American Morning
Commentary: "We owe you more"
From Jill Schlesinger, Financial Advisor – Special to CNN's American Morning
Editor’s note: Jill Schlesinger, a certified financial planner, is executive vice president and chief investment officer of StrategicPoint Investment Advisors, which is based in Providence, Rhode Island.
I appeared on CNN's "American Morning" at 7:30 am today, ostensibly to provide commentary about the payment by beleaguered insurance giant AIG of $165 million in bonuses for last year. The interview turned into a brawl as the other guest vilified me and all of Wall Street for the AIG bonuses – in his mind, the compensation issue was in fact the root of the whole financial crisis. I did not get the opportunity to talk about what is missing from that analysis.
I came off the set thinking that we owe you more than a divisive, populist shouting match. Analysts, broadcasters and journalists of varied stripes owe you the nuance of the story, not just the headlines. We need to find the space between the poles that divide us so that we can discuss and understand the grey areas of this complicated and important subject – that is where the truly important policy decisions lie and where the impact on our economic future can be found. So here is the grey area surrounding the AIG bonus/Wall Street compensation story that I was not given the chance to articulate this morning.
As the financial crisis has unfolded, it is understandable that we seek to lay blame-that's human nature. Let me plainly state that every financial crash needs a number of willing participants-this crisis is no different:
· Wall Street firms assumed ridiculous risks and let down their shareholders;
· Boards of these firms rubber-stamped compensation packages that were astronomical and didn't appear to understand that risks that underlie returns;
· Shareholders allowed board directors to keep their posts because the companies were making too much money to make waves;
· Lenders and borrowers alike got caught up in the booming housing cycle and lost their heads;
· Lawmakers on both sides of the aisle were unwilling to act like adults;
· The Clinton and Bush administrations were huge fans of deregulation that helped augment the bubble's progress;
· Regulators were too lax in their enforcement activities, as they usually are during raging bull markets;
· The Federal Reserve under Alan Greenspan maintained a low interest rate policy for too long; and
· Too many Americans forgot the simple rules that we learned from our parents: don't spend more money than you earn, and save a little bit from every paycheck.
With that said, let's get on to the matter at hand: the structure of compensation in the financial services industry. To understand this area, you need to accept that these people earn a TON-precisely because over the past umpteen years, they have been extremely profitable and have been in the business of making what everyone wants: money. Most Wall Street firms started as partnerships, where a bunch of guys took very low salaries, pooled their money, invested it or advised others, and hopefully at the end of the year, there were profits to split and those profits were called bonuses. That structure worked well in its day, but probably stayed in place too long and needs to be updated, but it is still the norm on Wall Street.
Here is an example of how the system works today. "Jennifer" is an employee of ABC Securities. When she was hired, she was told that her "total comp" would be $300,000, comprised of a $100,000 base salary and up to $200,000 of cash and stock "bonus" that is discretionary based on her performance. Jennifer's bonus was not intended to be subject to the profitability of the firm, because that is not how the deal was structured. Yes, the second part of her pay is discretionary, but in most years, as long as Jennifer performed her job and her business unit did its job, she would earn $300,000. In that sense, the term "bonus" is a misnomer-it should really be called deferred compensation that most employees use to manage their own financial lives. And in fact, many Wall Street employees took large cuts to their total income last year due to the terrible conditions that existed at most firms.
There is a big difference between these discretionary bonuses and the AIG situation. The AIG $165 million represents legacy "bonuses" that the company was contractually obligated to pay. Yes, I know that it seems unfair that we taxpayers are making these payments, but when the government forked over the fist bunch of money to AIG last fall, there were no compensation strings attached. I think that the rationale behind that decision was two-fold: (1) the severity of what we were facing was so acute that some details were simply not covered, and (2) the government was concerned that the new management of AIG be able to retain a core of their best people to help wind down some of the most dangerous aspects of the business. (Remember, this was a mere fraction of the total amount AIG received – the real issue is where did all the rest of the money go, which a totally different conversation.) Without a guarantee, many would have fled the toxic environment and left AIG in an even deeper hole.
This is but one small aspect of the crisis and yet it is so easy to scapegoat "greedy Wall Street" as the cause of all of our financial woes. Focusing on the bonus issues – while playing to the real anger that exists out there – diverts attention from the bigger issues and makes this about class warfare and not about basic good governance and risk controls – whether in the administration and oversight of TARP funds or the regular conduct of AIG's and other recipients' business. The more sophisticated approach demands that we assemble the facts and accept that the there is no one person, institution or class of people that is responsible for the mess. We got into this together and we will emerge from it together. So let's stop shouting and start talking like responsible adults-we owe it to one another.
The opinions expressed in this commentary are solely those of Jill Schlesinger.
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So they got bonuses. Big deal. Good for them. If I had the chance to make that kind of money I would. You all would too. You can't deny that. Don't cry because some have more than you. The thing that worries me the most is that Obama is using his power to get the money back. Beware folks if this precedent is set. Whether you make one dollar or a million dollars, he will come after you if someone decides you make too much. With that comes disincentive to work and reliance on a bankrupt government. No thank you!
Jill,
I agree with the other posters complimenting you on following up with the other side of the issue. CNN sometimes conducts poor journalism by not allowing balanced dialogue in these interviews.
However, I do not agree that the bonuses should be paid. If the contract doesn't allow the company to be discretionary on the paying of the bonuses, let the employees take AIG to court for them. There was in interesting article in Fortune today about the term "unconscionable" as it relates to contracts.
Many people work for companies that offer bonuses for exceptional performance. In years the company does not make money, the employees don't get bonuses, no matter how good they did individually.
The free-market system is a two-edged sword. Success = riches, failure = losses. AIG executives need to feel the pain of their failure.
No matter how do you want to slice it, this bonus structure is unjustified. This is tax payer money, not investment. This is the money the government squeezes out of hard working and struggling american families, basically food out of your baby's mouth. It can't be used to pay as bonuses to fat cats. You will tell me that it is necessary to prevent the collapse of the financial system. I will say this is an example of why the capitalistic system has run out of its course. Like a terminal patient, it can't be reformed, can't be rejuvenated. It can only be thrown in the dust bin of History. The system is totally corrupt and reactionary. The only cure for its deficiency used to be the periodic boom and bust, ie. depression to remove and clean out the excesses. Now that has been gone for quite some time. So the monster is getting really sick and fat. It is now ready to collapse on its face.
These bonuses represent less than one tenth of one percent of the money transferred from the Federal Government to AIG. That's less than $1 for every $1000 tranferred to AIG.
Where is the concern for the other 99.991% of the nearly $180 billion transferred?
Where is the concern for the nearly $2 trillion dollars the Federal government is borrowing and passing out to it's favored receipients at our expense?
Pelosi, Reid, Obama and Bush handed out truck loads of cash and we're worried about the change that rolled off the back into these AIG executives bonuses.
Worrying about these bonuses is like worrying about an extra penny and a half commision to a realtor on the sale of a $200,000 home. Its a nice distraction since so much of the frustration and anger is directed at AIG instead of the politicians who handed them this money.
The real waste is in Washington DC, spending our children's and grandchildren's money.
