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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Nice try, but as to the argument that the bonuses are contractually required, let the employees sue to recover their bonuses. Even if they are really required, let them come into open court and explain to a judge, better yet a jury of unemployed, underemployed, or hardworking taxpayers, why they should get bonuses (at least 73 of them over a million dollars each) for creating a mess that the jurors (along with the rest of us) have and will pay for.
If they can convince the jury that AIG should have paid them, then maybe it should pay them, and add on whatever interest has accrued since it should have been paid. If they lose, they should be required to sell some planes or yachts to at least cover AIG's (i.e. our) attorneys' fees for the contract litigation.
So why are we paying them?
While i agree that, in the broad scope of things, the $165 million isn't much, I am still dismayed at the way wall street continues to work....and I'm an MBA, CFA, and former investment manager! These people are earning compensation for MAKING the mistakes that drove this economy into recession. So the whole idea that we need to compensate these people because they are the "best and brightest" is false on its face. They're not bright. Just greedy.
Many of these comments are pure class envy.
People are making assumptions on the subject that have no idea what is in the AIG contracts for the bonuses. Contract bonuses do not have to be tied to company profitablity. May not make sense but it happens.
NO ONE (not even Ms. Schlesinger) has even mentioned that Sen. Dodd wrote in a provision to the Stimululs Bill that exempted contract bonuses agreed upon prior to the Feb. 9, 2009.
Just another example of what happens when incompetent politicians rush to provide a fix to a crisis!
The best option was to let AIG go into bankruptcy and there would have been no issue. Thank you Federal bailout folly.
This is a vapid attempt at justifying a reward for non-performance. Attempting to justify the "comp" structure by saying profitability (that is performance) was not "part of the deal" is beyond absurd. Profitability is always part of the deal-are you some kind of socialist? The reward to those who believe profitability is no longer "a part of the deal" everywhere else in the business world isn't a bonus–IT'S A LAYOFF.
It's better to be quiet than to attempt to defend the indefensible.Everyone on Wall Street isn't greedy because they earn high pay. However, everyone on Wall Street (or anywhere else) who believes poor performance by an individual or a company should be rewarded by the usual bonus is DELUSIONAL. If you further believe that taxpayers should fund part of this lunacy, then you should consider institutionalization.
everything about this is wrong. a company that shouldn't exist is paying it's (ex)employees (who have proven incapable of performing their jobs effectively) performance-based bonuses with the hard-earned money of other people who, because of the actions of this company and it's industry, can't afford to keep food on the table or a roof over their heads.
these villians may get their money now, and they may even get to keep it, but the evil they embody is something no deferred payment will wash clean. their blatent disregard for the well-being of the society at large (that has supported them for so long) is the most shameful aspect of the entire situation. there is not a single shred of decency in anyone that accepted a bonus from AIG.
a time will come when these people will have to answer for their despicable behavior, and on that day there will be no bailout to save them.
Your comment ... "You are dead WRONG. There are people out there with no jobs or low paying jobs that are struggling to pay their bills. There is NO ONE in the world that deserves millions of dollars in bonuses. Go work in a factory for 8 hours a day, collect your check on Friday, dead tired, and then read the tax line on your check and realize those taxes went to people who are sitting on millions of dollars. Frustrating."
Sorry... but I worked 4 jobs to put myself through college with my own $ so I didn't have to work in a factory. People are free to negotiate any deal they can when getting paid. Sounds more like sour grapes than frustration.
Schlesinger is right that this should not be about the dollar amount. If one makes their company millions then a million dollar bonus is in order. The fact that the majority can not make their company millions does not make the bonus any less valid for those who can.
However, when one makes mistakes, whether systemic or not, they must bear the consequences. My company is having a rough time in this economy and employees who are not at fault have lost their 401k matching and are going to endure mandatory time off. Why then should AIG's employees fare any different?
you seem to say at some point 'bonus or stock option' ... we don't mind stock option ... let them all get all the stocks in the world now ,,,,
Ms. Schlesinger, your 'analysis' still leaves too many gaps, and your opinion seems to leave out one very distinct fact, i.e., we, the taxpayers, now own AIG, and the government, as our representative in this “deal’ from hell, is certainly permitted to address where our money is being spent. This ‘bail out’ was necessary due to the incompetence of the very people who are getting paid these ‘bonuses.’ How dare they pay themselves off with the ‘charitable donations’ of taxpayers that allowed them to actually have a job when millions of taxpayers are losing theirs?
As an attorney, who was a partner in a law firm, I had a contract based on a ‘draw’ and ‘deferred compensation’ calculated on the profits we made at the end of the year; and if we made little or no profit, we did not receive our deferred compensation. i.e., ‘bonus,’ or it was reduced accordingly. What group of bone-headed executives at AIG agreed to give out 'bonuses' to people no matter what the profit structure of the company turned out to be, especially when they knew the economic situation they were facing, and after they took taxpayer money to stay afloat?
If AIG did not get the billions in charity from the taxpayers, it would have to declare bankruptcy, and then NO ONE at AIG would be paid anything, and certainly not those people who received ‘deferred compensation.’
Finally, one argument I keep hearing is that this type of payment is made so that the recipients will not leave and go to another company; apparently, they are too valuable to lose. I have two responses to that half-baked argument: first, many of the recipients already left, so that part of the argument doesn’t hold any water, and second, since these people drove this company into the catastrophic position they now face, they should be fired, not rewarded. In other words, good riddance!
Reading all the comments, frankly I'm baffled by those that continue to defend a system that rewards greed and crime. Watch a road crew work, and watch an investment banker, an insurance broker and an investment broker work. Frankly, I'm ot much interested in your rational.
The people in question stole from the American investing and depositing public trillions, yes, trillions of dollars long before their overwhelming greed finally came to light. Last fall, in one day, a trillion dollars of American investors capital was redistributed out of investors hands – it didn't just disappear.
If the apparently small group of people defending these astronomical bonus's, performance compensations, performance incentives, legacies or whatever this week's favorite term is – realized that this incredible amount of our nation’s capital is being taken out of their pockets as well as others – they might be as much outraged as the rest of us.
And what is wrong with class warfare? It happens every time those that can't control their greed accumulate enough of a society's resources to piss off the masses. As soon as the majority of the population have nothing left to eat but "cake", and no real opportunity to improve their lot through hard work and investment – out comes the guillotine. People don't like getting screwed. That shouldn't come as much of a surprise, and, at this point in our history, most certainly shouldn't be ignored.
When we have the least trustworthy among us handling all the wealth and its attendant power, what would one expect to happen – functional democracy? And wasn't Karl Marx a prime instigator in a class warfare revolution when it became impossible for most Russian citizens to find sufficient food and fuel?
Maybe I’m just not an advocate of a system that encourages us to screw our fellow citizens until they can’t afford groceries or a place to live – and have no compunction when doing so.
Ever heard of Seppuku??
Consider the same Jennifer example. Say the company has no money to pay Jennifer (she did an excellent job), would the CEOs pool some money in to pay her? dude, this is exactly what has happened!
