After Bailout AIG Gives BONUSES!

source: http://finance.yahoo.com/news/Millions- ... 44457.html
note: this is so insane, these people need to be bit_ch-slapped into next week
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Millions in AIG bonuses draw chorus of outrage
Chorus of outrage over millions in executive bonuses at bailed out insurance giant AIG

WASHINGTON (AP) -- Leaders of the White House economic team and the Senate's top Republican bellowed about bonuses at a bailed-out insurance giant and pledged to prevent such payments in the future.

From one Sunday talk show to the next, they tore into the contracts that American International Group asserted had to be honored, to the tune of about $165 million and payable to executives by Sunday -- part of a larger total payout reportedly valued at $450 million. The company has benefited from more than $170 billion in a federal rescue.

AIG has agreed to Obama administration requests to restrain future payments. Treasury Secretary Timothy Geithner pressed the president's case with AIG's chairman, Edward Liddy, last week.

"He stepped in and berated them, got them to reduce the bonuses following every legal means he has to do this," said Austan Goolsbee, staff director of President Barack Obama's Economic Recovery Advisory Board.

"I don't know why they would follow a policy that's really not sensible, is obviously going to ignite the ire of millions of people, and we've done exactly what we can do to prevent this kind of thing from happening again," Goolsbee said.

Added Lawrence Summers, Obama's top economic adviser: "The easy thing would be to just say ... off with their heads, violate the contracts. But you have to think about the consequences of breaking contracts for the overall system of law, for the overall financial system."

Summers said Geithner used all his power, "both legal and moral, to reduce the level of these bonus payments."

The Democratic administration's argument about the sanctity of contracts was more than Senate Republican leader Mitch McConnell of Kentucky could bear.

"For them to simply sit there and blame it on the previous administration or claim contract -- we all know that contracts are valid in this country, but they need to be looked at," McConnell said. "Did they enter into these contracts knowing full well that, as a practical matter, the taxpayers of the United States were going to be reimbursing their employees? Particularly employees who got them into this mess in the first place? I think it's an outrage."

In an interview that aired Sunday on CBS' "60 Minutes," Federal Reserve Chairman Ben Bernanke did not address the bonuses but expressed his frustration with the AIG intervention.

"It makes me angry. I slammed the phone more than a few times on discussing AIG," Bernanke said. "It's -- it's just absolutely -- I understand why the American people are angry. It's absolutely unfair that taxpayer dollars are going to prop up a company that made these terrible bets -- that was operating out of the sight of regulators, but which we have no choice but to stabilize, or else risk enormous impact, not just in the financial system, but on the whole U.S. economy."

AIG reported this month that it had lost $61.7 billion for the fourth quarter of last year, the largest corporate loss in history.

In a letter to Geithner dated Saturday, Liddy said outside lawyers had informed the company that AIG had contractual obligations to make the bonus payments and could face lawsuits if it did not do so.

Liddy said in his letter that "quite frankly, AIG's hands are tied," although he said that in light of the company's current situation he found it "distasteful and difficult" to recommend going forward with the payments.

Liddy said the company had entered into the bonus agreements in early 2008 before AIG got into severe financial straits and was forced to obtain a government bailout last fall.

The bulk of the payments at issue cover AIG Financial Products, the unit of the company that sold credit default swaps, the risky contracts that caused massive losses for the insurer.

Goolsbee acknowledged the AIG example could make it harder to sell the administration's financial plan to Congress.

"Yes, you worry about that backlash. But you're also angry that this would happen at an institution that has been so troubled and you're trying to save. So I think that's perfectly fair," he said.

Goolsbee appeared on "Fox News Sunday," and Summers was on CBS' "Face the Nation" and ABC's "This Week," where McConnell also was interviewed.
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As the old saying goes: There's more than one way to skin a cat.

As public and political outrage grows over $165 million AIG paid as bonuses to executives while taking billions in taxpayer dollars, an idea is germinating in Congress. If you cannot get the money back, tax the bonuses.

"It's an idea very much at the embryonic stage," said Senate Banking Committee Chairman Chris Dodd, D-CT, "You can write a tax provision targeted specifically at 98% of the taxable proceeds."

Dodd said that "doesn't violate the terms of the contracts," referring to legally-binding agreements that appear to preclude government action.

Senate Finance Committee Chairman Max Baucus, D-MT, says his staff is reviewing such a proposal. He called it a "worthy" idea but said he needs to know more about how it would work.

Dodd says this is something that "could happen fast. We could write this tomorrow."

When asked if he plans to write legislation to limit the Federal Reserve's unfettered ability to lend money without strings attached, so as to prevent the situation with AIG from happening again, Dodd would not answer directly, saying only, "We need to look at that whole debate about modernization of the system...They've got to do a better job."