I worked on Wall Street for the past ten years and NEVER made 300K. That is a lot of money... First, , if the person is making 300K, they are likely making closer to $150K base. Someone making this much money does not deserve compassion from someone makes $20K per year or who is now unemployed. Period! Bonus is on top of base salary. Base salary is designed to cover living expenses. So, what we are looking at here is people who are used to profiting handsomely, being put in a position where they are only making enough to cover their living expenses. Doesn't sound like a bad situation to a lot of people. More humility is needed around this conversation and Wall Street is in no position to be defending that the "excess" 200K is part of regular pay. It sounds ridiculous! Absolutely ridiculous.
I agree that the blame needs to be shared. I agree if the word bonus is a "mis-nomer" it should be changed. What I don't understand is why the word bonus is a mis-nomer in this case. If the word discretionary doesn't mean discretionary, then why not use the word deferred?
What does bother me is the concept that I should feel MORE sorry for these executives and their 300K salaries and the financial ruin it would cause them to not get part of their compensation then I am supposed to feel for the rest of us, equally to blame, but who don't have these golden safety nets.
I made bad decisions. I may fail financially. They make bad decisions... they are guaranteed "bonuses" or "deferred compensation" (which is a stretch Jill... deferred compensation is used to make the books look better than they actually are which is fradulant).
I DO, however, appreciate the attempt to provide another perspective. That is something that has been missing in a LOT of media these days.
I am glad to see some give a rational discussion on the bonuses. I too work on commissions and bonus. I too, have a contract. I want to be paid by my contract I have signed with my employer. My bonuses are not subject to the profitability of the company. I did what Iwas to do under my contract and expect the company to uphold thiers.
If our Legislators agreed to give AIG this money with no accountability they are the ones to blame. It should have been clear that the taxpayer money should not have been spent on TaxPayer Money.
Also, I do agree about the shouting when there is more than one view point. The interviewer should have had more control. Shame on CNN.
Ms Schlesinger:
First, I thank you for your insight. Unfortunately, the example you gave through the use of "Jennifer" will do little to quell the perceptions and ire of the overwhelming majority American taxpayers. You see, Ms Schlesinger, the vast majority of Americans do not make $100,000.00 a year with or without a bonus, discretionary bonus, legacy payment, or whatever one may call it combined.
To paraphrase another... I personally believe that once taxpayers bail out a corporation, its officers basically become government employees. How many government employees do you think receive $3,000,000.00 or more in bonuses? That is the amount that at least seven of AIG's financial products officers reportedly stand to receive if these contracts are honored.
It is beyond time for Wall Street, the insurance industry, and the banking industry to come clean and provide full complete disclosure to the American public. Congress should do the same for they are culpable, as well. Americans are not an unintelligent lot.
Jill, reality check. You're wrong down to the minutest details of your argument. Figure it out and become part of the solution to this mess. A good mind is a terrible thing to waist to Wall Street cronyism, selfishness and greed.
You are right about the deregulation being the base cause, removing the safe guards put in place after the 1929 crash was the base problem. But bonuses paid to the screwups that got gready and bankruptded these businesses is a joke. Anywhere outside the financial market they would have all lost their jobs and should. Retunsion bounses no servience pay. The need to be gone and replaced with someone resposable.
Let's see, our government blindly hands over $170 Billion without any stipulations, then we all get outraged at AIG regarding how they spend 0.0004% of it?
I think the outrage is going in the wrong direction!
Talk about bubbles! Ms. Schlesinger's column is an example of living in the bubble where Wall Street=good because a lot of money was being generated. AIG wasn't creating profit, honey, they skimmed off a huge amount on derivatives and only cared if they got theirs. In the words of Tom Friedman-the IBGs or I'll Be Gone when this whole scheme implodes. Right along with the brokers who gave loans people couldn't afford, who passed them on, hey, IBG, the rating agencies-IBG. Please don't insult us Ms Schlesinger. We have a home that is paid for, no second mortgage, older cars. We have never lived beyond our means. But our 401k is cut in half and we will likely have to work until we drop because of the people you are defending.
As if $100,000 "base" salary isn't incentive enough for employees to do their jobs? Where I come from, if you don't do your job, you get fired. Where does the bonus come in? Especially if we're all paying for it? And where did the rest of the money go?
Ms Jill, I did see the show at 7:30 today. Well, I didn't feel it was Mr Mack who was shouting but you who was. I thought, Mr Mack was more humble than you.
On the sidebar, I dont agree with you a bit. If a company is not making profits, they cant pay bonuses (call it deferred comensation if you want to). And to pay it with public money, are you kidding me!! I want to see which court sides with AIG.
The biggest problem is that government created this mess when they made the decision to bail out AIG. There is never a good reason to have our oversized and completely inefficient government take over any industry, in part or in whole.
This is all about class warfare. There is a campaign that the government, at the highest level, is selling the American People that states that wealth is evil, especially in times of need. How do they execute this campaign? They push all of us into anger against business owners, Wall Street, and huge coprorations, while they sieze more and more cntrol each and every day, with cheers from the people. Before you know it, however, the government has much more control than the Constitution ever intended and maybe even more than your average liberal is comfortable with. It's anti-capitalism, plain and simple. It's a smoke screen to get us to believe that we're fighting against these people who earn more than we do. When did it become a sin to earn money? When did Americans stop believing that success drives our economy - not the Federal government?
I admire your high sense of ethics that believes that the fine print of a contract should be "honored" even if it hurts! But I don't remember personally entering into a contract with AIG–do you?
Legacy shmegacy.
These guys begged us for help...led us to believe they would be trying to help us all by saving the company...but in the end it was all about saving themselves.
This is like the millionaire on the Titanic who trys to buy a seat on a liferaft. When he gets no takers...then he indignantly say's, "I've invested millions of dollars to help this ship get built–as much as %10 percent of this ship was built by my money! So I think I am entitled to one tiny little cushion on this insignificant little rubber boat-thank you very much (as he pushes your Grandmother into the ocean)!
trying to buy a seat on a liferaft...when they get no takers, they
...Like a waiter / waitress receiving a base salary of minimum wage augmented by tips...? Well, isn't the total of her "tips" dependent upon the number of patrons frequenting the business during that particular period and how pleased they were with his / her services?
Does the restaurant provide tips to the waiter/waitress that the patron did not leave? Just asking....
Why is it when the money is coming in in wheelbarrows all we hear from Wall Street are cries about government interference in the "free market"? But when the excrement hits the fan, everyone wants a government bailout-banks, insurance, car companies. How about no bailouts for anyone- the weak ones will die and the strong survive and thrive. We should all opt out of paying taxes for a year to remind them where the power really lies in the country!
You said it all with your "Jennifer example" and the "up to" comp and bonus. Is "up to" a guarantee? Since AIG would not exist without the bailout money, the "up to" bonus should be forfeit, as the company cannot honor it due to the condition of their business, a-la force majeure. The taxpayer should not be liable to uphold someone else's promise they could not keep..."no earmarks", right?
I get the impression that the author of this article thinks we just "don't understand" the situation.