I am not a college educated person, yet I am VP of Marketing & Sales at my company and I sit on the Board. I own three houses – two of which are rentals (one fully paid for). I have money invested in other areas as well and therefore am diverse with my investments. I never have credit card debt and I have money put away in a savings account for "just in case." I do not make a three figure salary, but make a very decent salary and enjoy my job. Yet, some people say that "we" all got ourselves into this mess by spending more than we save. I can say that the majority of my friends live the same way as me and they too are angry at what has happened to our country. It is greed on many people's part, but there are some of us who did all the right things and yet have to suffer because of others. The housing market was way too inflated for the past 3-4 years. I could see that a long time ago - I could not figure out how the builders were going to fill up all of the houses/condos/apartments/retail space being built all over our U.S. cities and suburbs - where were these people coming from? Statistics had been showing that our population has been decreasing over the years. I saw many people purchasing homes that I felt could not afford the homes they purchased and just knew it was a matter of time before they would be in foreclosure. I saw salaries skyrocketing which I knew was going to cause us many problems in the future because that meant that minimum wage would drastically increase and hurt small businesses – the largest employers in our country. Many business men that I talked to last year and this year said that "no one thought it would end." Come on people! We are an ever evolving society. Everything ends at some point. Our economy is cyclical – there are always good times and bad times. How could they even think that "it would never end"? How is it that the highly educated people of this world didn't see any of this coming? It truly amazes me because it didn't take a genius to know this was going to happen. I certainly saw it coming.
Ms Schlesinger:
I believe this issue gets to the heart of where we are today. WallStreet should be able to act ethically, without the guidance and requirement from our government. Why should it EVER have to be said that bonuses should not be allocated to company execs when their company has received bailout funding from the hard working taxpayers? This is not the american people looking for someone to blame in a crisis situation. This is an opportunity for us all to stand up and say it was wrong, and to enforce a change so we can move forward as a country.
Also noteworthy, I am a Corporate Financial Advisor and I fail to understand the simple math here. Bonuses are tied to good performance, so where is the lie here? In the performance results? or in the need for a bailout???? please help me understand that one!
Thank you very much for your input on this subject.
I have a simple question, if my tax dollars did not go to bailout AIG would Jennifer still receive her $200K?
AIG can only pay out what they have in their bank account, My guess is that if WE did not pay for their bailout, then "Jennifer" would have been told " Sorry Toots" by AIG management.
I had the misfortune to be employed by two companies that went belly up. Both owed me money. I was simply told to fill out some paperwork and "get in Line with the other creditors" , Guess what ...I never saw a cent!
This is ridiculous because if AIG had been allowed to fail or even an orderly bankruptcy then Jennifer would have been out of luck. No Bonus or any other form of compensation.
That is why people are so angry. Don't get me wrong I'm just as pissed at the government for not putting some controls on the money handed outright to AIG ..but to say this is just "business as usual" OR " the way things are done" ignores the cold hard business facts.
i am pretty sure there are a 100s more willing to work for the millions you are 'throwing into the river' if only that would become their daily bread. i am pretty sure a few brainstorming could effectively duplicate the decision that these execs can conjure. we don't need no stinking Adrian Veidts.
It's not so clear that AIG is in fact contractually obligated to pay these bonuses. Has Ms. Schlesinger read any of the contracts in question? Are they public information? (I doubt it on both counts.) I say let those who think they are contractually owed bonuses bring suits on the contracts. Make them stand up in court and whine for their money. There are things called "affirmative defenses" against such suits. Maybe the people who ran AIG into the ground aren't really entitled to all that money. Maybe the contracts are fraudulent. Maybe those people didn't actually perform under those contracts. Maybe the plaintiffs won't get anything. Maybe they'll settle for less. Maybe they'll be too ashamed to sue in the first place. And who can say the world would be worse off if these people flea the toxic environment they created? It's seems odd to simply assume we really want to keep these people around when they are likely at least partly responsible for destroying their own company. And where are they going to go, anyway?
A family member making $13.00 an hour recently had to take a $2.00 an hour pay cut because of the state of the economy. His company received no money from the government. How dare you defend paying these thieves their expected income? Everyone else around the country has to sacrifice, but the people who caused the crisis get the ridiculous salaries that they were promised?
I always thought that a bonus was paid on performance. If taking a company into the tank is called "performance" then maybe I've been looking in the wrong dictionary. It's apologists such as Ms. Schlesinger that allows these creeps to exist. If they had pulled something like this in China, their kangaroo courts would have executed them immediately after the trial. Yes, it's a great country that allows crap like this to happen.
Also, to the writer that stated, "Karl Marx must be smiling. I hear that Albania is nice this time of year". I would be willing to pay for a one-way ticket there, with one stipulation, don't come back, CREEP!!!
reminds me of Marie Antoinette
Hi Jill,
While I agree with the premise of your argument that there should be less shouting and more conversations about this issue (AIG bonuses), I disagree that tax payer money should be used to pay these outrageous bonuses. I actually prefer to listen to channel Thirteen/WNET because I am tired with all the shouting that occurs on Cable stations.
It is a shame that those who may disagree with you would spend the time ripping into your views, rather than having an intelligent conversation on the issues. As a listener, I would like to get the views of both sides so that I could take a side in the argument, but it is difficult with all the noise that is on Cable.
Although I do agree that based on an agreement made to an employee that their bonus is based on that individual's performance, they should receive the money regardless whether the company made or loss money. AIG's problems are not normal loss or profit financial conditions. If the government did not provide tax payer money to prop up the company, AIG would have ceased to exist. Therefore, the employee in this case more than likely would not have received the bonus.
I also agree with you that there are gray areas as it pertains to most situations, but in this case it is no long a gray area, but black and white. Why, because the company was about to go bust, therefore, your argument no longer holds up. Basically, my tax dollars and yours as well, are paying this person's bonus, although I did not have anything to do with deciding this person's compensation.
Handel
Blasphlemy! Its all double-speak in favor of the rich and greedy. I work 40 hour work-weeks including a day or two a month on weekends. I'm lucky to see an annual $500 bonus at the end of my performance appraisal cycle (as determined by my supervisor) only to see greater than 2/3 of it gone to taxes. I will not see any piece of any federal stimulous money because my state had to raise taxes to the highest level in the history of this country due to the consistent incompetence in the state capital. It is my opinion that the government should withdraw ALL monies GIVEN to AIG, including all the non-worthy bonus money to the few select individuals who probably never worked a day in their life with a real job. Let AIG stew in its own crap that the few irresponsible individuals created. End of story.
"Without a guarantee, many would have fled the toxic environment and left AIG in an even deeper hole." - toxic? where is the proof for this? These were the same ones that brought it along! Plus, just like the rest of the industries are suffering from pay-cuts and layoffs, it should be the same in this 'industry' also (if you hate it, you don't deserve to thrive). You don't even make a point here – this is plain rubbish. what about the 11 (that we know of) that left after taking the money? how is that justified?
--
"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." - the catch here is 'in most yrs' .. dude, do you think there aren't people who are sane or who don't know how wall st works? this year and the last one are most definitely not ordinary times ...
The CNN interview was appalling. The other "guest" was unprofessional and an embarrasment. The CNN "host" was worse; who else would ever want to appear on that show ? CNN's reputation was seriously tarnished. CNN worked hard to earn it's reputation. Sad to see the profound slippage that has occured here. A change is needed in that time slot. Several of us will not see such a change as we are not watching CNN anymore at that time.
