Of Greed, Bankers, and Greedy Bankers
http://www.straitstimes.com/BreakingNews/Money/Story/STIStory_486180.html
Feb 4, 2010
Fury over AIG bonuses
WASHINGTON - A NEW furore erupted on Wednesday after AIG revealed plans to pay US$100 million (S$141 million) in bonuses a year after similar payments by the bailed-out insurance giant ignited a political firestorm.
The White House said President Barack Obama was 'frustrated and angry' about the hefty payouts while the government's pay czar in charge of compensation at bailed-out companies called the payments an 'outrage' that were nonetheless legally binding.
AIG said it would make the payouts under a deal in which employees agreed to accept less than they were owed in exchange for early payment.
Asked about the new bonuses, White House deputy press secretary Bill Burton said: 'Obviously, the president is frustrated and angry that Wall Street continues to have the sense that excessive compensation should reward some of the excessive risk taking we've seen over...the last couple years on Wall Street, things that brought us to the brink.'
Kenneth Feinberg, the pay czar designated under the Troubled Asset Relief Program, said the payments were part of legally binding contracts that must be paid despite the outrageous nature of the bonuses. 'These are old grandfather contracts that have the legal force of law,' Mr Feinberg told the ABC television program Good Morning America.
He said that the government was working to recoup part of the payments under agreements reached with AIG employees. 'We are making some progress,' he said. 'I do not for a minute ignore the outrage out there which I share. But the fact of the matter is we've got to abide by the law, we've got to work as best we can to get as much of this money back as we can and frankly we are doing a very very good job I think in getting as much of this money as we can pursuant to the rule of law.' -- AFP
Last year, AIG accepted a bailout of US$170 billion in taxpayers' money. They then proceeded to give up to US$218 million in bonuses to their financial services division-the same people who were largely responsible for landing the company in such a bad state in the first place. This came after AIG reported a US$61.7 billion fourth quarterly loss and an total annual loss of US$99 billion in 2008.
Fast forward one year, and in 2010 they are planning on paying US$100 million in bonuses this year. Now I don't know about AIG's performance in 2009, but I don't think it's anything stellar.
When I entered the workforce, I always had the impression that bonuses were paid to you based on how well the company did, and then how well you yourself did-if your company did well, you get a bonus, if it doesn't, too bad. Taken in context, when I first started work, I was a civil servant and my first year was 1997-the year of the Asian Financial Crisis. Even though my 'company' was not in danger of massive losses, I remember my year-end bonus was quite measly, like ¾ months or so, and we all accepted it because we knew that the economy wasn't doing well and we were thankful that we weren't in danger of losing our jobs, unlike many others out there in the private sector.
This mindset carried on to my present job, and although it was painful to experience a pay cut on our measly allowance, we understood that it was still better than being told to pack our bags and go home. It's quite simple logic and you don't need a Ph.D or a CFA to understand this.
So I don't understand why is AIG still paying its executives millions of dollars in bonus? These millions of dollars are not surplus profits that the company made but taxpayers money loaned to the company to bail it out from bankruptcy. If the bailout didn't happen, AIG would have gone bust and all those executives would be out of a job, let alone no bonus. I also don't understand how a bonus can be contractualised; if it's actually in your contract that you will going to get $100,000 in bonus, that's not a 'bonus', that's part of your annual salary. And if there was no bonus instead, what horribly bad thing would happen?
It all boils down to greed. The whole mess started because all these bankers and financial types were trying to see how much of the pie they could grab, so much so that they starting making plans based on pies that weren't really there. Now that the Federal Government gave them more pies to get their act together, all they can see is the pie and they're back to seeing how much they can grab again. If I were an American taxpayer, I'd be mighty pissed as well.
§ Quod vide:
AIG Bonus Payments Controversy
§ Technorati tags:
social commentary
Feb 4, 2010
Fury over AIG bonuses
WASHINGTON - A NEW furore erupted on Wednesday after AIG revealed plans to pay US$100 million (S$141 million) in bonuses a year after similar payments by the bailed-out insurance giant ignited a political firestorm.
The White House said President Barack Obama was 'frustrated and angry' about the hefty payouts while the government's pay czar in charge of compensation at bailed-out companies called the payments an 'outrage' that were nonetheless legally binding.
AIG said it would make the payouts under a deal in which employees agreed to accept less than they were owed in exchange for early payment.
Asked about the new bonuses, White House deputy press secretary Bill Burton said: 'Obviously, the president is frustrated and angry that Wall Street continues to have the sense that excessive compensation should reward some of the excessive risk taking we've seen over...the last couple years on Wall Street, things that brought us to the brink.'
Kenneth Feinberg, the pay czar designated under the Troubled Asset Relief Program, said the payments were part of legally binding contracts that must be paid despite the outrageous nature of the bonuses. 'These are old grandfather contracts that have the legal force of law,' Mr Feinberg told the ABC television program Good Morning America.
He said that the government was working to recoup part of the payments under agreements reached with AIG employees. 'We are making some progress,' he said. 'I do not for a minute ignore the outrage out there which I share. But the fact of the matter is we've got to abide by the law, we've got to work as best we can to get as much of this money back as we can and frankly we are doing a very very good job I think in getting as much of this money as we can pursuant to the rule of law.' -- AFP
Last year, AIG accepted a bailout of US$170 billion in taxpayers' money. They then proceeded to give up to US$218 million in bonuses to their financial services division-the same people who were largely responsible for landing the company in such a bad state in the first place. This came after AIG reported a US$61.7 billion fourth quarterly loss and an total annual loss of US$99 billion in 2008.
Fast forward one year, and in 2010 they are planning on paying US$100 million in bonuses this year. Now I don't know about AIG's performance in 2009, but I don't think it's anything stellar.
When I entered the workforce, I always had the impression that bonuses were paid to you based on how well the company did, and then how well you yourself did-if your company did well, you get a bonus, if it doesn't, too bad. Taken in context, when I first started work, I was a civil servant and my first year was 1997-the year of the Asian Financial Crisis. Even though my 'company' was not in danger of massive losses, I remember my year-end bonus was quite measly, like ¾ months or so, and we all accepted it because we knew that the economy wasn't doing well and we were thankful that we weren't in danger of losing our jobs, unlike many others out there in the private sector.
This mindset carried on to my present job, and although it was painful to experience a pay cut on our measly allowance, we understood that it was still better than being told to pack our bags and go home. It's quite simple logic and you don't need a Ph.D or a CFA to understand this.
So I don't understand why is AIG still paying its executives millions of dollars in bonus? These millions of dollars are not surplus profits that the company made but taxpayers money loaned to the company to bail it out from bankruptcy. If the bailout didn't happen, AIG would have gone bust and all those executives would be out of a job, let alone no bonus. I also don't understand how a bonus can be contractualised; if it's actually in your contract that you will going to get $100,000 in bonus, that's not a 'bonus', that's part of your annual salary. And if there was no bonus instead, what horribly bad thing would happen?
It all boils down to greed. The whole mess started because all these bankers and financial types were trying to see how much of the pie they could grab, so much so that they starting making plans based on pies that weren't really there. Now that the Federal Government gave them more pies to get their act together, all they can see is the pie and they're back to seeing how much they can grab again. If I were an American taxpayer, I'd be mighty pissed as well.
§ Quod vide:
AIG Bonus Payments Controversy
§ Technorati tags:
social commentary