Be assured .. WE DO UNDERSTAND. We understand that the Wall Street crowd wants to make the money they feel entitled to even when the company has failed and they are being supported by the federal government.
Get a clue, Jill. If there had been no bailout, there would be no AIG .. hence no bonuses. What don't YOU understand?????????
OK, those bonuses are water under the bridge. We can't get it back now, that $170 million is chump change in the big scheme of things.
The Bush Administration just wanted to flood the system with money, foolishly trusting America's corporations to work together to alleviate the crisis. What happened is that Wall Street worked the feds the same way they worked prospective buyers who were looking for a bigger home than they could afford. They figured out a way to get the feds to pay for their mistakes AND get their bonuses.
What we need to learn from AIG is that global corporations view their customers the same way a rancher looks at his herd. As we all know, ranchers do not worry about whether their cattle are happy. They keep them healthy when it is profitable to do so ... and they send them to the packing house when it is profitable to do so. The management of global corporations are not striving for a just society or a fair society. They want a system in which they can make as much money as they want without regard to the suffering of others.
The mythical magic of competition in free markets is supposed to wash all this stuff out and produce the best possible world for the largest number of people. Now we know that CEOs have learned how to game the system so that they win and we lose. To them, this is justice. To them, their workers are a cost (salaries) which should be as low as possible. To them, their consumers are an irrational market that can be swayed by fancy advertising.
Capitalism has morphed into something that none of us would have voted for if we had ever been asked to vote.
Insurance companies don't seem to have a problem doing a slow roll, or denying responsibility due to a technicality, when it seems they may have to pay a "contractually obligated" claim on an insurance policy. Why were they so quick to pay here? They should have not paid, and let the employees fight for their bonuses in public court if they felt they were entitled to them.
I was due a bonus, one almost equal to my salary, at the end of 2008 . . .so I guess I was on similiar comp plan as AIG execs. My company made some bad decisions over the last couple years, and was forced to downsize. I was part of the downsize and didn't get my bonus. Unfortunately, my company wasn't large enough for a gov't bailout. So get off it. I just lost my job, but I'm helping to support AIG. You DON'T deserve your bonus when your company is on it's way under.
"diverts attention from the bigger issues and makes this about class warfare and not about basic good governance and risk controls – whether in the administration and oversight of TARP funds or the regular conduct of AIG’s and other recipients’ business."
But this is about "class warfare." The greedy executives are at fault for the loss of the middle class in America, worse shareholders have LET THEM! Why are all these executives and top management still making the big bucks and letting the little guy go????Where is their paycut??? Shouldn't they be cutting their pay to keep the little guy on so people have jobs? And so more the economy doesnt continue to go in the wastebucket?
My main question today is
Shouldn't the government be rewarding companies for keeping jobs? Why are we giving money to banks who are letting people go left and right?
P.S. This bonus nonsense should never have been issue, because morally right and good and honest people would say "hey, taxpayer is keeping us afloat so we still have jobs...I don't think that we should distribute these bonuses even though we are contractually obligated to especially since, this is probably going to be another media spectacle and embarrassment for us" But wait, those greedy guys are what shareholders elected into power....Interesting...
To Jill Schlesinger:
I accept your premise that there are many to share the blame for the economic crisis! Each should be held accountable in their own way. I don't accept what I think I hear you say that there are too many to blame and punish. CEO's of Fannie Mae and Freddie Mac,
for instance, should be in jail today for lying before Congress.
Pay these “misnamed bonuses" that should be named "deferred compensation" with the company stock. Any company receiving stimulus money should be required to change these contracts to be based at least on the companies financial position and subject to it being accurate and not a made up financial lie to be discovered a few years later.
Finally, many of those who are receiving their “deferred compensation" are the very one's who put their company and assisted in putting the nation and the world in the crisis that we are in today. They should compensated with jail. But we don't, we pay them to stay...the reason being that we need the same people who got us into the crisis to get us out. Well that was a Philosophy of Kart Mart when they were in bankruptcy...I don't shop there anymore.
The same thing will apply with Wall Street for instance AIG. I won't by insurance from them anymore.
Wall Street won't get out of this mess easily because they all have lied so much and thus don't believe each other for that reason. The sub-mortgage crisis is not the only source of the crisis...Wall Street and its greed and deception have fuel a worldwide crisis.
I wouldn't give Wall Street another dime...let them figure it out on their own and give all the bonuses they want without tax payer’s money!
Hello Jill
The deal was structured to make the bonus payment regardless of the companies profit? Jill thats crap! Yes crap even if it is true! What we have is a large financial club that rips off shareholders. Make it to this level and up becomes down. Once the shareholders are ripped off then they rip off the taxpayer. Who are these people who think that they deserve huge bonus payments even when huge losses happen under their watch.
Contracts can be written in many ways and the way these were written should be criminal. You don't deserve the money you are paid and neither do they. Do you really think that class warefare will not occure if this crap continues?
Gene
Why are the contracts for these executives not negotiable but the auto industry contracts are? This seems like an obvious double standard in which the "working stiff" gets shafted yet again.
Ms. Schlesinger, You have a right to your opinion; we taxpayers have a right to be outraged by what AIG exes has done. The outrage is not so much that those execs got bonus...its how they got it (with taxpayer money!!!!!!!)
I pray to God that all AIG execs involved in this scandal are punished to the fullest extent allowed by law.
While I appreciate the counter-point to the rage - all valid and salient points in this discussion - I still believe the central question is if AIG were left alone to solve their problem, whould they make the decision to re-direct the deferrend discretionary compensation to offset loss? After all, wouldn't it be within AIG's fiduciary authority to exercise its discretion on the deferred compensation? That's the point of discrectionary compensation. Faced with bankruptcy filing, they should address their employees with the decsion that they have to take a cut or the company goes under. And the employees? Are they so self involved that if asked to choose between saving their company by getting a reduced salary for a while or getting one last check and then being unemployed that they would choose the latter?
While a tough choice, in a capitalist free market these are the type of leadership decisions a Board must make. And before the American government steps in to bail them out, shouldn't the USG be given proof of the company's commitment to correcting the situation?
The amount isn't important. The act is. In AIG's case it just happens to be of equal amounts, which adds to oversimplify the situation that if there are no deffered discrectionary compensation checks issued then the problem is fixed. But to the average Joe, they believe it is. And the more I hear, the more I do too.
It is unfortunate that wallstreet believes they not only deserve all the money they reap. But while they often go back to their homes in the Hamtons. The rest of the "real" world loses their jobs and struggles to keep food on their tables.
No one owes Wallstreet anything! and as soon as these "the entitled people" get this through their heads. The world will be a better place.
If US tax payers gave the money which rescued AIG. In fact if it was't US goverment these "golden boys" would be unemployed.
It is ridiculous to have bonus. In contrary, they had to cat even their salary.
Jill,
I don't think you were mis-represented. I think you just confirmed that representation with: "...she was told that her “total comp” would be $300,000, comprised of a $100,000 base salary and up to $200,000 of cash and stock “bonus” that is discretionary based on her performance"
That statement right there, shows me you have no idea how stupid you sound. Most Americans don't even make $100k per year, much less a $200k "bonus".