I do disagree with most of your points. However, you were correct when you observed that we need to talk like responsible adults about this mess. Such a discussion certainly did not occur on CNN.
Finally, CNN did itself no favors by allowing you to post your comments in another medium with far fewer observers. This is a lame attempt to correct serious malfeasance. The only way to rectify even a portion of this sad event is to put you back on the air. You should appear on a different CNN show; we will not be watching American Morning while that "host" is still on the air. That goes double if the other "guest" ever appears again anywhere on CNN.
The commentary is illustrative of the disconnect between the financial community and the rest of the populace. As a financial analyst it is easy to see your opinion is with the financial community that doesn't understand the rest of America. Most everybody else is suffering, losing jobs and is in the depths of despair largely due to the immoral actions of the financial community. The financial community however does not share in that suffering as they keep their high levels of compensation as they are bailed out with money taken from those that are in dire straights. Is it any wonder then that people react with extreme emotions to hear that? I would caution that without actions to counter that, such as end bonuses, lower salaries, or whatever to share in the suffering, that you could end up with a lot of serious hatred in society against the financial community.
AIG should not have been given the bailout money. They should have been in bankruptcy. We, the hard working people, did not get any bailout for our business in this bad economy. When our business ran out of cash, the banks came in, foreclosed and sold all our assets for pennies. Our only choice is to file for bankruptcy. We don't and will never understand why AIG is given special treatment. We will never accept this kind of unfair treatment. When we hardly have any money to buy food for ourselves and our children, AIG gets bailout and their people who have successfully screwed our lives get to be millionaires. From the beginning, we are told that we will have to sacrifice to save AIG for the sake of our future well being. So, has AIG became our GOD that we need to save at the cost of our or our children's lives? Should we now knee down and bow our heads to pay respect to AIG for being our SAVIOR?
i haven't really read anything that is new and different to what has been their defense all along: AIG is contractually obligated to pay those bonuses to retain their best people, and that it is just small part of the bail out money.
it's not as if those people were given $100K each, we are talking about millions of bonuses each individual and it's coming from the bailout money, while many people struggle to find work and put food on their table. AIG was given a lease on life and yet the very people responsible for the malaise are getting away with millions of dollars under the cloak of legality. legal is not always ethical. how else can we describe these actions if it's not greed?
I have one problem with your analysis. You felt that part of the blame rested with: "Shareholders allowed board directors to keep their posts because the companies were making too much money to make waves."
This is a legal fiction. The Board of Directors is responsible to NO ONE but its self perpetuating members.
If Congress and the New York Attorney General can not get any bonus information from Bank of America's Board of Directors and very limited information from AIG's, what power does a stock holder have – other than to bailout of all publically traded stocks?
A recent proxy statement contained the following in response to stock holder request to vote on the remuneration of executives received the following “guidance”:
"A vote by stockholders on remuneration of the Executive Committee is also not appropriate because shareholders do not have the essential basis to make an assessment. To determine remuneration, confidential information -such as detailed market shares, margins and strategic objectives – is needed, and this information can not be made available to shareholders."
Stockholders are not owners with any real legal recourse. They are de facto investors whose sole recourse is to take their investments elsewhere.
The Boards of Directors are the group that requires outside balance of their total unregulated power.
Did you go on the show under the misguided premise that this was going to be "fair and balanced" reporting? Didn’t you watch what happened to Cramer on the Jon Stewart show?
Come on. You like most pundits on these shows are looking for your 15 minutes of fame and you misjudged. Are you as good at financial planning as judging the media's motivations? They are there to ENTERTAIN. I hope you didn’t think you were there to INFORM.
Whose, right and whose wrong in this argument? We all screwed up. But to make me feel good, I think financial planners are to blame so you should give back all your ill-gotten gains to your customers!
In theory, I would agree with Jill's comments except that no other industry pays such extravagant "compensation" at almost every level without no basis in actual performance. In general, sales people are well-compensated if they achieve their targets (makes sense) and executives are well paid as they effectively steer the ship and manage the risk (makes sense). In banking, however, someone out of grad school with no experience works for a $100K salary, already gabove-average compensation, and then makes 1-2x+ their salaries as a bonus. For what – working riduculous/hazing-like hours with arguably little added-value (and definitely not any more than what a $40K analyst provides in any other industry)? The fact that this has always been part of the fabric of banking and looks to remain this way is what is truly wrong.
Nice job on the explaination, HOWEVER, the regular working person, that doesn't have all these "packages, bonuses,"whatever, ALSO has no control over any of the decision making process. Not only that, BUT, they are ALWAYS stuck with having to pay out of their "much smaller pockets".
We all know there are tax breaks for the wealthy, they have corp owned cars, drivers,credit cards, business expenses, business meals, etc, while the "average Joe", pays out of his/her own pocket for their house, car, childcare, medical, taxed to the limit, etc.
I for one am sick and tired of people with mega bucks making decisions that I have to live with (and lately can't afford) and I can do nothing about it.
It's not just CEOs and upper management if major corporations, it's politians as well.
They say union workers are overpaid – that they should pay out of pocket for benefits, etc. Are any of the people in government or these top exectutives giving some up and paying out of pocket - HELL NO -they have Pensions too !!
Americans are sick and tired of being taken advantage of – and I am seriously worried about what could come next.
If you read some of the blogs, people are taking about riots, civil war, etc –
CORPORATE GREED IS KILLING AMERICANS – AT LEAST THE MIDDLE CLASS –
WAKE UP AMERICA OR WE COULD BE THE NEXT THIRD WORLD COUNTRY!!!!!!!!!!!!!
The hubris, the arrogance of these industries. And the third grader approach of federal regulators, and of media analysts.
These are the essence of my education into high finance. Thank you very much. Do not believe in the word "can't". We CAN take it back.
We WILL recover "our" investment. We SHALL remove from office
anyone found complicit or incompetent.
Finally someone is speaking some sense. This hysteria over "bonuses" is out of control and mostly because on air commentators have not done the homework to understand that the majority of bonuses are deferred salary.
Yes, at the very top there are senior managers getting million dollar payments that probably do not deserve it, but the bulk of that $160 million is going to everyday workers that had little say in the risks the firm was taking on.
$300,000 in New York City allows you to rent, not buy, an 850 square foot 1 bedroom apartment. Forget having a wife and kids. You can’t afford it.
I am so tired of the un-informed anger that I am now rooting for these contracts to be voided. When contracts become meaningless and the government sets pay scales for financial firms it won’t just be AIG that collapses. Maybe when we are all wallowing in our own ignorance we will learn to think twice before we burn “bankers” at the stake.
Ma'am:
Please do not imply that any large number of Americans believe that the bonuses paid to AIG executive are even a significant portion of our overall economic woes. That is most condescending and is certainly not widely believed.
However, when AIG is in serious enough trouble to come to us (yes, the government, "we the people") and ask for money to prevent a complete collapse of one of the largest insurance companies in the world, then we have both a right and an obligation to attach reasonable conditions to those funds. You are correct, the government did not.
