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Executive Bonuses should not be paid with public money.

Arch Enemy

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lol @ no poll and the idea of "public money".
 

jamesrage

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I think the first mistake those in office did was give out bailouts the second mistake was not say you couldn't give out bonuses with tax payer money.However AIG does have to meet it's contractual agreements and since those in office didn't say they couldn't use that money to pay out bonuses then AIG should be allowed to. It would be different if the government said here is the tax payer's money but under no circumstances will you use tax payer money to pay off bonuses, if you want to pay out bonuses then do so with your own money. Personally I think this is a distraction from more serious issues. What about the billions of dollars these clowns in office have given other countries, and other frivolous and dumb **** beside? They are bitching about these AIG bonuses when they gave AIG our money,its like they are trying to shift more of the blame.They should have let AIG fail as well as any other business that makes stupid mistakes..
 

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They should have made it a stipulation of accepting the bailout money.

You can't just break binding documents like this. Once you do this, legal agreements can be broken, because of xxx.

It sucks, but there is a greater good.
 

Harshaw

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AIG still has an actual revenue stream, you know. How do you know the bonuses were indeed paid from "public money" and not independent revenues?
 

Goobieman

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AIG still has an actual revenue stream, you know. How do you know the bonuses were indeed paid from "public money" and not independent revenues?
The same way they know that the war in Iraq was paid for with borrowed money, rather than revenue pulled from personal income taxes.
 

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As I understand it, the bonuses were contractual obligations that AIG had to fullfill or face owing even larger bonuses down the road. Furthermore, there was nothing the bailout bill that prohibited AIG from using the money for bonuses. Lastly, the contracts with the bonuses were on the books and could've easily been discovered if anyone in government bothered to check AIG out before handing them bushels of no strings attatched cash.

If you're outraged over the bonus "scandal" I suggest you take your misplaced rage at AIG and place it where it belongs - the architects and supporters of bailout bill that were ignorant of this possibility and made no provisions to prevent it. In short, don't be mad at AIG for making a sound decision, be mad at the people who allowed this to happen.
 

ReverendHellh0und

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As I understand it, the bonuses were contractual obligations that AIG had to fullfill or face owing even larger bonuses down the road. Furthermore, there was nothing the bailout bill that prohibited AIG from using the money for bonuses. Lastly, the contracts with the bonuses were on the books and could've easily been discovered if anyone in government bothered to check AIG out before handing them bushels of no strings attatched cash.

If you're outraged over the bonus "scandal" I suggest you take your misplaced rage at AIG and place it where it belongs - the architects and supporters of bailout bill that were ignorant of this possibility and made no provisions to prevent it. In short, don't be mad at AIG for making a sound decision, be mad at the people who allowed this to happen.



read on, dodd wrote in protections of bonuses in the bill at the request of the Obama administration.
 

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read on, dodd wrote in protections of bonuses in the bill at the request of the Obama administration.
Last I heard (which was 3 or 4 days ago, so this could be out of date) Dodd was claiming he wrote in a provision that would've prevented the bonuses, but it was watered down in committee or something. Strangely, he claimed he didn't know who gutted that provision. If something has come out that gives us more information, let us know. :)
 

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Last I heard (which was 3 or 4 days ago, so this could be out of date) Dodd was claiming he wrote in a provision that would've prevented the bonuses, but it was watered down in committee or something. Strangely, he claimed he didn't know who gutted that provision. If something has come out that gives us more information, let us know. :)




catch up my friend.


Dodd admitted he wrote in the protection of bonuses at the request of the obama administration

Ghietner admitted it.

Obama played dumbass on late night tv.
 

Psychoclown

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catch up my friend.


Dodd admitted he wrote in the protection of bonuses at the request of the obama administration

Ghietner admitted it.

Obama played dumbass on late night tv.
Thanks for the update.

But back to my basic point, this story isn't about corporate greed. It's about government stupidity. :doh
 

TOJ

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catch up my friend.


Dodd admitted he wrote in the protection of bonuses at the request of the obama administration

Ghietner admitted it.

Obama played dumbass on late night tv.
He wasn't playing.

Anyone paying attention the last few weeks and has not realized he actually is one must also be one.
 