When Doctors screw up sometimes people die. Those doctors get sued out of business for carelessness. Maybe the same needs to happen to the bankers and advisors that carelessly allowed this to happen. They killed the financial life savings of who knows how many millions of Americans.
Play the victim card all you want–say that you were just a cog in the machine but the reality is just the same. You personally were part of the group of people that DESTROYED the financial life savings of millions of Americans.
It goes beyond what is contractually obligated to these people...goes beyond it by far. These people have been criminally negligent in their jobs and should pay the price.
When you are out of job too, then and only then, will justice have been served.
Yes, we are in "it" together as you rightfully pointed out, but some are very eagerly and cheerfully, and most importantly knowingly, took us into "it", while the thousands working people in those institutions follow the orders from the top and yet the investors and the public, including lawmakers not knowing what is going on just trusted the scammers on their promises and falsified documents. "Those" are not that many, but few people are responsible for all this financial crisis mess, those at the top of the decision making chain of command, whether that be wall street firms, insurance groups or government watchdogs. They are easy to find, easy to count and to name, and to make fully responsible for their deeds in the court of law. That has nothing to do with laying blame, but everything to do with living by laws. I am absolutely sure that there are laws that will punish for what they did, be it a criminal negligence or outright scam.
Let's not forget, for last 20 years this is not the first time that with trillions of taxpayers money these and other scammers were bailed out. Let's recall crisis of 1987 and next in 1999, and who and how they were bailout. And you will see the same names over and over again. Practically, with all those bailout money given to the industry over the years, they owe everything to the people, the taxpayers many times. There is nothing theirs, except their scams. All the money they operated with were borrowed from the very people of this country. All the millions and billions they "made" on these scams should be taken back as the compensation of their acts. This is not some money games, these acts are criminal in nature and have very definitive terms in law books. Let's stop to rationalize and cover for thieves and criminals, their place is not in positions of executives of our financial system, their place is in jail.
We are bond to fail into the same traps every few years unless we clean our house well.
You can slice it anyway you like–deferred compensation or some other misnomer. But, at the end of the day, AIG got taxpayer dollars, and that is the ONLY reason they still exist. To AIG's credit, it may have had competent executives stay on board, but they also helped create this mess. This is not just an oversight; it's a slap in the face to hardworking Americans who find themselves overburdened as it is and still have to pay the taxes that line these executives' wallets.
I understand the concept behind the bonuses, but let's get to brass tacks. They call them bonuses to manipulate financial reporting and tax reporting. If they are labelled bonuses then they should be subject to risk like all other bonuses. If it's guaranteed it is no longer a bonus.
Then to the issue of compensation. The compensation at these financial firms have become bloated (and in my opinion extremely so) in times of great success. The justification was in how much wealth they were generating. Now that that has failed, it is only fair for compensation to shrink for exactly the same reason. the financial system has now destroyed great wealth, and should be held accountable by the real owners of the money, the people.
If you justify big payouts by earning big money, then ther reverse MUST be true or it is ALL a big Ponzi scheme.
I'm sorry, but based on your "logic" regarding deferred compensation and bonuses, I would pose the question that if discretionary bonuses were based on fraudulent returns, shouldn't all these executives be forking back the "bonuses" of the past five years?
You're being deliberately obtuse.....
As a former trader, I understand the evolution and concept of deferred compensation. Without knowing the details of individual contracts, it is difficult to believe that most of these "bonuses" were obligatory.
First, deferred compensation is based largely on performance and if your unit is responsible for the massive red ink in the company's bottom line, then there is sufficient basis to not pay the full deferred compensation. There is a saying on Wall Street, "You're only as good as your last trade" and that phrase more than applies in this case.
Second, without federal tax payer money, AIG executives would not have any base pay much less receive a bonus.
Third, it has been reported that many of the executives who received these "bonuses" have quit, taking their compensation with them. So clearly, they are not retainer bonuses.
AIG's actions are unethical at best and criminal at worst.
However, ultimate blame lies with the former administration and Congress. When they bailed out AIG in 2008, they applied no restraints on compensation.
The government should have seized AIG, in the same way the FDIC seizes a bank. Then, all contracts could have been renegotiated, solvent units could have been spun off and toxic ones could have been propped or allowed to fail.
To quote you:
"Without a guarantee, many would have fled the toxic environment and left AIG in an even deeper hole."
Apparently 11 of 73 did take the money and then flee the toxic environment they helped create.
Plunder and flee. Their behavior can't be justified because it's "unconscionable" and that's a legal reason for nullifying the contract anyway.
Point well taken and I saw the interview this morning (won't comment on that).
However, I disagree with you. It's nice that "Jennifer" expected her "deferred" compensation; however, it is not "business as usual" at AIG. Jennifer should have been pulled to the side like millions of workers in America and told, "hey, you still have a job, but I'm cutting your pay" or "hey, you have to stay home for two days out of the month, but you still have a job" or simply "you are not getting a bonus this year".
If AIG was performing and did not have to take a government bailout, I don't think anyone would care about Jennifer's "bonus" (aka "deferred compensation"). However, "Jenny's" deferred compensation is paid with tax money from people who do not have the luxury of giving it to her.
So, I understand all too well your point Ms. Schlessiger....but when are these people "really" going to "get it"? It's not "business as usual on Wall Street and "Jenny from the Block" shouldn't be compensated for poor performance....Jenny should take her "base salary" and thank God, like the rest of us, that she still has a dang job!!
Whatever happened, happened.
What people say means nothing, compared to what they do.
It is by our actions that we are judged, not our feelings, thoughts, or words.
Wall street has made there actions known, as have the American people. So don't tell me that I can't judge them, the American people, and myself.
We've all left our footprint here. You can't change the past, and you can't prevent the future. The same mistakes will be made again by different people and different corporations. So let's use a little distributive justice, and punish the people most responsible, Wall Street. Than we can start to move on and move forward. The American people have already suffered enough.
"Too many Americans forgot the simple rules that we learned from our parents: don’t spend more money than you earn, and save a little bit from every paycheck."
Jill, have you been living under a rock??? Americans HAVE been saving a little from every paycheck. It's called an IRA or a 401k or some other investment fund recommended by you and all your financial advisor friends. And what happened to that money? Americans have lost TRILLIONS of dollars in the last 18 months. Don't blame us for being homeless or jobless by saying we should have been saving our money. We did – Wall Street stole that from us too...
This in nonsense. Use simple common sense. Bail out funds should not be used to compensate employee "bonus" plans. These are tax dollars that must be repaid by the public. I emphasize public. The greed displayed by AIG was the problem, is the problem, and will be the problem. There is no rationale to justify this behavior. The government did AIG a favor with the bailouts; the American public will have to pay for the bailouts; these financial employees would not have received bonuses if we had allowed these corrupt financial institutions to go bankrupt! Maybe the government should rethink its policies.
Mrs. Schlesinger, Your comments are well thought out and rational. I am sure the appearance on CNN was no picnic but you probably should have expected a talking head dog fight because that is what so much of televised media is about today.
In you statement you left out one important concept that I really haven't heard many critics or defenders of Wall Street talk about. That is the Fiduciary duty that Wall Street, AIG and its employees have to the Tax Payers who's money they were entrusted with. You know the concept. A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.
