In Defense of Bonuses
March 19th 2009 18:29
I'll begin by clarifying the issues a bit on these bonuses, in case you didn't know:
1) These were retention bonuses agreed to IN CONTRACTS. What is a retention bonus? Basically, AIG told these employees that their jobs are going away, the division is being eliminated because of the losses. However, they need them to help unwind the company because THEY ARE THE BEST AND THE BRIGHTEST. So, to keep them from jumping ship to other jobs and leaving the company with nobody, at least nobody talented, to create as soft a landing as possible, they'll pay them a bonus if they stay. Many companies do this, sometimes by paying them double salary, to keep employees who know their job is going away to stay and help with whatever the transition is to soften the impact, helping all other employees.
2) Given that, Congress had a chance both in October and February to stipulate that stimulus money or TARP money could not be received without these contracts being renegotiated. Shephard Smith describes the silliness of the outrage better than I can.
However, the outrage in this is for me has nothing to do with the bonuses paid by companies that received tax dollars.
First, if my tax dollars are going to a company that is supposed to be paid back, I want the best and the brightest at that company doing it. If you're the best and the brightest and can make millions working at a company that didn't take TARP or spendulus money, why would you work at one of those that did? If anything, our government should be beating out all competition for these people in terms of salary and bonuses. These bonuses cost .2%, 2 tenths of one percent, of what AIG owes us (according to Liddy yesterday, but the numbers are not the subject of today's post). If spending 2 ten thousandths of our money is part of the cost of getting it back, PLEASE SPEND IT.
Second, our representatives keep throwing away the constitution to "answer" this outrage. You can't tax a specfic group of people: it's called a bill of attainder and the constitution forbids it. You can't nullify the contracts, that is also specficially specfied in the same Section 9 of Article I of the Constitution. Of course, in the end once they cool down and actually talk to their lawyers the unrepresentatives will realize this and try to pass taxes that apply to ALL bonuses. Why is this so bad? It effectively TELLS private companies how they have to pay their employees, and that's not the government's job.
Barney Frank has already proposed crafting legislation to cap all salaries, whether you took TARP or not, at $500,000, no matter how your company is doing, how the executives are doing, or anything. Of course, it won't pass, but the fact anybody in congress can suggest this is sick. It's made more sick by the fact that it won't apply to government workers, like the Postmaster General who makes over $800,000 a year. Ironically, it pays that much to try to attract the right level of talent to the position, and judging from the state of the Post Office's balance sheet, it isn't enough.
Bonuses are taxed at the top rate, by law. Even the AIG people who got a $6,000 bonus had at least 50% withholding already on it. Yes, when they do their taxes it will mean a greater chance of a refund depending on their real tax rate, but the fact is that giving them back means less taxes for wherever they live and the government.
Finally, to ask for the names of the employees is outrageous. These are private citizens, that entered into a contract and are TRYING to do their jobs. They were given these bonuses to stay on a sinking ship in AIG's fleet of ships. Our unrepresentatives are generating mobs and putting their lives in danger. They are the innocents. They didn't pay the bonuses or offer the contracts. They are not getting death threats, including directed at their children. Obama and the other GOP and Dem politicians frothing at the mouth at this and being angered about this are putting innocent people in danger. It was a GOP rep that said AIG executives should "kill themselves". Barney Frank insists on making the names public, despite that this could get them killed.
You know the last time we went after private citizens for ideological reasons? McCarthyism
Democrats and Republicans CREATED this situation. Shephard lines some of these out in the video I linked above. It's like leaving cookies out on the counter with a note that says "Kids, eat away. Have as much as you want!", then getting mad when there are none left when you get home!
What is really behind all of this then? Why all the outrage?
To demonize the rich again and place all the blame on greedy corporations. To get the people mad a Wall Street. It was Democrat regulations (CRA) and GOP deregulation (Glass/Stegal) and poor oversight by four straight administrations that contributed to it. Greed was allowed and encouraged, so yes, greed is partly to blame.
