, but during conference committee with the House, it was inexplicably removed.

"The reality is, had that legislation been passed it would have been a very strong disincentive to anybody paying out bonuses in the future," said Wyden.

Seriously? Your plan was to cap bonuses at $100,000? Well, $100k......unless companies wanted to pay more than that (which they would) then there would be a regressive tax~! The regressive tax is.......a tax rate that is almost exactly the same as the regular tax rate they'd pay on the money. Oooooh burn! Paying the top tax rate totally would have stopped everything, Ron.

He's learned from this harsh experience, he and Olympia are introducing an even harsher bill. All the same provisions as the previous bill, except the fake cap is set at $50,000. Surely it will stop someone from taking a million dollar bonus. Here's a crazy suggestion: class war select a bailout bonus level you're comfortable with and then tax everything over that.....100%. That would actually stop it.

EDIT: Slightly better news. Max Baucus and Chuck "Let 'em commit suicide" Grassley have a bill that caps it at $50,000 and then levies a 35% excise tax on anything over. Which, when factored in with other federal, state, and various taxes essentially means 100%. Throw a party.

The case for rewarding failure

I'm a little at a loss here. There's someone out arguing for $165 million in bonuses to be paid to AIG executives. Oh, I'm not surprised someone's making the argument, I'm just surprised the New York Times got it out of the gate before the Wall Street Journal had it's pants on. But then again I'm not sure I should be surprised. This is after all the paper that spent the fall and winter regaling us with tales of our beleaguered rich betters who could no longer business lunch or marry for money. I guess someone there had to take up the cause for millionaires about to be cheated out of bonuses just for collapsing the world economy and failing to perform at even a basic level of competence.

“This isn’t just a matter of dollars and cents,” he said. “It’s about our fundamental values.”

On that last issue, lawyers, Wall Street types and compensation consultants agree with the president. But from their point of view, the “fundamental value” in question here is the sanctity of contracts.

That may strike many people as a bit of convenient legalese, but maybe there is something to it. If you think this economy is a mess now, imagine what it would look like if the business community started to worry that the government would start abrogating contracts left and right.

It would look like what happens every time the government has to get involved with some mega-company going into bankruptcy that has union contracts? Go ask the UAW about the sanctity of contracts.

As to what would happen to the financial sector or banks if people had to worry about their bonuses: who cares? Are there ways with which they could actually be performing worse? If they're taking government bailouts, how many people there could have earned that bonus? Fuck 'em. You lose performance incentives when your performance collapses the economy of the world.

But what about the commitment to taxpayers? Here is the second, perhaps more sobering thought: A.I.G. built this bomb, and it may be the only outfit that really knows how to defuse it.

A.I.G. employees concocted complex derivatives that then wormed their way through the global financial system. If they leave — the buzz on Wall Street is that some have, and more are ready to — they might simply turn around and trade against A.I.G.’s book. Why not? They know how bad it is. They built it.

Great plan. We're hostages, pay the terrorists what they want or they destroy the eastern seaboard. Unless they just take the bonuses and then leave anyway. Maybe we should negotiate with terrorists the way Israel negotiates with terrorists. Get all Munich up in their assess. Get Eric Bana on line one. Though really, if they understand the problems so well we need to pay them ransom money...then how come they didn't understand the problems they were creating in the first place?

What is the limit on articles the Times can produce with Ayn Randian class humping coached in the argumentative cloak of "it might not be great, but we just have to do it"? Have they hit it yet? Here's a hint for the next time you decide that our financial betters aren't being properly deified: if the only two reasons you can think of are "Contract law! What will the children think?" and "Sure they failed, but only they know the specific way they failed. Let's hand them a sack of money so they tell us." then you don't really have any reasons. Just type out "They've scaled the heights of Wall Street, that means they're better than us and we need to pay them as a reward for their status." or "Some of my friends are being affected. Waaaaaaaaah!" and we'll get the message.