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The Sheriff of Nottingham from Robin Hood: Prince of Thieves

I love the government’s solution to the bonus situation. Tax em to death on it. I thought we were supposed to be protected from such things, I guess not.

I was listening to the radio today, and the guy had some very valid points for the executives receiving bonuses.

A) They were retention bonuses, which are much different than performance bonuses

B) When the government first made its moves to bailout AIG, Chris Dodd, the man who originated the idea of taxing them to death, passed by the opportunity that would’ve prevented this debacle in the first place. They didn’t.

Mainly, I’m most concerned over the implications of this. The government is showing an awful amount of force over a relative small amount of money, which when these bonuses were decided, were not government funds. In fact, I didn’t even see this kind of energy against terrorism or to help the victims of Katrina. So the government finally decides to wake up to the tune of money.

Yet if they pull off this “special” tax provisions, a few things could be had. If the government could step out of line on this, it leaves open a powerful precedent for it to tax anyone for anything just because they don’t feel like it. I could be charged a blog tax because I’m posting against them. Who knows?

The other concern with this “special” tax provision: what happens if they screw it up – in typical bureaucratic practice – and it ends up taxing far more. Say you’ve barely scraped through the whole year, but your company managed to have a decent year and decides to give bonuses to its employees. Wow, that extra $1,500 will go a long way. Oh wait, Mr. Dodd and company screwed up, so instead of $1500, you get a measley $150. Thanks government. That’ll cover 1 credit card payment this month.

I’m not for big government, and I’m not for little government. And I’m not for government who decides to change the rules on command because they don’t like something. They knew these bonuses were going to happen when they took up the charge of the bailout program, yet refused to do anything about it. You can’t make up the rules as you go along. That’s like pulling a guy over who was going 55 in a 55 zone, but you decided it was now a 35 zone, so he’s now under arrest. I don’t like these implications, and if you have any sense about you, you wouldn’t either. Sure, I’m not thrilled these guys are getting bonuses either, but maybe I wasn’t smart enough to force one under my employment contract.

If I were in his shoes, what would I do? Hrmm.

Would I take the bonus? Would I go through court to enforce it if the government illegal strips away the contractual obligation?

This is a question that has been burning at me, the view of the other side of the track. Sure, it is easy for us to sit here and judge them. Yet it is our of fear and anger, and we really do need to let cool heads prevail (Iowa senators no need to apply). Here are guys who are running basically a failed company. Sure, we could deny them a bonus, but they will just leave. And few are going to be willing to go work for AIG, knowing their fate.

People tend to forget the trend with money. More money, more problems. When you make more, you generally spend more. Which makes losing that income even more painful.

These men do have a right to that money. They are people after all, most of whom probably have families that rely on that money. There are numerous people who make their living off of doing services for these men. They probably owe money for their homes and cars, etc. Now we are going to tell them “yea, we know you were told you were going to make X amount of dollars, but sorry, we decided to ignore your contract because the people are mad.”

So what would I do? Would I take it? Hell yea! But I’d probably do something a bit different. I would have them give 1/2 of my bonus to specific charities. Maybe help a few homeowners get into a better position with their home or something. But I would take it. And if I didn’t get it, I would sue.

I was reading some of the comments on the AIG outrage article on CNN. Someone commented about teachers and others not being paid in accordance with their contract either. I know all about this, my mom is a bus-driver and isn’t putting down in overtime in fear that they’ll lay her off. California is on a stiff budget shortfall, which is hurting everyone. I hate to see it, but honestly, the course of action there is a bit different. If the teachers were to sue, the state doesn’t even have enough money to pay them any settlement. California can’t just print money because it has a deficit. Plus it is a little bit of a different world with teachers versus bankers. To be a teacher is about sacrifice, you’ve dedicated your life to educating the world of tomorrow. Quitting and suing (or suing and being fired) goes against the basic grain of a teacher, because the education of children would be harmed. Sure, they could sure, not be fired, and win. Then what? Then they are using their own money to buy supplies for the classroom, if there is even one left.

