American Morning

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March 17th, 2009
12:00 PM ET

Minding Your Business

 CNN Business Correspondent Christine Romans is Minding Your Business everyday here on amFIX

CNN Business Correspondent Christine Romans is Minding Your Business everyday here on amFIX

Outrage:

Thousands of you are seeing red over the green bestowed on AIG traders and executives. Incredible and overwhelming response to AM this morning about the taxpayer dollars going to pay hundreds of millions in bonuses to AIG.

Three undeniable facts you keep hammering: the taxpayer owns 80 percent of this company. The company's performance was horrendous and almost brought down the world financial system. No one would be getting a bonus if it weren't for the government rescue. Almost every caller and emailer is demanding these legal contracts be renegotiated.

A Treasury department official says the government's legal analysis shows the bonuses must be legally paid. The President says he wants to try to block them. Millions have already gone out the door. It's all just another ugly example of the mess we are in.

The Value of Your Home:

All week we are taking parts of the economy and examining how bad it is, how bad it could get, and most importantly, when we will know it is turning around.
These are the clues you will need to catch the recovery as it is happening.

Today, it's housing. A huge bubble popped. The housing market crashed. How bad is it? The Treasury Secretary warned last week: "Millions have lost or are at risk of losing their homes."

74 thousand homes repossessed by the bank last month alone. 11 percent of homeowners are behind in their payments.

The vast majority of you are paying your mortgage on time. But the value of your house is plunging. According to Case-Shiller, in some cities, home prices are down 40%. Millions of Americans owe more on the house than the home is even worth.

Economist Robert Shiller says the trend has been unrelenting. "We've been going down now for almost 3 years."

How bad will it get? Even though prices are down - they are still well above the housing booms of the 1970s and 1980s. It means we may have a way to go to bottom out. When will it turn around? Is good news finally on the horizon?

Shiller says the turn will come slowly. "I'm not predicting it but I'm saying it would be entirely within the realm of possibility that later this year we would see an improvement"

Shiller says watch for successive months of stable home prices, across the map. That will be the best sign as he says, "we're coming up."

On that front, of interest today - a blip in new home construction in February. It defied expectations. It's just too soon to know if it means anything significant. But it's the first positive surprise in housing I have seen in months.


Filed under: Minding Your Business
soundoff (4 Responses)
  1. Tweetybird

    Is it true that AIG insures the Congress Retirement Fund? Maybe
    that why the Congress give all this bailout to AIG, self protection?

    March 18, 2009 at 8:32 am |
  2. Paul K

    I do not like that AIG execs are getting the bonuses, but:

    Is AIG the only bailout recipient paying out bonuses or is it the one being singled out?

    Would you stay at a company that CNN broadcasts reports "they commit suicide", "people should storm the headquarters".......? Probably not. Why does CNN feeds advocacy of violence against their pet target of the day? Are comments 'off the street' really newsworthy?

    How many tens of billions will AIG get and the bonuses are $165M? If they get receive the 2x$165M less, thats $330M/$30B or 1.1% less based just on the coming $30B payment let alone the total of all the bailouts. Will they even notice it?

    Why would anyone expect Congress to do more than react to public emotionalism or their own self interests? The fall of Social Security will dwarf AIG. Maybe if Congress and other Federal workers weren't exempt from Social Security it wouldn't be where it is.

    March 18, 2009 at 7:40 am |
  3. Dawn

    If I understand this right, the bonus's are listed in the employee contract. If AIG does not give out bonus's it could be sued do to state law. OK so really then is it AIG fault or the greed of the executive. Couldn't the executive not except the bonus or give it back. Greed is what got us into this mess in the beginning.

    March 17, 2009 at 12:40 pm |
  4. Cynthia

    I am thinking – even if the government (or AIG for that matter) decided to fire these executives (who do not know what they are doing since the company is still losing money), we'd have to pay them millions in severance pay per "their contract". However, can't we do a reorganization so their jobs are not the same – meaning they are not at a level to get these outrageous bonuses?

    March 17, 2009 at 12:14 pm |