Dodd says he plans hearings into the AIG bonuses. The senator said he was told about the controversy on Thursday.

http://www.foxnews.com/politics/2009/03 ... dodd-says/

All bailout money was thrown down a hole. None of it has done what it was intended to do.

All bailouts from any president at any time is a violation of the people's trust. I'm disgusted with the entire process and with the Congress. There will be heads rolling in the 2010 Congressional elections.

Chris Dodd calling for an investigation is like a dog wanting to know who ate the last slice of bologna. That's a joke.

None of it has done what it was intended to do

one of the few times i disagree with you, well, except you're a republican, i'm an 'agnostic'

the bail out is doing exactly what it was designed to do, bail out the rich A-HOLES, that got us in this mess to begin with. why else would you pass the most expensive legistration with no oversight involved, most without even reading it.

again, shy of 600 members of congress, one million each..............yep, we can afford to vote for that, not our money, what do we care.

I'll rephrase it. Not designed to do what they said it would do.

From the BBC News
http://news.bbc.co.uk/2/hi/business/7954942.stm
An extract from the article:

The US House of Representatives has passed a bill to levy a tax of 90% on the big bonuses paid to people working at firms that have received state aid.

The $165m (£114m) of bonuses have caused outrage across the US.

US President Barack Obama has denounced such bonuses, while even AIG boss Edward Liddy has described them as "distasteful".

AIG has taken $170bn in aid from the US government.

From The Times online:

http://business.timesonline.co.uk/tol/b ... 947159.ece

Threat of 100% bonus tax raises fears for future of US banks
Christine Seib in New York

Proposals that could lead to Wall Street bonuses being taxed at 100 per cent could result in “the end of the banks as we know them now”, a leading financier warned yesterday.

The Senate is to debate next week a tax on bonuses even more draconian than measures contained in House of Representatives proposals passed on Thursday. The two Bills could be reconciled and the resulting legislation signed off by President Obama in less than a week, hitting America's biggest financial institutions.

Legislation is being rushed through amid public fury over $165 million (£114 million) in retention bonuses paid to staff at AIG Financial Products — the division that brought the insurer to the brink of collapse.

Robert Willens, a tax adviser to Wall Street banks, said: “If something even close to these proposals gets enacted, you could be facing a 100 per cent tax on bonuses. If that happens, there are people already saying that the banks as we know them will cease to exist.”

The financial sector has little chance of persuading lawmakers to tone down the legislation. Scott Talbott, spokesman at the Financial Services Roundtable, a trade association in Washington, said: “It's an uphill battle.”

The House Bill proposes that workers with a household income of $250,000 or more will face a 90 per cent tax demand on bonuses paid after December 31, 2008 by companies that have accepted more than $5 billion in taxpayers' aid.

The Senate wants a 70 per cent tax, split between the company and the individual, on all bonuses of more than $50,000. This would apply to any company that accepted $100 million or more of the bailout and has less than $500 million in assets.

As well as affecting AIG, which has received $173 billion from taxpayers, the House's proposal would hit Citigroup, JPMorgan, Goldman Sachs, Morgan Stanley, Bank of America, US Bancorp, Wells Fargo and Fannie Mae and Freddie Mac, the government-backed mortgage lenders.

Because the House's proposal covers household income, low-paid bank workers with modest bonuses would be hit if they had a high-earning spouse, Mr Talbott warned. “This will pick up rank-and-file workers, causing a brain-drain that will damage the Government's investments in the sector,” he said.

Wall Street companies paid $18.4 billion in bonuses to workers last year.Many are expected to speed up repayments of bailout money to escape restrictions on bonuses — moves that some fear will undermine the Government's attempts to stabilise the financial system.

Mr Willens said, however, that banks were unlikely to switch from small salaries and large bonuses to larger salaries. “That would saddle them with a fixed salary obligation that they'd have to pay even in lean years,” he said.

President Obama has given only lukewarm support to the Bills, amid speculation that he fears knee-jerk legislation would undermine America's standing as a financial centre.

And from the Daily Telegraph:-
http://www.telegraph.co.uk/finance/news ... treet.html

The backlash over AIG bonuses risks inflicting permanent damage on Wall Street
The pitchfork-wielding anti-bonus mob stirred up by American International Group is making for lousy tax policy.

Outraged US legislators are pushing through punitive taxes on bonuses not just at AIG but at all recipients of government funds. The hot-headed and unfairly retroactive changes could hurt investor confidence, undermine President Barack Obama’s credibility and damage the still valuable US finance sector.

AIG has been especially irresponsible, both with its risk-taking during the credit boom and with its handling of its affairs since. Agreeing to extra bonuses and then paying them to employees of its financial products unit after receiving $170bn-plus in government money – and failing to sufficiently forewarn Congress and others to boot – has rightly riled Americans and their elected representatives.