You are also correct that it appears AIG was legally obligated to make the bonus payments. But to call these normal types of bonus compensation is an utter falsehood. Deferred compensation is almost always discretionary, as even you noted. And it is almost always based on at least individual performance, if not linked to corporate profitability.
I would last make an ethical point: if the employees eligible for these payments had a shred of honesty, they would either decline the bonus or donate it to charity.
To say that the AIG execs are the cause of our financial calamity is not true, but they are a damn good example of one place where we lost our way.
I wasn't able to view this mornings program, though I would like to respond to what I believe is a fairly accurate analysis of the current situation we find ourselves in with one exception. I don't disagree that good governance and risk controls could have avoided
the problem we have today, but your mention of "Class warfare"
and your suggestion that we, "...stop shouting and start talking like
responsible adults..." perhaps misses a reality of the legislative
process (perhaps deficiency would be a better word). These firms and the people that run them have a whole army of lobbyists that spend titanic amounts of money defending their interests. Unfortunately, that is their right, but individuals have no means to effectively negate the influence of these lobbyists and those they
represent other than through overwhelming popular sentiment Which, usually manifests as a vilification of the segment of the population that most epitomizes what is detested. In which case, I don't believe public opinion is wholly out of line in regard to AIG's higher level employee compensation packages. Do you?
Maybe I'm missing something. These people deserve bonuses because we cannot allow the brightest minds to get away? Sorry, but we are in the mess we are because of them. (Yes, and those who had to have more than they could afford). Do they really deserve the millions they are being paid after the mess they have created? Oh, millions of federal tax dollars by the way. Please, cry me a river. If they are the brightest we can find then we are in deep trouble. Rather than pay them to stay how we give them a swift kick to help them out the door.
I understand they were in thier contracts before they received all our taxpayer money....but if they never would have received the bailout then they would not have gotten those bonuses. Even my 10 year old son can understand that.,..It is a shame that you say it is in thier rights to get a million plus and then leave the company. That is why we are in this mess to start with!!! You are all greedy and you are all stealing from us the taxpayers and shame on you all!!!!
Thank you for coming back and giving us your insight after what had to be a frustrating experience. Any explanation that furthers our understanding of this situation is appreciated.
There area few things that you forgot to include you selfserving wallstreet spin doctor! Since you like to dumb it down and make it simple allow me to break it down in the simplest terms that I see it in...
FIRST: The money that those "defered compsensations" are paid out from under the prior agreement when business was good would of came from profits the company should have made in a time of profit... this bailout is not "profit!" its MY money and not to be given to the people who failed to DO THE RIGHT THING or a GOOD JOB or sound the alarm! This money is not theirs, it's a tool borrowed FROM THE AMERICAN PEOPLE by those who created this problem to use and get us out of the mess they created!
SECOND: Your excuse for the distrubition of MY money to these wolves in wolves clothing was that it was to make possible for AIGs ability to retian "the best people"... these wolves are off to their Hampton estates or sailing in the gulf while the Worlds financial system melts down. They are not still working for AIG; they took MY money and ran... and are not looking back. I want my pound of flesh!
You are trying to pass this off as acceptable by SWITCHING the bonuses that were "performance based" for this BS term "deferred compensation"... if its performance based, they loose because they failed... FLAT OUT FAILED at their job. and if its "deferred" well its still deferred and should be paid by the profits made by AIG and its company, not cut from my tax dollars. Those dollars are loaned to them to DO THE RIGHT THING and fix the problem your "best people" created!
These pirates sailed the ship stright for the reef and then took a life boat made out of my money and jumped ship... now were on the reef.
You are missing the point, Ms. Schlesinger. I agree that the debacle over "deferred compensation" only accounts for a small percentage of the bailout money. It is, however, a symptom of the dysfunctional sense of entitlement that is seemingly endemic to the financial sector. Why are these employees being paid so much to perform a function whose results are, by all current accounts, dependent largely on luck and public perception?
Your assertion that Wall Street's early compensation model is the norm today is faulty. As you said, the end of year profits were split to determine bonuses. If this system was still the norm, your Jennifer's compensation would differ in various ways:
1) We can't quanitify the deferred compensation because it is determined by splitting profits, and we can't predict what those profits are going to be ahead of time. Furthermore, these profits shouldn't based on her clients' investments; they should be based on gains. Those aren't realized until the client makes sales. In fact, to be completely ethical about it, they shouldn't be realized until they are moved into stable accounts (bonds, savings, or CDs). Otherwise there is no guarantee that the client has actually made money. If Jennifer makes a sale, takes a comission on the profit, and makes a bad reinvestment, the client is out of luck while Jennifer enjoys her comission. This lends itself to moral hazard. In other words, Jennifer shouldn't have been promised $200,000 to begin with.
2) Jennifer wouldn't be getting anything in the way of deferred compensation this year because sales are not turning profits right now.
3) The partners took very low salaries. $100,000 is not a low salary. I have a Masters Degree in Computer Science and 8 1/2 years of experience in the software industry and I have yet to reach that level of compensation. According to the reports we're getting, though, Jennifer's compensation is relatively low for an employee in the financial sector.
More out of touch with reality rationalizing. I own a business and have employees who receive bonuses. Nothing makes any sense about how these compensation packages are structured. Unlike AIG and the others, I can't afford expensive top-tier lawyers but I don't need them to know that you don't structure any bonus that doesn't take into account ability to pay the bonus relative to financial condition of the company. NO ONE does this in business who I know or have ever heard of, until this. No wonder AIG is fundamentally insolvent.
So here is a mock ludicrous bonus structure example if I'm AIG. "We will pay you $300,000 salary and a $1,500,000 bonus based on performance. However, excluded from our definition of good performance will be greedy self-interest, the financial failure of your own division and the company overall, your ridiculously short sighted and unacceptable decision making about risk, your own failure to see the house of cards that you yourself were building, failure to warn your bosses about what you "should" have seen coming long ago, and the company's financial inability to pay.
These are not bonuses for performance. It really is deferred compensation with a no-strings attached what-so-ever. But if that's true then why call them bonuses at all. Why not just straight salary. The reason? – they were intended to have strings attached. Why were they afraid to pay them straight salary?
What was the point of the deferment? Somebody should explain that – What was the point of the deferment? It makes no sense.
Once AIG was nationalized by the US Gov. and now that it is 80% owned by taxpayers, the $400 million compensation contract became a worthless piece of paper. As worthless as the pieces of paper bought, sold, and traded by AIG's risky/shadowy/unethical employees.
"Populist Anger" that is derided as irrational, is entirely rational. There is no defense whatsoever for these bonuses.
The "Class Warfare is Unfair" argument is an easy out, a way to change the subject. It is given by rich knuckleheads that need to justify their greed. As far as who should be blamed, haven't millions of Americans had to foreclose on their homes. How many Wall Street executives lost their jobs?
"There is a need to retain the brightest workers" doesn't fly. Run by me how these financial wizards that found new ways to hide the true value of their financial products were as blameless as the now jobless hardworking American that got the short stick from their predatory mortgage.
As long as their is a lack of regulation, as long as conservatives convince the American public that "the government" is the problem, greed will always trump ethics & responsibility. A self regulating market a la Alan Greenspan is about as sensible as giving speed to a group of Kindergarteners.