A fiduciary must not profit from the fiduciary position. This includes any benefits or profits which, although unrelated to the fiduciary position, came about because of an opportunity that the fiduciary position afforded. Namely the bailout of AIG.
Secret commissions, bribes or extortion, also come under the no profit rule. The bribe shall be held in constructive trust for the principal, the Tax Payers. The person who made the bribe cannot recover it, since he has committed a crime. Similarly, the fiduciary, who received the bribe, has committed a crime. I would argue that there is a close relationship between a "retention bonus", meant to keep employee at AIG, and a bribe or an extortion payment. What else is the payment of money to someone so that they will not act in a way that may harm the bribe payer anything but a bribe or extortion.
One point of disagreement!
The board of directors of public held companies get a healthy compensation and considerable prestige being on the board. It is their consumate responsability to curb excessive risk taking and to set reasonable compensation for management. I find it very very difficult to believe that anyone is worth hundreds of million in compensation unless they are risking their own money. I have also been told that many were taking excess risks because everyon else was to boost profitability. I guess if everyone is jumping off a cliff one should join them.
However she puts it, no one (regardless of who they are) should get rewarded for failure and that too when the tax-payers are footing the bill! Once, the AIG is bailed out by the government, they should be treated as govt employees and their contracts have to be re-written.
Let us take for example, I work for Company A and my company gets bought out by Company B. I get new employment contract, my bonus distribution will be different; lot of times, even the designation change; and so does benefits.
Why should the AIG guys think they are any different from the lot of us. If they want to leave, let them leave.
Great article. People get so caught up in the emotion! A contract is a contract and if employees have contracts regarding bonus payments and conditions were met then AIG has to pay bonuses.
I don't think any court would say bonus payments should be withheld because the money is borrowed from the government. The deal is between employee and employer. Perhaps these agreements should have been written better and had more specific restrictions. If AIG went bankrupt then the bonuses would not be payable unless funds were available. Otherwise-no choice.
For all those who oppose this I ask-would you refuse to take the bonus? When your company is not doing well (assuming you are lucky and still have a job) are you giving back part of your paycheck? Are you refusing a raise, and if you are lucky enough to work for a company which gives bonuses this year are you saying NO to keeping it? I don' think so.
Lets not be jealous. No I don't work for AIG no I don make $1 million dollars a year or even close. I am losing my job in the next few months. I won't cry over spilled milk! I will find a new career, a new start. The American way-do it, contribute, make your own path. S
I am not sure why these execs must still be called "best". A month ago they came to the govt. asking for a loan to resurrect their company, its a mistake on the govt. part that they did not see that the money was in fact going to bank accounts of top execs. However weren't the people asking for money aware of this? Were they smiling under their tears thinking "let the ship go down but I will get my share"?
As our president said this is not a question of "dollars and cents" its about values.
These execs should know thousands of people who are on street today had paid money as tax for them to be afloat.
Whether the govt can get money back or not, execs should be ashamed of taking it! If they have any honor left in them they should forfeit their bonuses.
I am sure they will never, still there are people who think they are the "best"!!!
understandable but in a recession restructuring of contracts is the most likely way to cut cost. People that refuse to restructure contracts that are demanding these bonuses need to be let go. My father works for Ford and for the 3rd time in the past 2 years have restructured their contracts to help save the company money, Yet a company receiving 6 times the amount of the entire auto industry combined is allowed to give employees that amount of money. These people aren't being forced to accept the money if they want to stay in business don't take the money and restructure you contracts to make it fair to the people giving you this money.
The money that was paid by the taxpayers was intended to prevent the company from going under and stabilizing the financial system, and was not intended to end up lining the pockets of these executives. I work in finance and am aware of the compensation system - that bonus are a significant portion of compensation is irrelevant. The fact of the matter is that AIG is a bankrupt company that would not have been able to pay these contractual obligations but for receiving the taxpayer's money - it is just plain silly to think that this money is owed to these people or that AIG should pay them out of some concept of fairness - I think you are completely out of touch with the real issue here, which is actually very simple and straightforward: that taxpayers, many of whom are in financial crisis, should not be funding bonus payments to executives of a company that has failed.
If a company loses money, they should not be giving bonuses. You can try to deflect that simple point by bringing up consumers and government and anything else, but those are nothing but diversions...the old "well, just look at what he did" argument that always gets thrown up when someone gets caught red-handed doing something they shouldn't have been doing. The people responsible for these bonuses deserve to be fired, and there should be some real investigation into the legality of this type of "take the money and run" action. There is absolutely no question that management knew they were on a ship that was going down. Rather than trying to right the ship, they robbed the company blind.
The thing that irks me about this whole discussion is that when a company does badly, it usually is the mid to low paid employees that are asked to take a cut so they can save their job and those of their fellow employees BUT when it comes time to ask those who make the most this same gesture isn't even a consideration. Both parties have contracts with the company when it comes to compensation. My income is very high and this new administration's policies will most likely hit me financially, but in times like this, shouldn't everyone share in the burden and adjust their expectations, so we can lead this country out of its past and build a new sustainable future? The way I see it is the establishment is acting like a bunch of spoiled children who are just selfish and entitled.
"Without a guarantee, many would have fled the toxic environment and left AIG in an even deeper hole. "
Fled to where, exactly? Is there a huge demand for executives who helped drive a company so far over the cliff that it took the entire world economy down with it?
First, fault the Fed Govt for the idiotic structure of the entire TARP, etc. packages.
Nevertheless, the correct response to those who were to receive "bonuses" would have been, "We're sorry, but the company is bankrupt. We can't pay you in cash, but we can pay you in stock that can be redeemed after all the TARP money is repaid and we're profitable again."
Or even better: "You're bonus is that you get to keep your job."
Financial engineers should not be immune to the results of the risk they have taken. There is a reason why variable compensation is "variable" – even though bonuses my be the de facto compensation, they are based on company performance. By bailing out banker bonuses we perpetuate the illusion that got us to this situation in the first place – unlimited upside, but a floor on the downside risk.
While I see the need to retain top performers at companies like AIG, I still have one question – if they didn't pay out bonuses, where would these execs go? Its not like there are tons of companies clamboring for ex-financial services professionals right now. They will have to stay in those jobs until they get fired or the economy turns around.
And that all goes out the window when public money is involved. Taking my dollars wasn't in their contract, but they did it anyway. i want them back.
Ms.Schlesinger is entitled to her opinion. So is the collective judgment of the American people. The issue is not bonuses in themselves but the practice of companies who are only alive due to the good graces of the American people to have the audacity to pay bonuses during a time of financial crisis. One must also wonder if the performance upon which individual "bonuses" were based was in fact real or simply a product of "jobbing the system." It seems that given the drop in the market no profits were actually earned or were merely illusory. Ms. Schlesinger does not feel to grasp this fact. One must then wonder what kind of financial and interpersonal judgment she possess. In turn what judgment the money managers at SharePoint Investment Advisors must possess.