Korimyr the Rat

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But back to my basic point, this story isn't about corporate greed. It's about government stupidity. :doh
The two go hand-in-hand, don't you think? The lack of oversight which allowed AIG to behave so recklessly in the first place was something fiercely lobbied for by the corporations, and this is an important part of what allowed those corporations to grow "too big to fail" in the first place.

And then, even when they are failing and begging for government money, the Congress refuses to impose conditions upon them... because the Congressmen are still in their pockets.

Hopefully, Congress will be a little more cautious when it tries to bailout all the companies forced under by the panic created by their little kneejerk Bill of Attainder.
 

Psychoclown

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I do think the fact that AIG is "too big to fail" is a major issue that people aren't talking about. This crisis is driven by individuals who borrowed money they couldn't afford to pay back from banks who couldn't afford to risk so many sub-prime loans. So the bankers and borrowers were idiotic and normally I'd say they made their bed so they can lay in it. I have zero sympathy for both the individuals who are defaulting on loans they shouldn't have taken in the first place and the bankers that foolishly took on that enormous risk without a thought to what would happen when borrowers started defaulting.

But the problem is if they are allowed to go down in flames, they take the rest of us with them. So what do we do? We prop them up with bailouts removing the penalties for their poor decision making - essentially encouraging them to do it (or some other stupid greedy scheme) again because they know we can't afford to let them go under. If one company is that key to the economy, its too big. We should seriously look into breaking up AIG and any other corporation that is "too big to fail". Every company should be responsible to the market corrections. They might think twice about taking ridiculous risks without the possibility of a government bailout to save their asses every time.
 

obvious Child

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obvious Child

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I do think the fact that AIG is "too big to fail" is a major issue that people aren't talking about. This crisis is driven by individuals who borrowed money they couldn't afford to pay back from banks who couldn't afford to risk so many sub-prime loans.
Driven? Questionable. People keep hammering on the sub prime mortgages themselves while ignoring everything else. The real problem when you examine it is not necessarily the mortgages themselves. It's the leveraging that went on to buy all of the securitized assets. As I've stated several times here, investment banks took out huge loans to purchase such assets. When the revenue streams from the mortgages dried up, the securitized assets essentially became worthless. Normally, on an equity purchase the firm merely writes it down, takes a charge on income and is done with it. It hurts no question and they'll likely have to restrict lending to cover their losses but it's more or less a done deal once the charge dries. Now, what had was leveraged purchases. So instead of writing it off and being done, the investment banks now have to make payments on their loans, largely commercial paper. So no revenue from those assets and liabilities on the original purchase. You see the problem. So banks slash lending to conserve case to try to stay afloat. They call in their lines of credit from regular banks who suddenly see huge outflows from their off the books obligations. So they start cutting lending to cover their lines of credit. So not only are investment banks slowing or stopping lending but regular banks. If the asset backed securities had merely been equity purchases, we wouldn't have this problem. This is lost on so many people it's amazing. Remember that the US housing market is only around 3% of the entire economy and sub prime is a tiny fraction of that 3%. It alone cannot account for this problem. The reason why most mainland European banks are no where near our level of mess is because their leveraging never exceeded something like 15 to 1. At home in the good ol' USA we had leveraging of over 60 to 1. Similar instances happened in England.

The problem itself isn't the sub prime. It's the obscene leveraging. AIG is in the mess because it's essentially insured bonds with CDS which it historically made billions off doing nothing (literally nothing) but is now called upon contractually to make firms whole on largely commercial loans that are going bad.

But the problem is if they are allowed to go down in flames, they take the rest of us with them. So what do we do?
Slice up AIG into financial products and insurance and sell the profitable insurance and let the financial products go under. And pray to God that Congress doesn't outlaw CDS.
 

obvious Child

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and what excuse are you making here? :roll:
I provided a link to an argument regarding the actual nature of the bonuses. You are free to read it and discuss things like adults. If you wish to continue the "I hate OC and will make disparaging comments to him whenever I reply to him" go to the basement.
 

ReverendHellh0und

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I provided a link to an argument regarding the actual nature of the bonuses. You are free to read it and discuss things like adults. If you wish to continue the "I hate OC and will make disparaging comments to him whenever I reply to him" go to the basement.



its bunk. its excuse making for party and in no way worthy of attention in another thread. stop crying.
 

obvious Child

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its bunk. its excuse making for party and in no way worthy of attention in another thread. stop crying.
"If you wish to continue the "I hate OC and will make disparaging comments to him whenever I reply to him" go to the basement."

