After being gone for three weeks and two weeks back in the country, I watched the Sunday talking heads series on ABC/CBS/NBC. Various government officials are being questioned mostly about the on-going economic/financial crisis. And, did I learn anything new? No! I heard just a whole lot of hot air, excuses, insinuations, pretense, politicking. Well, what did I expect?
One thing that sticks out in my mind is this issue of the so-called bonuses paid out to various financial institutions executives. My government dished a whole lotta dough in our name to these institutions and we are getting a whole lotta B.S. back.
We ask how come execs are personally getting millions from our money for running those businesses into the ground. We are told, you know, it's all these contracts and such which need to be honored; we honor contracts in this country; we are a country of laws.
Well, that may be so, but let me see. A bonus, in my book, is what you get for something you did well! A so-called bonus is not a bonus if it is contractually guaranteed and not being performance related, no?
What am I missing in this picture? For example, I am told that my government owns 80% of AIG on my behalf and is not empowered to force it to behave! Something is really, really rotten in this historic scam.
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7 comments:
I have reduced my watching of news to a minimimum; there are more important things to do.
I have already lost my money.
Bonuses: the question is: these bonuses are for what period? The period before the peak, or the period during
which the market collapsed. As we know, often times, we get paid for thing done two years ago. I don't
know the answer of course. But we do know that lawyers, as many other people, are at the origin
of all our problems, including all of us, the consumer.
Having said this, the government should not have involved itself with AIG. If it failed, so be it. There
would have been world-wide repercussions (maybe). Many repercussions are due to the media with
its "excessively" negative slant (since well before 2000).
The government would have more money, and the company could do exactly as it wished.
We are happy with capitalism when everybody makes money (as it should be), but we are not
willing to abide by capitalism when the system fails. We should be consistent, or else the situation
is even worse than it would be otherwise.
That is the extent of what I will say.
Giving bonuses to those CEO's is entirely consistent with the bailout. It is the same idea of rewarding failure. Welcome to the welfare state.
Here is what you are missing :-)
As we find out now, these are not performance bonues, but retention bonues, issues around July or August 2008 (before the crash). The way this works is that you are paid extra and in exchange, you agree to stay with the company up to a certain date. Of course, after that date, the employee can leave (legally), and several have. So whatever we might think of these payments, let us not propagate wrong information. It is dangerous to believe what one reads in the newspapers.
http://money.cnn.com/2009/03/18/news/companies/aig_hearing/index.htm?cnn=yes
Different newspapers interpret the facts differently, so we know some are not truthful (whether purposely or not, I do not know). but if the papers do not tell a consistent story, there is zero chance that any of us citizens have it right.
I have heard the retention bonuses are often used in the industry. But the public probably does not understand. Bonuses on performance should of course be illegal if performance is negative (perhaps salary should go down in that case). But retention fees: that is not as clear cut.
That shows how non-objective the media are today... they will play fast and loose with the facts in order to stoke people's envy.
On the positive side: at least some people are questioning whether the government should be owning and controlling industry.
For an explanation of the root of the financial crisis, I recommend both of you to read the article here:
http://www.theobjectivestandard.com/issues/2009-spring/altruism-financial-crisis.asp
I predict double digit inflation by 2014.
2-3 trillion deficit? One can blame Bush as much as we want, and he has some blame on his hands, but Democrats have been in power for over two years now (in the Senate and House). Companies in the US should be allowed to fail. Save perhaps 1-2 companies that might affect the world (perhaps), but the more we try to save everybody, the worse things will get, or the slower the recovery will be. We are afraid of redistributing the wealth to another segment of the population. Rather, we want to equalize. Had we let AIG fail, there would have been no bonuses. There would have been repercussions, as there will be under the current course.
Nobody complains when the market goes up an average of 10 percent for 20 years. It goes down 40 percent and people lose all sense of reality. The strong drop is partly the fault of people getting out of the market, and due to the sophisticated software managing many portfolios.
What happens if China or other countries stop purchasing our debt? Could happen if they believe that our currency is losing its value fast. After all, they have much gold. This would be winning a war without firing a shot!
I wrote this for the record so I say "told you so!" :-)
I assume you saw the tv appearances of Peter Schiff where he predicted the crisis, and inflation to follow a year ago?
The sad thing is: inflation is actually a GOOD thing for those who are looking to fund government deficit spending. The deficit will be payed back with devalued currency.
It's an insidious hidden tax, and a de facto "wealth redistribution" (theft).
I have not heard the public and congress decry the retention bonuses being given out to Fannie Mae and Freddie Mac ($170 million).
http://washingtontimes.com/news/2009/apr/04/fannie-freddie-overseer-defends-big-bonuses/
and ...
Oops: I don't see this on the front page of the Nytimes or on CNN. Perhaps this is not important? But the bonus of AIG were important!!! Is this a double standard?
As the original post says:
What am I missing in this picture?
After all, I have been told that media bias and other bias is in the eye of the beholder, and it might be true. So why don't I see this story prominently posted in certain newspapers?
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