Perhaps the American people can vote with their feet. Simply don't due business with the companies that exhibit this type of outrageous behavior and those who in turn defend this behavior. Boycotts ended apartied in South America. I suspect they could bring a level of discipline to Wall Street too.
It is very simple in my opinion. If the company were still performing well and operating upon its own revenue, then hand out all the bonuses you want. Who I am to tell a company what they do with THEIR money.
But this isn't their money. Its the hard earned money of every American out there. Kids working through college, single parents, struggling low income families, and struggling middle class families. If you think I am willing to tell my children that the reason they are eating ramen noodles and macaroni n cheese (not even the good kind, nasty Flavorite stuff) because we are struggling to pay bills is so that employees that almost drove a company into the ground can get some bonuses that total more than I will probably make in a lifetime, you're insane. Not on my watch. I helped pay the money that made it to where those people still have jobs. I'll be damned if they are going to spend it so recklessly when I can't even afford to give my kids fruit snacks every once in a while.
There may a great number of people to blame. None of them will receive a bonus for being to blame other than the AIG executives and employes. Your point is irrelevant.
Schlesinger should be fired. If AIG was allowed to go bellyup, would
these aholes have gotten their bonuses?
Not only is it wrong, it is morally wrong.
Schlesinger should take a bridge.
Hi, I would like to get a job interview with a company that is "too big to fail." And I would also like to interview for one of those jobs with a bonus that will be guaranteed regardless of how the company does over the course of the year. And just in case things don't go well, I would like to be paid handsomely to be kept around to "Unwind" some of the bad decisions that I may have made in the past.
I would like to do these things because I'm really tired of being subject to realities of the other economy out here where if a company fails I might loose my job, and where my compensation at the end of the year is based on my performance and the company's performance.
I have one more populist question: is there a list of companies too big to fail on the internets?. Could I find it with The Google?
One key point – how much of a bonus would they have received if there wasn't a taxpayer backed bailout and AIG went bankrupt? Should we also pay Lehman bonuses???
I agree with Bridget Feeley, Ms Chetry did not moderate this show properly, she just created fire for viewship. WRONG WRONG WRONG.
I myself will watch Fox News from now on and show this garbage to all I know.
Ms. Schlesinger never got to tell the Truth to the ignorant that do not understand the importance of a contract nor earning $200,000.00 + dollars per year. It was already in thier componsation package, grow up. You people think you're "entitled" to something you never earned. If you don't like what this country already gives you for sitting on your ass watchin Oprah, then move somehwere else. To get these top exects to work for the company you hold stock in , WE must pay them in order to get the payback we want. If we knew this recession was going to happen, the board of directers would not have given them as good of contracts as they did. It's called capitolism folks, if you do not like it MOVE. YOU are costing us more than ANY of these top executives.
Legally AIG was obliged to honor its contract. But MORALLY it should have considered the effect such huge bonuses would have on the public in light of the current crisis. It should have asked the prospective receivers of bonuses to defer them in order to preserve the company's public image and promote further bailout not only for AIG but other banks as well.
No offense I can say that you offer your points well enough, but I have to agree with Alesia; I can't really agree with the whole compensation idea. It's still dumb. Say for example, you have an abundant resource of whole grain which would be your currency; You have one plentiful bunch of grain you get every year; (Your Base pay) which should cover pretty much all the necessary needs to survive or support a large family. In other words, that base pay should be more then enough, hell it's overkill.
Then you get compensation for selling some of your resources(your bonus) so you get whole big whole resource of grain that's 5 times the amount you already get...
But here's the thing, other people need that grain to eat.
So in this case, You're trying to justify, millions of dollars belong to those employees and CEO's, based on the idea that it's in the contract of your company, and because the government decided to overlook clauses and details of that contract; you say those people are justified to receiving millions of dollars.
That's the same kind of situation, of say, You're a little kid and your mommy didn't see you beat the crap out of a smaller kid and take his ice cream. So you begin to think, "I get more ice cream as long as she doesn't know!! And I deserve it because I've been a good kid!"
And yes I agree that America's just looking for a scapegoat. Of course the Clinton administration started hacking away at job securities for people with the NAFTA agreement. And the Bush administration just flung more fuel on the fire with the Iraq War but in my opinion, Wallstreet just makes for helluva a good scapegoat too...
I agree with Alesia, there's a thing called ETHICS; this is why I've become less and more less of a supporter of our capitalism system. It creates too much of a caste system. And by caste system; AIG's keeping core employees like other companies, because of high values and skills as an employee. That's a smart way to go business wise.
But it's unfair to a more plunging population...People getting put on the streets, working long hours at a crappy job. This is defending the wealthy 1% and saying; "Because their skills are more valuable to us...they get anything they want"
This of course, isn't going to make a crowd very happy.
So I'm gonna offer a bit of simple advice; if you want to win an argument and defend your point of view more here, I would reach across the table with some more instances of HUMANISTIC ethics as opposed to totally defending your viewpoint based on BUSINESS ethics....Hell pick up a stool and smack the guy talking over you and tell him to let him have your turn
I apologize that I didn't get a chance to watch your piece on the show. And it's seems unfair that you got shouted at. I believe you make some good points. Although I disagree with the whole compensation thing; I'm not a person who really cares alot about money just as long as I get enough to survive and live life comfortable and make beneficial contributions to society.
So I am going to put a proposal to my boss that I don't get bonuses based on performance. I would like them guaranteed.
Jill, you really need to get a clue. To defend the indefensible is outrageous. These people didn't deserve bonuses, unless of course you believe someone deserves a bonus for running the company so far into the ground that it needs the American taxpayer to bail them out from failing.
Once Again.
Lets be as unresponsible as those execs. Let's not save their butt's.
Let's take back the billionw we have loaned them and let the Exec's and others get their extended compensation and bonus from the bankrupt company.
And we taxes for this??? How is this benefiting us??
Interesting that the bonuses have been known about for months by the very politicians who are now screeching about them. If these so-called leaders know so much why didn't they object when the stimulus package was implemented last year? The duplicity and lack of any spine by Barney Frank, Chris Dodd, and even King Obama and his court is sickening; if this dog and pony show continues our country will be down the toilet before our citizens, way too many of whom are self-centered, blindly believing pawns, realize that they have been duped big-time.
Performance = bonus. No performance = no bonus. Unless its guaranteed (deferred) SALARY and if that's the case, go after the Compensation Committee. Not only are the recipients of these bonuses shameful but the lack of oversight is every bit as bad. I wonder if the current administration will allow AIG to be sued by its shareholders?
Glad you have put it into perspective no matter how ugly it may sound conceptually. Chetry should be fired and Mack should have a muzzle put on his BIG mouth. He must be from Detroit.
The entire situation is a SCAM!!! Bonuses that company is obligated to pay?!?! The company should be in bankruptcy court!!
is this what cnn journalism is?
does your hus or bf got those big bonus and you trying to justify it
It sounds like some one was trying to protected her own. I don't have to listen and not agree with the execuse from the people from the same circle. Above all, this is my money and all the tax payers' money. Not "WALL Street" money. Wake up! You guys are still greedy!!!
Also, with a 80% stake in the company, you figure the government could do something about these bonuses – if not, what was the use of "buying a stake" in the first place.