Banking is a little bit different. AIG will eventually no longer exist. Maybe it will, but it will be unrecognizable. The school systems in California, or anywhere in the U.S. for the most part, is not going to go away. The personal committment to a bank is no where near as taxing as that as education, even though educators are paid a fraction of a banker. Bitter irony, I know. But the banker and the educator both have a right to stand up for their rights, to enforce others to live up to their agreements and/or abide by labor laws in effect for the protection of all Americans. The difference is for the educator, the price to fight – endangering a child’s education – is too high.

Charles Grassley, Republican Senator from Iwoa, and a disgrace to Americans everywhere

How in the world can this man go on radio and say these things? Here’s the quick excerp from CNN:

“I would suggest the first thing that would make me feel a little better toward them [AIG executives] is if they follow the Japanese example and come before the American people and take that deep bow and say, ‘I am sorry,’ and then either do one of two things: resign or go commit suicide,” he said.

“And in the case of the Japanese, they usually commit suicide.”

You’re an elected representative of the people. I understand the people are outraged. I can understand especially the people of Iowa, many of whom have probably never seen a million dollars, with no major banks centered there, being obviously upset about this entire financial mess.

But get real. You are a grown man. You do not go on radio as a representative of the people and suggest that people committ suicide! Honestly, sadly, I hope someone does now. Just so this man can be reamed from sea to shining sea for making that remark. He is saying that money and pride are more important than a human life! Oh my god.

I could just rant on for hours about this guy. I just hope someone in Congress gets some sense and recommend him being removed from office.

Maybe I’m a little sensitive about the subject. Why? When I was 19, a friend of mine pointed out some jock he knew and told me that he was an asshole. I said jerks like that deserve to die. 2 weeks later he died in a car accident. Did my words kill him? No. But did he deserve to die? No.

Read more on Grassley, and more of the fuming of against AIG here on CNN.

AIG claims it is paying out $165 million in bonuses because of contractual obligations

People are in an uproar over AIG’s blatant attempt to reward the idiots that sunk them to nationalization. Even worse giving them bonuses with what appears to be taxpayer money! Obama is sounding the alarm, telling the people he will do everything in his power to stop those bonuses.

As asanine as this may sound, we’re going to have to accept these bonuses. Unfortunately, these bonuses aren’t just “hey, let’s throw taxpayer money around,” they are contractual obligations to the employees they are owed too. Cuomo is investigating, as always (I’m kind of sick of the guy to be honest), but I don’t know how much he can really pull on them.

Why? These bonuses were written into the contracts of these employees. HR managers have limited run at offering pay, but they are given lots of room for special contractual perks, in an effort to obtain and keep talent. These things were written in blood before the government became a majority owner of AIG. Sure, a smart HR manager would have made them performance based, but that obviously doesn’t seem to be the case (I don’t know the specifics of these contracts). However, withholding these bonuses because Congress doesn’t like it is a violation of that contract. In other words, if they don’t pay them, AIG (and the government) can be sued, realistically for a lot more than the total bonus amount ($165 million is a lot lower than we’ve been hearing. Hell, Thain wanted 25% of that for himself).

If these things go to court, these employees will most likely win. If they don’t, there could be negative connotations for the rest of the U.S. Why? If I get offers from 2 companies, one a U.S. company, another one a foreign company. The foreign company and the U.S. company offer similar compensation and bonuses, who am I going to go to? The foreign firm, as long as their contract laws ensure that my employer cannot retroactively change the terms of our contract. If we decide that the laws doesn’t apply this time because we don’t like it, then we are violating everything America is about.

So yea, I hate to say it but, just pay them the bonuses. $165 million dollars is less than .1% of what AIG has gotten in the bailout, compared to the roughly $4 billion Merrill Lynch paid out just before it became BoA. $10 billion of BoA’s TARP funds came from Merrill, so those bonuses were approximately 40% TARP funds. No wonder Cuomo is barking up their tree. In the end, in order for this country to remain a capitalist society, we have to uphold contract laws, even if we don’t like it. Pay them out, then mark down a lesson for future regulators. Don’t set bonus limits, but require bonuses over a certain amount to be based of performance factors.