I worked in financial services for seven years. I understand the compensation expectations and structure. Your argument holds no weight whatsoever! All parties need to take accountability for their actions and it should start with AIG! It's important to keep an open mind in a crisis, but you are dead wrong. Shame on you for your commentary!
What exactly is the purpose of "defered compensation" except as a reward for goood work? I am sorry that the AIG employees have apparently lived beyond their means and used bonuses like salary, but that is not my problem.
Perhaps AIG should publish an accounting of who did not get bonuses due to poor work, then we would know that they have punished the bad apples that led to AIGs failure and would feel better that AIG thought it through.
The unfortunate results of capitilism and individualism is that we tend to forget that our actions affect others. Every executive who requires large bonuses to do a good job takes money from the budget to hire people down the line who do a good job without tons of monetary bribes.
This defense of the "performance bonus" is based on a fallacy that the employee satisfactorily performs his/her job duties. I would argue that in the AIG case, the executives in the financial derivative unit totally failed in their job performance. How else can you say about their actions or decisions that nearly bankrupt the company? In a company with more accountability, they should have been fired instead of being rewarded.
Am I the only one thinking that the opposite of "populism" is elitism? I feel terrible that AIG execs can only afford ONE new yacht this year.
Where was Ms Schlesinger when the auto workers were forced to renegotiate their contract for the auto bailout? Were those contracts not sacrosanct? Why was it acceptable to strip auto workers of their contractually obligated salaries and benefits in order to receive government money, but unacceptable to do the same for AIG workers?
Ms Schlesinger talks of class warfare and she's right, but it's coming from the other direction; we have a superclass of elite, entitled nouveau riche who believe the world is their oyster and that the rules are meant for others. it's gonna be a hard fall for these guys.
The problem with the argument of Ms. Schlesinger is the following: Imagine the situation when the government did not bail out AIG. Would the executives have received the bonus? They would have lost their jobs leave alone the "bonuses". To me, it seems like they were being paid a whole lot more than they deserve. Otherwise, the company would not have been in such a bad shape requiring a bailout.
Since this is on CNN I'm not surprised that most people are missing the point here. Anger at AIG is misdirected here. While there are plenty of scumbags on Wall St., there are plenty in every profession, and if they were smart enough to get a bonus written into their contract, then good for them. The dolts who complain about it are jealous. Too bad the jealously didn't motivate them to have more ambition or work harder. The only person responsible for your outcome in life is you! But I digress...
If people want to be angry, point your ire towards Washington and people like Senator Chris Dodd who specifically added an ammendment to the Stimulus Bill that specifically allows AIG to pay bonuses of this sort. Congress could have specified that none of the TARP money or Stimulus cash could be employee compensation, but they didn't. In fact, since Senator Dodd received the most campaign cash from AIG of any member of Congress, you could speculate that Senator Dodd added this amendment on purpose regardless of his feigned outrage today. As is typical, our Government is responsible for creating this environment, and now we put our trust in them to fix it. Now that I think of it, look in the mirror – that's who we have to blame – you and me for putting these clowns into office.
I love how it is referred to class warfare only when the middle class want justice for the upper class. For the last decade the upper class has been fleecing the middle class without conscience. Middle class slaries have stagnated, while the upper class has made millions in bonuses for quality of work that would get a cashier fired. What you call class warfare, I call class "correction."
I should have watched the interview before commenting...
One last comment – Jill, you walked into the controversy by comparing how partnerships split profits to how bonuses are contracturally required regardless of profitability. The partnership example actually reinforces the fact that bonuses are not deserved when the company loses money. Taking taxpayer provided bailout money to pay them just reinforces bad behavior.
Furthermore, as frustrating as the interruptions were, you did not handle them well.
Rude behavior by the other guest and unprofessional behavior by CNN's moderator aside, Ms. Schlesinger still comes off sounding like an apologist for Wall Street's enormous sense of greed and entitlement, most likely because she is herself a beneficiary of the Wall Street compensation system. Hmmmmm.......Executive vice president and chief investment officer of StrategicPoint Investment Advisors and Financial Advisor – Special to CNN’s American Morning. Ms. Schlesinger, why don't you tell us what your own "total comp" is before you attempt to lecture us about scapegoating "greedy Wall Street." I daresay that your own lifestyle, annual financial compensation and sense of entitlement are equally outside what most Americans enjoy.
If we could point to just one bad apple here I could grant you your point about not needing to villify all of Wall Street, but unfortunately, we continue to treated to a steady stream of unethical, ego-centric scions of Capitalism (e.g. Bernard Madoff, Allen Stanford, et al), not to mention John Thain and his $1.2M office/bathroom renovation. And it's the seemingly endlessness of these bad actors that really makes normal, hardworking people very, very angry.
Every now and then we, the normally powerless, are able to enjoy a moment in time when the confluence of a devastating situation allows us to wield the favorable publicity seeking, pseudo-righteous anger of our so called popularly elected representatives to thoroughly whack the living daylights out of some group of people who deserve a good whacking, but who would normally be untouchable. And this time that group of people happen to be you and the rest of your Wall Street ilk. So please, let us enjoy our moment. All too soon the situation will eventually right itself and we'll go back to being paid $10-15/hr by people like you, and lip service by our ploiticians.
I completely reject Ms. Schlesinger's article. This type of thinking is bogus. For many years we were all told the financial crowd was the best and brightest and only they could understand the risks and make a profit at it. It is very clear that they were making bets they could not cover and want taxpayers to pick up the pieces. Privatize the gain/socialize the risk.
Another bogus argument for these unconscionable payments was they were needed to retain staff. About 15% of the staff took the taxpayer funded bonus and left.
Jill- Get a life. While you have managed to wrap your Wall Street logic around HOW the bonues were paid, you unconconvincingly dropped the ball as to WHY they were paid. Because AIG owed bonus money to execs who drove the company into the ground, and er,.. let me explain,..er, that's just the way it is.... Jilly, you have put on display the insulting, arrogant, small minded, elitist, and self-serving qualities of your elitist out-of-touch ilk. Oh, and did I mention elitist? As one blogger put it, 'legacy' is irrelevant when a company is now 'on the dole' with the American taxpayers buckeroos. Tell 'ya what, why don't you just cover the 165 mil of American taxpayer money that was shelled out as grab bags for failure. Since as you put it, "this was a mere fraction of the total amount AIG received " How insignificant....... Oh, and by the way, I hope Jennifer with the $300K salary from ABC securities doesn't step over former $50K per year homeless person on her way to the bank, since this is probably all their fault for getting into a house they couldn't afford.
As I see it, without the government bailout money, AIG would be out of business and these "bonuses" couldn't have been paid in that case. These folks would be in the unemployment line like 4 million other folks. Lots of folks like me are working shorter hours and taking pay cuts just to keep a job. They should be grateful to have a job. Maybe their personal performance was OK but for all intents and purposes the business failed and doesn't have the bucks to pay them. Taxpayer money shouldn't be part of the deal – it's not their money.
The firm I work for also pays us a bonus. This bonus, while part of the overall compensation package is considered "at risk pay". When the company does well, you are eligible to recevie a bonus. When the company does not perform well (not meet threshold targets), no bonus is paid.
Why is AIG or Wall Street different? Greed.