Plans to tax bonuses at financial institutions that have been bailed out by the US government are the knee-jerk result. The scheme passed on Thursday in the House would result in taxes of 90pc on bonuses at institutions that have received funds from the government; in the Senate, which now has to consider the measures, thinking seems to be 35pc levied on the employer, and an extra 35% on the employee.

The bonus tax idea is bad for a range of reasons that senators should consider calmly, even if the House didn't do so. One is that it changes the rules – again – for recipients of government assistance. Government initiatives to kick-start clogged financial markets depend on investors and institutions participating. If they think that the rules of the game are going to change continually, they’ll be reluctant.

The tax plans are also retroactive to the beginning of this year. Bankers awarded bonuses for 2008 – and some payouts were both relatively modest and legitimately earned – received them earlier this year, net of prevailing taxes. They may in good faith have spent the cash, invested it or even given it away. Changing the rules now, and demanding a giant additional tax cheque, really isn’t fair.

Even more importantly, there’s the longer-term impact on the US financial industry. Wall Street’s finest, together with AIG – admittedly a different beast – are now in the doghouse together. But the finance business is in fact one of America’s global strengths. The planned taxes are just the kind of thing that will give foreign firms and non-US bankers an edge.

In fact, US institutions may be motivated to pay back funds received under the Treasury's Troubled Asset Relief Programme so as to escape the new taxes. That sounds like a silver lining - except that administration officials don't want that yet, for fear that firms will lose the capital cushion against further losses that Tarp was designed to provide.

That's just one example of the crossed wires inherent in the latest tax plans. And with so many bigger issues at hand, it's surely the kind of risk to credibility that Congress should make sure it avoids.

Me thinks the government are going to have to be very careful that this isn't simply a knee jerk over-reaction that does more harm than good.

Chris Dodd was proved an out and out liar by CNN news!

Myself like many U.S. taxpayers are disgusted. I wonder if any of our elected officials will ever really consider a bailout of the taxpayer

snowman wrote:Myself like many U.S. taxpayers are disgusted. I wonder if any of our elected officials will ever really consider a bailout of the taxpayer

You have got to be kidding. The taxpayers and those who are productive are making all of the bailouts possible!

Americans are apparently confused and think that the bonuses were for performance. These bonuses are lump sum incentives to keep key people in place to untangle the mess at AIG. Employees were ready to leave whether the company was saved or not. From a business standpoint, it was about the only move AIG had. They couldn't operate without key management, and they didn't have time nor the prospects to do any head hunting to replace them. Congress knew this, and that's why Congress approved of the bonuses. What AIG did was legal, no matter how morally wrong anyone may think it was, and I am furious about the bonuses and the bailout in general. This makes the big hearings last week even more farcical because everyone involved (except taxpayers) knew that AIG was giving these retention bonuses.

Secondly, everyone who is screaming about the bonuses in Congress voted for the stimulus package that contained these bonuses. Of course, the vote had to be taken hurriedly without reading everything because America was going to collapse (yeah, right). A Senator confessed to the media that he lied earlier in the week when he said he had not inserted the bonuses into the bill. He said that he had inserted them at the urging of the current administration and the Secretary of the Treasury.

http://www.cnn.com/2009/POLITICS/03/21/ ... index.html

Third, I wonder why Americans aren't screaming about the money that AIG has funneled to foreign banks to prop them up? Now American taxpayers are financing banks in other countries!

Lastly, the bill passed by Congress, that specifically targets the receivers of these bonuses to tax them unreasonably, is unconstitutional. The bonuses were made in contract between private business and private workers before there were any bailouts. The Congress has no authority in such private business matters, especially after they had approved of the bonuses in the first place. It is also unconstitutional for taxes to be levied retroactively. The legislature has no authority to punish anyone. The courts are the only branch that has authority to punish anyone, and all of those people in court are entitled to due process of law. No one receiving these bonuses has been given due process.

I am disgusted that the bonuses are there, but I am more disgusted that the Congress approved them in the first place. I am against all bailouts and believe that none should have been given.

Tilokarat wrote:Obi seems to be in a towering rage over this mess.

Why did he not notice what was taking place in Congress? Why the delayed reaction? Is this part of the attempt to boost his ratings and popularity as well as going on talk shows to re-connect with the masses (communist rhetoric for the people)

He signed the stimulus bill that contained the bonuses. I guess he didn't know what he was signing, or he knew and signed it anyway. Neither choice is good for any chief executive, private or public, when playing with the people's money.

A list of politicians who received campaign contributions from AIG is supposed to be forthcoming. The below article only deals with one Congressman in particular, who is also dealing with tax evasion charges (he is also on the committee in the House that helps to write the tax code).

http://www.nytimes.com/2009/03/21/nyreg ... f=business

I think it's time to start over in Congress. Time for a whole new 535 members.