Saw that coming.

Leave the discussion to those who understand the nature of the bonuses. You clearly do not nor do you wish to learn.
 

Psychoclown

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Driven? Questionable. People keep hammering on the sub prime mortgages themselves while ignoring everything else. The real problem when you examine it is not necessarily the mortgages themselves. It's the leveraging that went on to buy all of the securitized assets. As I've stated several times here, investment banks took out huge loans to purchase such assets. When the revenue streams from the mortgages dried up, the securitized assets essentially became worthless. Normally, on an equity purchase the firm merely writes it down, takes a charge on income and is done with it. It hurts no question and they'll likely have to restrict lending to cover their losses but it's more or less a done deal once the charge dries. Now, what had was leveraged purchases. So instead of writing it off and being done, the investment banks now have to make payments on their loans, largely commercial paper. So no revenue from those assets and liabilities on the original purchase. You see the problem. So banks slash lending to conserve case to try to stay afloat. They call in their lines of credit from regular banks who suddenly see huge outflows from their off the books obligations. So they start cutting lending to cover their lines of credit. So not only are investment banks slowing or stopping lending but regular banks. If the asset backed securities had merely been equity purchases, we wouldn't have this problem. This is lost on so many people it's amazing. Remember that the US housing market is only around 3% of the entire economy and sub prime is a tiny fraction of that 3%. It alone cannot account for this problem. The reason why most mainland European banks are no where near our level of mess is because their leveraging never exceeded something like 15 to 1. At home in the good ol' USA we had leveraging of over 60 to 1. Similar instances happened in England.

The problem itself isn't the sub prime. It's the obscene leveraging. AIG is in the mess because it's essentially insured bonds with CDS which it historically made billions off doing nothing (literally nothing) but is now called upon contractually to make firms whole on largely commercial loans that are going bad.
Interesting, but I'm not quite following you. I'm not a finance or economics major, so I'm a little unclear on some of the terminology. Would you mind breaking it down in a little more layman's terms to help me understand what you're exactly claiming is the problem?
 

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Interesting, but I'm not quite following you. I'm not a finance or economics major, so I'm a little unclear on some of the terminology. Would you mind breaking it down in a little more layman's terms to help me understand what you're exactly claiming is the problem?
Alright, I'll try do this relatively simple.

The sub prime mortgages got securitized, meaning the loans were chopped up and sold. The people/firms which bought them bought them for the revenues which would be the loan payments. This is primarily how the securities were valued. But they purchased these securities with loans themselves. When the revenues from the securities stopped they still had to make payments on the money they borrowed to buy the securities. Thus the toxic asset was born. No revenues but liabilities to be paid on it. If firms had just paid cash for the securities they would be essentially done with it once the security became worthless. Instead they have to make payments on an asset that generates no income. Pretty bad situation.

So when this happens the firms who bought them, aka Citibank stop lending money out to you, me and that small business over there because they have to conserve cash to pay for the loan they took out to buy the security. And they call in their credit lines to help them which causes the bank providing the credit line to slow lending to everyone else. Overall credit dries up.

Really simple, you borrow money to buy an asset which generates some money. That asset then stops generating money. You still have to pay your loan but you have no income from that asset.

As for the leveraging, 60 to 1 means there was $60 of debt for every $1 of equity (like common stock).
 

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So the first domino was still the subprime loans going bad? And the companies that owned the loans not only lost the value of the loan but are also saddled with the debt they incurred to purchase the loan. So essentially, if I'm understanding this right, AIG failed to manage its risk exposure and exposed itself to too many high risk loans and compounded that mistake by borrowing money to facilitate that overexposure to risk. Wow, they deserve to go belly up.

Which brings me back to the point of my previous post, by bailing them out, we're not letting them suffer the market consequences of the gross miscaluclations. Which means they have no real incentive to stop taking such wild risks since they know the government will be there to bail them out.

So let me ask you this, is it true that AIG is "too big to fail"? It seems to me from your earlier reply you also favor breaking them up. Anything else you'd do? I take it we don't have any regulations on leveraging ratios, it that something worth looking into?
 
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