Why don't we just have Christmas time for dole out free gifts of taxpayers' charity to all ailing businesses?
You explained the anger of most Americans with "deferred compensation" that is "discretionary based on her performance". To the majority of people in business, that is exactly what a bonus is. Not something you can count on, just hope it happens if both you and the company does well. The only people I know that can count on the pay promised regardless of performance are government workers and tenured teachers. If the rest of us have to modify how we manage our own financial lives based on how well our company does, why doesn't Wall street (and those government workers) who are paid with taxpayer money!
Although I do appreciate the wonderful description of the "grey" area that you have provided, I believe there are two fallacies in your logic. First is that these people would leave a toxic environment if they didn't get their bonuses – to go where? – there aren't any jobs! Secondly – I do not believe that your description of bonuses is accurate for all those who have received them. I believe your model applies to the trader who is measured on quantity sold – however, for executives who have fiduciary responsibility for the performance of the company this does not and should not apply. If they actually performed in a manner that won them those bonuses AND the company is going under - who structured that deal? Shame on them!
She makes a valid point in this commentary. I don't like paying out big bonuses with my tax dollars either BUT changing the rules AFTER THE FACT could set a dangerour precedent.
Bonus is still Bonus. Deferred compensation is deferred compensation. if i mess up such a big company, i will be too shamed to come back to claim my 'bonus'.
I can certainly SEE Mrs. Schlesinger's point, but that still doesn't make it defensible. Without our taxpayer money, there would BE no deferred compensation. It's not just populist outrage; it's common sense. Whether or not AIG was contractually obligated to pay these bonuses was a moot point the second they accepted taxpayer money in lieu of failure. There shouldn't have even been a NEED for a no-compensation clause. This money (OUR money) was intended to put you back on the track towards solvency...nothing more, nothing less. Here are your options: 1) forgo the exorbitant compensation until you've paid us back, or 2) fail and get nothing. Simple as that.
So who owns AIG now?? they have my money...I think it's fair to know all the names of the people who took my money....
Aren't the people at the top responsible for the performance of the company? Aren't they in essence the true 'owners' of the company? If I owned a restaurant and had 8 great years and one bad year that collapsed my business, well then I will suffer and probably lose everything. That is just because as the Restaurant owner I assumed the risk and the rewards and downfalls that come with it. The people at AIG should have the dignity to go down with their sinking ship. They are the captains of their Company. Instead it is others who can't afford to pay the price for the mistakes that the AIG 'board' made that are sufferring while these people get off without having assumed any risk at all. That is plain wrong regardless of the legal arguments.
The Wall Street thieves, taking advantage of the deep-seated capitalism of the American ruling classes, have arranged things so that they can stick their snouts into the trough of money and just help themselves, unlike other people who work for a living. As for class war, the conservatives don't mind at all as long as they are winning, but if any justice is attempted they wail "class war, class war." It is time for some real class warfare now, one that would put the fatcats to the wall. The federal gov't should seize the bonuses, followed by nationalization of the banks, followed by nationalization of the stock exchange. That should rein is the pirates and freebooters who rip off the public.
AIG needs to be "SEIZED" by" Presidential Order " All of the company officers who were in on the bonus need to be fired . Anyone else who is in on the process should also be "FIRED". CLEAN HOUSE AND START OVER!!!!!!!!!! IT CAN BE DONE ! IF EVEN THE PRESIDENT WON'T DO IT THEN GET OUT OF THE WAY AND LET THE AMERICAN TAXPAYER HAVE AT THEM THEN WE THE PEOPLE WILL CLEAN UP CONGRESS AND SO ON AND SO ON >>>> GET OUT OF THE WAY BECAUSE WE THE PEOPLE HAVE HAD ENOUGH
talking about bonuses-
except for the ceos and the upper level management..did the everyother employee who was promised bonus -verbally or in paper- paid bonus?
why is all the rumpus about agreement to pay the bonus-as it applies only to CEOs CFOs
key point:
as long as Jennifer performed her job and her business unit did its job
so i guess you think that causing a financial catastrophe is "performing a job"???
wouldn't any normal citizen that brings such financial chaos be fired???
if i did something that caused my company to lose money, i would be fired, plain and simple.
oh, and they wouldn't give me my "bonus" either.
As you trip over yourself defending bonuses to the insolvent-except-for-a-taxpayer bailout financial banks consider the following point being made to automobile excecutives:
"Critics of GM and Chrysler, which have received $17.4 billion in government loans to stay alive and have requested a total of $39 billion, say the government should let them go into a short, prepackaged bankruptcy that would let them restructure debt and void costly labor contracts."
Why was the same criticism not being directed at AIG and other large Wall Street firms last fall? Why wasn't the voiding of labor contracts an option. Of course the answer is that the Wall Street-Washington DC nexus prevented a discussion on this. The Obama Administration is participating now as actors in this drama as they pretend to be "outraged" at AIG bonuses but say little or nothing about
where the funds that originally were sent to AIG were channelled.
A third political party based upon fiscal responsibility with representatives not for sale to large American finanicial interests is sorely needed. The degree of corruption on Wall Street and in Washington DC reeks.
James Angresano
Professor of Political Economy
The College of Idaho
Ms. Schlesinger,
I agree that the TV debate was child-like & your adversary was rediculously rude..
But, your explanation only proves that you just don't get it.
Well, I had hoped that in the least Ms Schlesinger would have made me understand the reasoning behind paying out big bonuses when the company did not make a profit and is on the verge of bankruptcy. Unfortunately, she did not. See I come from a world where I have to work extremely hard for my money to take care of my family. The company I work for has a bonus/incentive program too. The difference is that we don't get paid our bonus or incentive until we make a profit over the budget. If we don't, we don't get paid. If we have a bad year(due to the market-not due to performance), our budget for the new fiscal year is somewhat adjusted accordingly and we usually manage to gain our bonuses back because we've worked harder and smarter.
If we don't get bonus strictly due to our performance, we get reviewed and may ultimately lose our job. That's how it should be, pay for performance. Why would you want to retain people who put your company in financial ruin? How could management and it's workers ever let it get that bad and then expect a bonus on top of it? That just doesn't make good business sense. Which I guess is why they're in the mess they're in. Fact remains-I certainly don't want to pay them with my tax dollars. They just didn't earn it. Period.
If comp is based on profitability and/or efficiency, should anyone in the federal government be paid anything at all? last I heard we were running at a 700 billion to 1 trillion annual deficit (LOSS).
Yes it's discretionary compensation, and not tied to their performance as most "bonuses" are. The key word is DISCRETION. It's at the discretion of the higher ups if that is actually paid or not. If it were guaranteed, it would say that in her contract. I think, with their company having been bailed out, the executives would use their "discretion" and not pay out these exorbitant bonuses. It's hard to feel sympathy for someone who's base income is higher than mine, and a "bonus" is more than twice my income. Let alone the people to which my salary is "walking around money." I think another problem is the language they use, they keep saying "retention" and that without these bonuses, the employees that actually do the work will leave. Well, it looks like a few of them did anyway!! Outrageous!!
to david (above) and others like him – there's a reason you make $38,000/year. it's because you spell "chronic" as "cronick" and "diagnosed" as "diagnoesed". I would guess in your world, the word "definitely" has an "a" in it.