AIG Headquarters

AIG, the largest crook, eh, insurance company around, has accepted another $30 billion from the U.S. Government. If we think Citi and Bank of America are in dire straights, consider this: If you combine the amounts the largest 12 US Banks received in TARP funds, you would still be nearly $6 billion short of the AIG bailout. Thats right, Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, PNC Financial, US Bancorp, Bank of New York Mellon, Suntrust Bank, State Street Bank, Capital One, BB&T, and Regions Financial has received a whooping total of $174.3 billion, as compared to AIG’s $180 billion. Plus the US Government will be taking risky securities from them as well. Us taxpayers will also be taking over partial control of a few business units that AIG has been trying to sell but has come up short.

People scream and complain all day, because the thought of Bank of America receiving $45,000,000,000 (yes, that’s 9 zeros) is mind boggling. Maybe we don’t want to sit down and think about how big $180,000,000,000 really is. There are countries that don’t even have a GDP that high. In fact, there are a LOT of countries with a GDP lower than $180 billion. Yet here we go, giving away medium developing countries to an insurance agent, who should be a master of risk management even more so than a bank, who took on ungodly risks and is paying the piper for it. Their company’s credit rating is being considered for downgrade to junk, which is why the government stepped in again. If it gets downgraded, clauses in insurance contracts will allow customers to close their policy.

Maybe we need to let AIG fail. Not quickly and painfully, since it’s span is webbed throughout the world, and could cause serious withdrawels in places like Japan, China, Hong Kong, among other places.  We need to let it fail gracefully, selling off its pieces as we go along.

How can I say this? Even though I support the bailout and government intervention in times of need, I still believe it goes slap against the core of what a government really is supposed to do. That is to provide infrastructure, emergency services, education. Enticing businesses to come and and stirring up economic activity is of intrinsic interest, but not the first priority (though it is needed for the 1st). AIG is a company that is supposedly too big to fail. Yet if it’s credit ratings drop, customers move elsewhere, investors move elsewhere. While AIG would shrink, it’s competitors would grow. At some point the cost has to outweigh the risk, so is the risk worth at least $180 billion? I dunno, but I think at some point we’re going to find out. That is a tremendous investment, seeing as how most companies in the U.S. have never earned that much money.

Honestly, at this point I’m feeling taken by AIG.  Citigroup is getting to me too, with their 36% move, which unless they get up to like, say $30 a share or so (rough estimate), we the taxpayers are getting a really big short end. At least Bank of America has been repaying their interest to the government, so I can tolerate that $45 billion.

Too many things are still uncertain, but I do think that we are going to see some bad things happen or nearly happen to Citi and AIG this year. Just an opinion. Think differently, then put it out there.

FDIC Insures Deposits Up To $250K

I ALMOST FORGOT TO MENTION THIS! Jeeze, I could get on myself for that. Two banks collapsed into the FDIC’s waiting arms this weekend, bringing the total number to 16 for 2009. There were 25 in 2008 total, so you decide. That’s 16 banks in 2 months, and there are another 10 to go (not to mention a number of other problems, such as commercial real estate, that may implode at any moment). It was another couple of small banks, Heritage Community Bank and Security Savings Bank. Heritage Community Bank was a bank out of Glenwood, IL, while Security Savings Bank was from Henderson, NV. MB Financial, NA and Nevada State Bank were the recipients, respectively.

The grand total to the FDIC (::cough:: taxpayers)  for these two? $100.7 million. A small number, if you consider a small number to be more money than most of us will ever see in our lives. Hope that puts that into perspective.

The FDIC said that the current crisis will probably cost the fund $65 billion by 2013. Or in other words, less than AIG’s bailout.

To finish off tonight, the government did announce that it will take control of 36% of Citigroup. That is 14% + 1 share of nationalization the good ol fashioned way. Now we know what government and private equity has in common.