AIG should have been allowed to fail. Then all of those contracts would be null and void, the gov't could have sold off whatever there is of value and we wouldn't be in the hole for BILLIONS of dollars with no end in sight. Every employee at AIG should be grateful for still having a job, NOT whining about not getting a massive bonus!
The issue here is that these bonuses are based on profits that disappeared based on the decisions these "best and brightest" made. Corporate and Wall St. executives have been treated as though they are royalty. When there are no profits, the government puts in bail out money that is tantamount to bankruptcy. These should not have been paid and many that were paid over the past 12 years should be clawed back.
"We got into this together and we will emerge from it together”
After working for years in small business employment (which never, EVER "trickled down" to the employees, (therefore, no 401K, no health insurance, no bonuses, etc.), and having lived responsibly and very frugally, with belt tightened – for years....
Having done absolutely nothing to contribute to this greed-based meltdown, now I have to deal with cancer. Without insurance, too much disability income to continue with medicaid, and not disabled long enough for medicare – just had to cancel another doctor's appointment.
NO, not all of us created this mess.
Bull-pucky... I want a bonus now. I am a majority shareholder in AIG and I want my bonus. I want them to be broken up and sold off immediately and my money returned. They are not too big to fail, no one entity is too big to fail. They are only that important in their own mind and if they can convince others then they get to keep coming back over and over for more of my money to the tune of what?... $3T? Get a grip on reality, break them up, sell off what is viable and STOP throwing money down their SH*t-hole. Is stupidity still rampant in Washington, is it catchy? Allow it to happen, allow Citi, BOA, and all the other large financials to fail, let the toxic assets to find their own level, quit trying to create another artificial bubble. Not everything will fail and what is left will handle our financials. We actually don't actually need them, they are simply a convenience. But thanks anyway, I'm not buying any more.
MJ Richards
I want to comment in support of Ms Schlesinger's position. I don't question the ire of the public so much as I question the decision for the bailout in the first place. Clearly many mistakes were made to help us arrive where we are today. Most, in my view, were errors in judgement by many in Congress as well as the management of these companies. Barney Frank and Chris Dodd and many others that were receiving campaign support from AIG and Fanny and Freddie did not want to change anything for fear of losing that support. It is a matter of record that Congress was made aware of the 'house of cards' and refused to take any action. Now it will be their responsibility to fix it or face not being re-elected.
have to agree with every point. The bonuses are still not justified. You can argue up down right and sideways, but if the salary is 300, then it is paid over the year, not well here it is. I know thousands who would love to make 100k a year... and are qualified
Tax them and put the money back in the Treasury. The argument that if they dont get it they will go elsewhere just doesnt hold water. Who will hire those who ran the company into the ground. I sure would never hire them. And I doubt many others would either
all of the bailout money we're spending is total BS.. let's get real.. AIG and others should have been forced into bankruptcy, so that, all these crazy contracts could have been voided or amended.. the govt knew that when they bailed them out..
after it's all said and done, we'll realize a lot of people made a lot of money off all this bailout BS..
americans are still asleep at the wheel.. we can't keep printing more money.. hans't anyone realized that yet??
keep your money and support your local economies.. that will be everyones' best bet..
WE did not get into this together. I was not consulted when Wall St. decided unregulated credit default swaps were a good idea. They did not understand the derivitives market. I did nothing wrong. I worked hard. I saved. I payed my bills. I did not make a fortune. I did not get involved in ponsi schemes. I kept my head. And now Wall St. is handing me my ass. Thanks.
Never had anything, never going to have anything. As a vet I paid for your Vietnam War, as a worker I scarificed my 401k to get a college education which my employer ignored, as a home owner I am paying twice what my home is worth and as an individual I never married because nothing is permanent! This is a sad country!!
Yes, there is plenty of blame to go around. However, as a middle income taxpayer, I think it is a slap in the face to take money I have helped provide to keep a business from going under, then pay employees that kind of bonus. How did they earn that bonus? If I performed as poorly at my job, I wouldn't be getting a bonus, I would be getting fired!!
AIG was effectively nationalized when the US govt became an 80% owner. The management and board should have been replaced at that time and it seems we would not be in the position we are in now...people who stole value are now taking cash. I hope the Obama administration has the will and political skills to nationalize our troubled banks or this is not remotely the end of our troubles
Hi all,
I am really confused, while I understand the bonuses are a comitment, how much of a comitment would they be if AIG did not receive the bailout and failed completely. There would be none!
Many times when companies get into difficulties they ask lower wager earners to give up, well clearly the reality many do not realise is why do you want a many low income earners to to give up so much when it is easier to approach a few high income earners and achieve the same finacial goals!
The big boss need to give AIG a bailout as well! if they do not beleive they should then they are saying they do not beleive in the company!
It is so interesting that the author of this article hides behind the argument of class warfare. Her suggestion that honest hard working people must just surrender the limited resources they have and not be upset when the so called brightest, talented and overpaid wall street guys (from the so called reputed B-schools) behave in a reprehensible manner. There is nothing wrong with capitalism per say. It is the brand of capitalism that we in America follow that needs to change. As far as my basic knowledge goes, true management principle laid down by management gurus of the past is "Rewarding excellence". Certainly, what is happening across the landscape on wall street does not reflect that. I have never invested a single penny and I know I never will. Considering what is happening out there, my decision is well justified.
I don't know if your kind of thinking should be shamed or pitied.
Are you really that cold hearted, or just need to have your head removed from a dark area of your body?
If the basic principle of right vs. wrong does not prevail for this deplorable action then how can there be any hope whatsoever for America to pull together?
Shame on you and the scum you stand up for.
"success have 1000 fathers, failure is always an orphan" – you exactly contradict yourself by solely blaming AIG for this mistake, and not any ordinary americans.
That was the best commentary I have read about this crisis. It is unfortunate that some of your colleague rather have a shouting match than a discussion to get to some suggestions on solutions.
Kuddos to you!
"Without a guarantee, many would have fled the toxic environment and left AIG in an even deeper hole." – so these "saviors" need the my dad's, a machine operator with an annual income of 32k, tax money to help them to get out of a hole they created but now they run off with millions??? ..does that make sense to you?
Ms. Schlesinger, who then is to be faulted for the financial mess that has caused the near, if not real, collapse of the various financial systems? You speak of the various people as "well intentioned" and capable. I do believe they were capable-of creating fraud. I have looked at AIG in depth and believe they are the "ENRON" of the financial world. And I say this with full knowledge of what I am saying. I personally believe what happened to these so called capable people was the surfacing of just plain old GREED. They did it to themselves and their short sighted management. No one told them to created the various financial instruments they created. You know what got them to do that–GREED and the obsession with more more more. Ms. Schlesinger you are wrong===very wrong. If I could, I would take all the top 4 levels of management of AIG, Merrill, Citi, and all others and put them in a "tent" city for 3 yrs-and then see who survives. I have no mercy Ms. Schlesinger-no mercy at all. They knew exactly what they were doing! I am sure of that!
Sure, nice bonuses in exchange of superb returns on their work.
now... why reward the opposite too? why would anyone do a good job if he/she gets rewarded too during a bankruptcy, a recession, depression, or criminal behavior?