People who make upwards of $300k each year generally have long resumes and are very well schooled. They worked hard to get where they are at and they probably spent a ton of money on their education. If you work on an assembly line, you get paid for working on an assembly line. Why do you think pro ball players make $10 million a year? Because they have skills that others don't have.
Who knows if these people deserve their bonuses? Some do and some don't. Not everyone who got paid was responsible for putting AIG in this mess. And if these bonuses are contractually guaranteed, then everyone should shut up about it. What would you do if it were you in their place...say "no thanks, I don't want a contract that will pay me $1.5 million a year; give it to someone else". Get real.
And one other point. The cost of living in the metro NY City area is astronomical! Do you pay over $2,500 each month to live in a 700 squ. ft. apartment, plus another $300-$400 in parking? Or how about living in a suburb, and being forced to pay $1 million for a house that would cost no more than $300k in the midwest. Throw in $18-$20k per year in property taxes and $30-$40/day in commuting costs...Suddenly $300k/year doesn't go that far.
We certainly can debate how we came to be where we now find ourselves, but Ms. Schlesinger's attempt to defend or justify AIG's conduct is pathetic. AIG is currently going through what is no less than a defacto Ch. 11 bankruptcy that is being funded by the taxpayers of this country, all on the belief that it is better for our country to save AIG rather than let it crash and burn. In a real Ch. 11 bankruptcy, no bankruptcy judge or bankruptcy lender would authorize bonuses to be paid to the Financial Products Division personnel that brought AIG to its knees. Euphemistically describing these payments as "retention" payments is laughable. Retention of whom and for what purpose? To sell more products like the mortgage derivative securities that AIG previously sold at a gluttonously-high profit with no regard for high risk? Please, we out here in the hinterlands may not be masters of the universe like Ms. Schlesinger and her Wall Street buddies, but we know a scam when we see one. The bonuses should not be paid at all. If AIG refuses to stop the bonuses, the Attorney General should commence involuntary Ch. 11 proceedings against AIG immediately.
Incompetence should be punished. They should be happy that they are not going to jail.
AIG should postpone their "contractual obligation" to pay these "bonuses" until the money used to pay said "bonuses" is AIG's money & not borrowed taxpayer money. Additionally, recipients of said "bonuses" should be MORALLY and ETHICALLY obligated to either refuse their bonus or take their bonus and give it to those in need. The government (as usual) dropped the ball by not making specific stipulations as to where/how/whom the TARP funds would be spent by the recipients.
What disgusts me the most is that the recipients of these "bonuses" will probably take the money, because they actually BELIEVE that they earned it, and will sleep tonight with a clear conscience (based on THEIR ethic & moral beliefs). Afterall, facilitating the economic collapse of the free world is hard work!
The bonus thing is just a smokescreen. Wake up people! The entire bonus amount is only 0.1% of what taxpayers have put into AIG so far. I don't like these bonuses either, but while the media, Congress, and each of us complains about the $165 million, we are ignoring what happened to the other $179.8 BILLION that we taxpayers have put into the company.
Thank you so much, Ms. Schlesinger. That is the first clear and reasonable article I've read relating to AIG and the part it has played in the current ecomonic mess.
I can see why people are upset, especially when they don't have all the information because of biased reporting or don't understand the whole picture. I'm not that crazy about those bonuses either. But on the other hand, the way that congress and the rest of the media is waging such a hate war against AIG is something that's difficult to understand (or maybe not).
Yes, I totally agree that AIG did foolishly invest in a lot more messy mud pies than they could handle... but the main point is that they weren't the ones who made those mud pies in the first place. Some would say that they were created in the congressional bakery run primarily by Franks and Dodd and perpetuated by all their friends there in Washington. And now, amazingly enough, who is doing most of the finger pointing at AIG?
AIG was just at the end of that long line of risk. But what if for a moment, we imagine that AIG never existed and never invested in those pies. That alone doesn't do one darn thing to get rid of those messy pies. So where do they end up in this imaginary case? Now at the end of the line of risk, we find the pies being owned by a multitude of banks, GIA's and other financial investors (some of which you have seen in the list provided by AIG).
But in reality, AIG did exist and did attempt to insure all those messy mud pie investments. Also in reality, now all of those intermediate investors are not in quite as bad of shape financially as they could have been. And that's because they are getting billions of dollars to cover the losses they might have had to bear alone... through the bailout money given to AIG.
I wonder how all of these companies would have fared if they had been stuck at the end of the line, all by themselves. How many of them would have failed because, individually, they might not have been quite large enough for the government to notice and therefore provided aid to? Maybe the Treasury was right in the first place when they said that by helping AIG they would be helping in the best possible way to keep the economy from failing.
But that's not the correct bandwagon to jump on right now, is it. No body really cares about what's right or wrong today. We already have our scapegoat and we're gonna have a barbeque.
Ms. Schlesinger,
The financial industry produces one product., $$.
Above a certain level of staff all performance is driven by meeting or exceeding their numbers, such as revenue targets, number of new clients, etc.
To say that one in the financial industry earns a $200k deferred compensation based on their performance when the company has lost the amt of money AIG did is laughable.
You're implying that hundreds, if not more, AIG staff met their financial targets yet the company lost Billions ... that really is fuzzy math.
It sounds to me Alesia that you chose to have children. Did someone force you to make 35,000 a year? I would obviously need more information about you to make a informed opinon , but something doesn't seem right. Lets get one thing straight. Nobody owes us anything. you are 100% resposible for your actions. I don't hear any responsibilty comming from your comments. I wish they never got the bonuses too. Thats the deal they made , simple as that. Do you realize there are much bigger issues regarding this than the bonuses? Does Barney Frank , Chris Dodd , Pelosi and George Bush have anything to do with the financial mess? Lets go to the root already. If someone said to you ," sign here and you'll get a millon dollar bonus" what would you do? Honestly now.
bo-nuts!!!. how can you call it a bonus when it is more than what 185 combined average americans make per year?
are there families that much bigger?
For me, this is not about scapegoating. The author is right in pointing out the many contributions that have led to this mess, and for noticing what a tiny percent of the bailout funds these bonuses represent.
But the author misses the mark.The notion that a company can be contractually bound to pay DISCRETIONARY income is non-sensical. So what if the *operational* norm is to treat bonuses as entitlements? If the language in the employee contracts states that compensation beyond base pay is "discretionary" then what is the legal basis for them having to pay out these funds?
I also find the argument that "the staff people we need to save AIG would have left if they didn't get their bonuses" to be wholly unpersuasive. Where would they have *gone*? How many other companies are out there today – insurance or otherwise – who can still afford to pay such outsize salaries? If I was at AIG and a potential recipient of such a bonus, I might wail loudly at not getting it, but I would know damn well that there ain't too many other jobs out there right now and at the end of the day I'd be spitting happy I still *have* a job. And those who might quit out of spite? Fine. I have no doubt there are plenty of talented people who would be willing to come on board to help AIG out of its mess.