This ginned up anger is to create support for passing outrageous compensation caps on private companies, followed by wage control. It's also to distract us from the FACT that $20 to 60 Billion, depending on who's reporting it, of the AIG money went to FOREIGN BANKS. Our tax dollars went to foreign banks through AIG because public outcry kept help for foreign banks out of TARP, so Paulson had Geithner put it in the AIG bailout.
To end this too long post, let me put this in commas and zeros so you can see where the real outrage needs to be focused:
173,000,000,000 - The max amount the press says we have given/set aside to AIG
73,000,000,000 - The amount Ed Liddy at AIG said AIG currently owes to us
30,000,000,000 - The amount the government has set aside that AIG hasn't taken yet
13,000,000,000 - The amount AIG gave to Paulson's old company, Goldman Sachs
40,000,000,000 - The average reported amount given to foreign banks through AIG
165,000,000 - Notice the fewer zeros of total bonuses paid to help us get our money back
Which amounts should we be upset about? The millions spent to try to get our taxdollars back, or the billions funneled that AIG doesn't count in what they owe us, because we will never see that money paid to foreign banks paid back to us.
You can support my blogging even more by buying my book at Author House. Unlike liberals, this is the only fantasy world I live in
1) These were retention bonuses agreed to IN CONTRACTS. What is a retention bonus? Basically, AIG told these employees that their jobs are going away, the division is being eliminated because of the losses. However, they need them to help unwind the company because THEY ARE THE BEST AND THE BRIGHTEST. So, to keep them from jumping ship to other jobs and leaving the company with nobody, at least nobody talented, to create as soft a landing as possible, they'll pay them a bonus if they stay. Many companies do this, sometimes by paying them double salary, to keep employees who know their job is going away to stay and help with whatever the transition is to soften the impact, helping all other employees.
2) Given that, Congress had a chance both in October and February to stipulate that stimulus money or TARP money could not be received without these contracts being renegotiated. Shephard Smith describes the silliness of the outrage better than I can.
However, the outrage in this is for me has nothing to do with the bonuses paid by companies that received tax dollars.
First, if my tax dollars are going to a company that is supposed to be paid back, I want the best and the brightest at that company doing it. If you're the best and the brightest and can make millions working at a company that didn't take TARP or spendulus money, why would you work at one of those that did? If anything, our government should be beating out all competition for these people in terms of salary and bonuses. These bonuses cost .2%, 2 tenths of one percent, of what AIG owes us (according to Liddy yesterday, but the numbers are not the subject of today's post). If spending 2 ten thousandths of our money is part of the cost of getting it back, PLEASE SPEND IT.
Second, our representatives keep throwing away the constitution to "answer" this outrage. You can't tax a specfic group of people: it's called a bill of attainder and the constitution forbids it. You can't nullify the contracts, that is also specficially specfied in the same Section 9 of Article I of the Constitution. Of course, in the end once they cool down and actually talk to their lawyers the unrepresentatives will realize this and try to pass taxes that apply to ALL bonuses. Why is this so bad? It effectively TELLS private companies how they have to pay their employees, and that's not the government's job.
Barney Frank has already proposed crafting legislation to cap all salaries, whether you took TARP or not, at $500,000, no matter how your company is doing, how the executives are doing, or anything. Of course, it won't pass, but the fact anybody in congress can suggest this is sick. It's made more sick by the fact that it won't apply to government workers, like the Postmaster General who makes over $800,000 a year. Ironically, it pays that much to try to attract the right level of talent to the position, and judging from the state of the Post Office's balance sheet, it isn't enough.
Bonuses are taxed at the top rate, by law. Even the AIG people who got a $6,000 bonus had at least 50% withholding already on it. Yes, when they do their taxes it will mean a greater chance of a refund depending on their real tax rate, but the fact is that giving them back means less taxes for wherever they live and the government.
Finally, to ask for the names of the employees is outrageous. These are private citizens, that entered into a contract and are TRYING to do their jobs. They were given these bonuses to stay on a sinking ship in AIG's fleet of ships. Our unrepresentatives are generating mobs and putting their lives in danger. They are the innocents. They didn't pay the bonuses or offer the contracts. They are not getting death threats, including directed at their children. Obama and the other GOP and Dem politicians frothing at the mouth at this and being angered about this are putting innocent people in danger. It was a GOP rep that said AIG executives should "kill themselves". Barney Frank insists on making the names public, despite that this could get them killed.