I listened via satelite radio to this and wanted eagerly to hear Ms Schlesingers comments and analysis. Instead this other idiot insisted on speaking over her and not giving her any time to explain about "bonuses on wall street". I believe she even said she was not defending but rather trying to explain how bonuses ever came to be. Then it was over because the host cut her off. All of us listeners out here lost out and that is really sad. The hostess probably went back to discussing something fluffy and I decided to go back to listening to POTUS and NPR.
This episode irritated me so much that it was on my mind throughout the day. After a while, it wasn't even about the bonuses anymore, but instead it falls into the typical loud mouth male popular opinion typcast disenfranchising the knowledgeable thought provoking female and the silly hostess did absolutely nothing to alleviate the childish interuptions. I carried this thought throughout the day and waited until I got home to post my comment.
I was pleased to see Ms Schlesinger address it, and was glad for it. I now understand how these bonuses came to be. It doesn't justify them today, but I understand now. All of us should be angry with the Wall St Execs who took advantage of an oldtime rule and not be angry with Ms Schlesinger who was trying to explain the rules of these old time contracts.
Kudos to Ms S for her courage to pursue this.
These Execs. are nothing but pure evil. These blood suckers should not receive a penny in bonuses for their failure. Its like if my child do something real wrong, then I should get him a Corvette. They in their quest for greed have done such a bad job that the whole bunch of them should be fired!!! Instead the poor hardworking taxpayers should pay them millions for what? This is what we get for no transparency...companies can do what they want with our monies, and these greedy s.o.b's do not have to account for anything. They should be accountable like everyone else. Lets see...if I do not pay my water bill?...or my electric bill....? Seems as though the rules only apply to some. Come on Obama...start cleaning up this mess...and fast too. Bush, you should rot in hell for where you have allowed your henchmen to drive this economy...your days are coming!!!!
yes, there is plenty of blame to go around ... and this outcome has been brewing for years. however, Wall Street does deserve some blame, so let it be voiced and allow the chips to fall where they may. and remember that when the government is doing the bailing, they have a responsibility to every taxpayer, no matter what bracket they fall into, to require accountability.
after the depression, new laws and financial oversights were implemented, and it's obviously time to update them. That's not socialism, its wisdom.
I call shenannigans! These people are not valuable employees who need to be retained. They are lying, thieving scumbags who deserve a jail sentence. I don't care how much fake money they made in the past; they made fake money in immoral ways. They are hardly the "best and brightest".
Ms. Schlesinger:
What do you think was the basic cause of the French (and many other) Revolution(s)?
When a small group of people take control of, and take advantage of, the capitalist system – the system is doomed. The real creeps rise to the top because of their greed, and being at the top provides them with a perfect scenario to feed their addiction.
When the average American citizen/taxpayer – teacher, carpenter, engineer, nurse etc, make $45,000 per year providing critical goods and services – then watch a money-changer make $25 million in a year – you are surprised there is outrage and just-plain-rage?
The former works hard to earn a living, and to invest and deposit what's left in the stock market and in a bank. Those involved in the stock market and the banking industry take this money, slice off a big chunk for themselves, and loan the remainder to the folks that provided the money. There is no mystery to this scam any longer.
If we decide to "talk like responsible adults", a system such as what we have now wouldn't exist. The simple reason that 5 or 6% of our population is opposed to changing the existing system is because they are members, or intend to be. Sitting at a desk three or four days a week running your hands through someone else's money seems like a mighty easy way to collect several million dollars a year.
These people are, by definition, scumbags and scoundrels. They are making an indefensible amount of money by cheating the vast majority of Americans out of what should be their investment gains, their dividends, their rate of interest on their savings and checking accounts, and the rates they pay to borrow money. Not to mention the income taxes they will have to pay to resurrect the companies that were brought down by nothing, and I mean just that, but greed.
I look at this simply: If these contractual obligations were put in to place prior to the bailout, they are entitled to it. How many people would voluntarily give a portion of their pay back based on it "being the right thing to do?"
How about Congress and the Senate both of whom doled out money to the banking industry without any stipulations. Aren't they mostly responsible for the overall mess that we are in. Are they giving back any compensation as a result of their failures.
This is a lot of attention to something that is largely symbolic and pales in comparison to the package passed last week with tons of earmarks represented bridges and road work being performed in the most remote areas of our country, yet we couldn't find the time and attention to trim the waste.
Lets move on to more worthwhile actions.
OK, so *why* did she bother going into the example of "Jennifer" when in the next paragraph she says that
"There is a big difference between these discretionary bonuses and the AIG situation"?
I bring this up because her "Jennifer" example, in my mind, reinforces that these (I quote) "discretionary" bonuses of "up to" (for example) $200k should NOT be paid out. She goes on to say that "... as long as Jennifer performed her job and her business unit did its job, she would earn $300,000...". I would argue that this logic, applied to AIG's business unit, would mean they didn't get these bonuses.
I know her point was to say that it's part of her comp but in bringing up these extra "facts" I think she's shot a hole in her own argument
my main question is, why didn't congress complain about these "bonuses" when they were tripping over themselves to throw money at AIG? why the sudden outrage now, when nothing has changed?
They had contracts for those bonuses, people, BEFORE the bailout money was received. There's nothing that can be done. (Short of congress passing a retroactive law, I suppose.)
Case in point why the government should not be bailing out private sector companies!!!
"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.'
To say that they were your best people doesn't necessarily mean they were good. You could put a 5th grader in a 1st grade classroom and because they get the best grades, it doesn't mean they're smart. It appears that there's an extremely shallow pool of intelligence and ethics comprising AIG. What other profession can you be so handsomely rewarded for incompetence? Ms. Schlesinger I can only assume that at some point in your career you've gotten yourself a handful of dirty money and are now trying to justify it to yourself...sorry, nobody is buying it...
While I appreciate Ms. Schelinger's attempt to "explain" the "bonuses" paid out to people who worked for a company that FAILED, she doesn't seem to understand that the company FAILED. "Jennifer" would have lost her $300,000 a year job, because her company FAILED. When a company FAILS, it is obvious the best and brightest don't work there. Ask a lot of the people who lost their jobs whether they got any bonuses for the prior year.
When the company took public funds – all bets were off, all previous contracts/hires – whatever you want to call them – should have become null and void.
What happened here was pure GREED. Everyone saw a way to get rich quick......not the old fashioned way of earning it.
In the case of AIG, don't forget that it was BANKRUPT. Are bankrupt companies who's worried about paying its bond holders and debts still obliged to pay the bonuses (or you say delayed compensation)? Chances are if the taxpayers didn't rescue AIG, the employees would NOT receive any bonuses. So AIG employees should receive exactly what they would have received if the taxpayers did not bail them out.
ok let's say these people are entitled to the bonuses, that still doesn't mean taxpayers should be paying for it. Let them sue AIG to collect their money.
Comments like "no one should make million dollar bonuses" and "$300k is more than anyone makes" are frankly un-American and against everything that makes this country great. You work hard and you get rewarded... those people that are getting million dollar bonuses made BILLIONS in profit for the company in most years. So the company pays them a percentage of what they made. It's no different than any other salesman, except that the numbers are bigger.
Those that complain that they don't make as much as those people need to look at their jobs. How much are you, individually, contributing to the company's profits? If you are contributing $100 mil, but are only getting a $50k salary then you can complain. But if you're just a normal worker, your pay is probably in line with what you contribute to the company's profitability. So think a little before telling other people how much they should get paid. In capitalism you get paid based on what you make for the company, and unless you want to go to Communism and then the government will tell you what you should get paid.
I don't care what name you give to "bonuses" they are based on performance. Since when can employees be awarded for "GREAT Performance" by granting bonus when the company is almost dead. I suppose these"GREAT" employees drove the company to where AIG is today. So I still cannot understand what are we awarding them for? So how can you justify that a company running into loss is not a result of bad employee performance. It is a collective result of Horrible employee performance and Horrible Leadership.
First, if the contract is a problem, I say, fire everyone for cause (they nearly brought down the financial world, that ought to be reason enough) – surely the contract provides for ways they can be fired for cause. Re-hire them to fix the problem they created, but with a 25% reduction in pay – and remove all bonus clauses – especially any for fixing the problem they created. And the argument that "if we don't pay them, they'll leave" doesn't hold up - I mean, if you were a hiring manager and you received the resume of someone who lists their last job as "AIG derivatives trader" which waste basket would you throw it into?
Let me explain what the lady was trying to say but was too shy to say: You people are morons. You don't understand that not only was AIG too big to fail, but the executives were also too big to fail. They gave themselves generous salary packages and were smart enough not to tie their bonuses to their performance or the company's profits. Their bonuses are based on existence. You people cannot possibly understand. These people were simply too successful to fail. Besides, you wouldn't want to see any country clubs or private golf courses shut down would you? Who would you look up to then? They are American royalty.
Well said! Now if we can tie the salaries and benifits of the politicans to how well the country is doing, then we might have some real progress.
I don't see why when everyone else is doing with a little less, contractors and unions are giving up pay, non union employees are giving up hours and taking cuts.... why shouldn't they?
If we are going to talk about limiting pay... and real change, lets start with our own elected officials.
My lesson from all of these failures, and the attitude of finance "experts" who feel they are owed these bonuses? Remove myself from this as much as possible: lower my own consumption, reduce taxable income and pay as little as legally possible to the government. And participate in the consumer environment as little as possible. When I hear the CEO and CFO tell us we should begin buying once more, then I buy even less.
Everything that you said is true and well balanced. The part that you do not mention and what ought to enrage all taxpayers, is that nearly all of the "bonus money" that was distributed throughout Wall Street over the past few years was based on ephemeral profits. Rubin and all the other big bonus recipients took real $$$ home,when the paper profits they earned for their companies evaporated by a factor of 3 or 4.
The taxpayer becomes responsible for losses, but the portion of the false profits that was paid out in bonus money is in the hands of hot shots buying multi-million $ apartments in New York City and yachts in Long Island.
This angers me! I worked in the financial industry from 2005-2007. At the end of 2005 I received a $1,000 bonus because our client base had gotten larger and our sales reps were phenomenal. At the end of 2006 I received a $500 bonus because two of our top sellers left, along with a lot of our client base. The same happened with a restuarant that I managed. One year, $1000 Christmas. The next – $0 (here comes the recession!) and finally, this August, the restuarant closed. There were no bonuses for me or anyone else for that matter (and we didn't close because of bad business – hurricane). I took a 50% paycut to work at Sonic so I could at LEAST pay my mortgage. I stopped driving my car. I ate at home instead of eating out. Please don't put any of this blame on me.
My God, the more some people like this try to explain why these "bonuses" are just fine, just part of doing business, the more obvious it becomes that they really, truly, DON"T GET IT!
Ms. Schlesinger's "Jennifer" example is perfect: perfectly disingenuous. perfectly ridiculous and perfectly offensive.
It is disingenuous because it implies that the public is upset about Little Jennifer and her Little delayed compensation. It is misleading to portray this as the sad tale of some girl who might not get all of her pay.
That little extra $100,000 or $200,000 that Little Jennifer may or may not get is chicken feed compared to the real story; which is about those who did not act in good failth in their dealings, and who will take, not one or two hundred thousand dollars, but millions of dollars, after they drove their companies and the economy into the ground.
It is ridiculous because those arguing in favor of these bonuses are living in a world of illusions where they are completely ignoring or just paying lip service to the economic reality of today.
And finally, Ms. Schlesinger, it is offensive for these simple reasons: even after you slash the hypothetical amount your Little Jennifer can make from $300,000 to $100,000, that is still so much more than the VAST majority of us make.
Your apparent obliviousness to the reality of over 90% of Americans is absolutely stunning.
People have already died because of this crisis. People are losing their homes. Tent cities are springing up around the country. I don't know a single Jennifer who will have to suffer on $100,000 this year, but virtually everybody I do know would be THRILLED to have $100,000 in income this year, not to mention the millions that is actually being handed out.
And that's what you don't get. You are a small part of a small minority living in a world completely removed from where the rest of us live. Your world is boundried by expectations that you deserve and should have that much more than the rest of us – and most of the time, that's fine.
But, when you ask us to step up and bail you and Jennifer out with what little we have, even as we're losing what little is left, and then you expect us to bail you out – not to where we are, but to where you are used to being – then you are delusional.
Ms. Schlesinger, why all the soapbox talk about what our parents told us about saving, and not spending more than we earn, and not getting "caught up" in easy money, and other little financial philosophical tidbits? This is all beside the point; it's hindsight, and at this stage in the game sounds like the proverbs from a CitiBank advertising campaign. What's at issue here is the abuse of taxpayer money, which makes taxpaying Americans very angry.
AIG doesn't have any money - it is a failed company - so where on Earth did they get the money to award BONUSES!? Hmmm, they must have gotten that money directly from the American taxpayer - money that was provided to them to continue operations in order to payoff debtors and restructure. That's a slap in the face and clear abuse of the second chance this company was given, which was perhaps not even deserved in the first place. Most Americans find AIG's continued greed, arrogance and ignorance of the hard times we're in, to be unbelievable, and such is the reason for their fury.
Their only hope for salvation at this point is to have a voluntary, unanimous return of the bonus money, with no questions asked. Otherwise, the list of shamed people receiving these bonuses will circulate around the country, and no respectable person will do business with them again.
PEOPLE: The POINT is that these payments are NOT actually BONUSES. They are termed BONUSES, but they simply are part of their contractual salary. Some were probably "guaranteed" and called 'bonuses'. It's just a NAME. The legal obligation to pay still makes this payment a salary. These are NOT real bonuses that most of us know as payments based on profitability or sales or whatever.
That being said, if AIG went down without the bailout, no one would have gotten paid. PERIOD. So why is OBAMA and the rest of gov't so quick to blame the Executives? BECAUSE THE GOVERNMENT SCREWED UP! When they gave the Bailout, they did not require AIG to modify all the employment contracts they had, which they could have done so through legislation.
you said that the bonus was effectively money given as longas the person and their unit did their job. Frankly, it looks like most of them didn't really do their job. More importantly, while there is an unwritten agreement that the bonus will be given as long as they acheive mediocrity or better, shouldn't the business maybe decide to award hundreds of thousands of dollars on top of an already six figure salary only to people that are maybe a little better than the average?