You know the last time we went after private citizens for ideological reasons? McCarthyism
Democrats and Republicans CREATED this situation. Shephard lines some of these out in the video I linked above. It's like leaving cookies out on the counter with a note that says "Kids, eat away. Have as much as you want!", then getting mad when there are none left when you get home!
What is really behind all of this then? Why all the outrage?
To demonize the rich again and place all the blame on greedy corporations. To get the people mad a Wall Street. It was Democrat regulations (CRA) and GOP deregulation (Glass/Stegal) and poor oversight by four straight administrations that contributed to it. Greed was allowed and encouraged, so yes, greed is partly to blame.
This ginned up anger is to create support for passing outrageous compensation caps on private companies, followed by wage control. It's also to distract us from the FACT that $20 to 60 Billion, depending on who's reporting it, of the AIG money went to FOREIGN BANKS. Our tax dollars went to foreign banks through AIG because public outcry kept help for foreign banks out of TARP, so Paulson had Geithner put it in the AIG bailout.
To end this too long post, let me put this in commas and zeros so you can see where the real outrage needs to be focused:
173,000,000,000 - The max amount the press says we have given/set aside to AIG
73,000,000,000 - The amount Ed Liddy at AIG said AIG currently owes to us
30,000,000,000 - The amount the government has set aside that AIG hasn't taken yet
13,000,000,000 - The amount AIG gave to Paulson's old company, Goldman Sachs
40,000,000,000 - The average reported amount given to foreign banks through AIG
165,000,000 - Notice the fewer zeros of total bonuses paid to help us get our money back
Which amounts should we be upset about? The millions spent to try to get our taxdollars back, or the billions funneled that AIG doesn't count in what they owe us, because we will never see that money paid to foreign banks paid back to us.
You can support my blogging even more by buying my book at Author House. Unlike liberals, this is the only fantasy world I live in
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Comment by S.L.
The Political Brief
Comment by Andrew Biviano
Plus, as you said, how the heck are we supposed to turn these ships around with no one at the wheel? I think that Barney Frank is plain wrong when he casts aspersions on everyone who worked there when the crisis hit. This was a huge systemic problem that no single AIG employee could have stopped, and they are still the best and the brightest.
What I think is really at the heart of the outrage is that people are for the first time realizing how much executives get paid and have not yet gotten over their jealousy. It seems almost identical to how people rip on professional athletes as greedy bastards -- that it's not fair that they make so much more than the rest of us just for hitting a ball. People forget sometimes how capitalism works, that if you can get millions of people to pay to watch you hit a ball, you deserve to be rich.
So I think that salaries should naturally be lower when times are tough. We should rein in greed as stockholders and citizens, and some minimal regulation as appropriate. But we shouldn't try to end market-driven salaries and shouldn't break the law of contracts.
I agree with you on the taxes, too. We should just let it go and focus on getting back the other 99.98%
What surprises me most is how this "scandal" is being pushed. What is the motive? And who has the motive? It is being used primarily to attack the administration, but I think that Republicans and conservatives understand how silly it is more than liberals do. Plus, neither party is exempt from criticism. Liberals who are outraged don't seem to want to attack too hard since they like Obama. I don't see either party pushing this story too hard, I think it is mostly media driven. (From networks on both sides of the spectrum). Populism sells. But the optimist in me says it won't last long, that it's the flavor of the week. We just need a sex scandal to push everything else off the front page.
Comment by Jonathan Biviano
Marriage Bits
Hey, it worked in the Weimar Republic, surely it will work here too . . . no, wait . . . .
Comment by Andrew Biviano
And seriously, would you please stop the Weimar Republic/Nazi Germany comparisons? They're just so unproductively inflamatory. Nothing overstates crticism more than comparing someone or something to perhaps the most evil person/regime in history. The comparison is only used by the most extremist critics; I'm sure you remember all the wackos that said that Bush was Hitler too. Maybe we can compare Pol Pot or Saddam Hussein, but our own leaders?
Plus, I think it shows a lack of understanding of history to pick and choose comparisons with other governments. For every similarity you can point to there are ten differences that make the similarity inapposite. For starters, Germany at the time of the Weimar Republic was recovering from a devasting and recent loss in W W I and had a very different political system and cultural atmosphere. I think the fact that we can have (hopefully) a less polarized debate and are not at risk of having elected a white supremacist means that the outcome of this situation will be different.
I'm not saying that we shouldn't look at history, but there are so many better and less offensive examples. I'm pretty sure you can find precedents or comparisons in American history for everything that is happening today.
I just finished a biography of Alexander Hamilton and gained a newfound appreciation for how we have dealt with so many tougher situations, and realized that the sky has supposedly been falling, according to someone, for our entire history. I also came to appreciate that there have never been more bitter political rivals than Hamilton and Jefferson, both of whom thought that the other would destroy the foundation and fabric of our nation. But both were great men who did great things for this country. If we keep this in mind and manage to disagree agreeably, we'll get through this better.
Comment by Jonathan Biviano
Marriage Bits
Zimbabwe did it to with the same result.
So, let me put it this way: What the Fed is doing has NEVER worked.
I will also grant you this: The Fed is doing it in circumstances that are unique, so it may work.
I have a new opinion about the timing, however. It was just about to come out that AIG had sent tens of billions of tax dollars overseas under Paulson and Geither's instruction. This was to redirect the pitchforks from Washington to AIG.
As of last fall, there was 800 Billion dollars in circulation. Even if only a third of this gets into the system, it's a 50% increase in circulation, which is very bad for the dollar.
Comment by Andrew Biviano
But let me get this straight. Your theory is that the treasury secretary and others in government pushed the AIG bonus story in order to create a scandal in which Geithner, Obama, and the entire administration come out looking very bad, so that people wouldn't ask about the Fed's decision to monetize debt and AIG spending money overseas?
Comment by Jonathan Biviano
Marriage Bits
Obama or his administration will claim he came highly recommended by Paulson, so it's Bush's fault he was picked, but that clearly he was not up to the job. Obama's teleprompter will tell him to be contrite and take responsibility.
I think there's a lot more not being reported in the frenzy. They know national broadcast news (not cable) is only half hour bursts. If they can fill it and cable news up with AIG, a lot doesn't get reported until it's old news, if at all. Let's list a few:
1) Russian bombers buzz the Navy off S. Korea at 500 ft.
2) North Korea announces it will be launching an ICBM, supposedly a sattelite
3) North Korea has captured two American journalists that accidentally wandered into the DPRK, supposedly
4) Obama's new budget pushes the deficit to 1.6T a year, by conservative estimates
5) The fed move, reported by the MSM as a "help to interest rates"
6) The major foreign relations gaffes: wrong-region DVDs as a gift to PM Brown, misspelling the Brazilian PM's name, reading the Irish PM's script off the teleprompter instead of his own, sending a conciliatory videotape to Iran that Khameni laughed in our face over, giving Russia a button that said "overcharge" instead of "reset" (apparently they took it as "flyover"), sending Hillary to China to beg them to keep buying our treasuries.
7) Stuff we haven't heard of because even Drudge and Fox have plenty of material already.
As Biden predicted himself in Seattle during the campaign, the world is testing us. But hey, we do have the President's prediction for the NCAA tournament! Good thing to have! He was 8-8 in his predictions on Friday and 15-17 overall.
Comment by Andrew Biviano
I can't believe that in your list of "important" news stories that the media is overlooking you have included misspellings, the quality of gifts, wrong-region DVDs and a mistake in reading the teleprompter. Really on the same scale? I'm assuming that to be consistent you also think the media didn't spend enough time on Bush's mispronunciations, or his dad getting sick in the Japanese prime minister's lap. These are all merely personal embarrassments that affect no one's lives. It is so incredibly telling that you accuse the mainstream media of not getting its priorities straight and then list these things as the stuff that should be talked about instead.
Or I know -- instead of focusing on the issues that we say are super important and overlooked, let's all keep harping on the fact that the president took a few minutes to fill out an NCAA bracket! Oh, the scandal! That'll show 'em that we have our priorities straight, and that we're not biased, like the media!