Obama tries to block AIG bonuses

[bascule]

The American dream was coming true, TBK.

 

The American dream was coming true at an unsustainable rate, as mortgage lenders pushed out very sketchy and now proven unsustainable mortgage products. It's like, great, you're living the American dream, but you *are* aware we're going to jack up your rates substantially next year, right? Oh wait, you can't pay that? And nobody else can either! Whoops.

 

It still cracks me up today that people blame the mortgagors.

[Pangloss]

The House passed a bill today to try and tax the AIG bonuses. It's actually a broad-based approach aimed at all such offenders:

 

The tax would apply to executives with incomes over $250,000 who worked for companies that received at least $5 billion in federal aid. That would include others getting help, such as mortgage financing company Fannie Mae (FNM.N).

 

http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSN1929836820090319

 

The bill goes to the Senate next. I think it will be interesting to see whether this law could be retroactively applied to bonuses that have already been paid out. I could see the argument -- taxes take place after the fact. But people know about taxes beforehand, and can plan accordingly, which is not the case here, so it's retroactive. On the other hand that doesn't necessarily mean the courts would not allow it -- retroactive laws aren't entirely forbidden, if I'm not mistaken.

 

Should be interesting to see how this plays out.

[DrDNA]

Am I the only one here that isn't so arrogant to assume that I could do a better job at running AIG than the AIG execs?

Yes.

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[*]Upset by excess telemarketing calls? [/Quote]

"Do Not Call" List????

Edited March 20, 2009 by DrDNA
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[Pangloss]

It's starting to look like Republicans have some real ammunition here in terms of responsibility for the AIG bonuses. Secretary Geitner said today that he pushed for the loopholes that allowed compensation bonuses. But the Secretary of the Treasury doesn't write the laws -- Congress does. And Congress was dodging these questions -- which are finally coming from the entire MSM and not just Fox News -- today. Pelosi, Reid, and Dodd were all hammered on this point at press conferences today.

 

I don't let Republicans off the hook -- President Bush signed TARP, after all, and Republicans seemed very much in favor of TARP and the other bank bailouts at the time. But they also complained that they weren't invited in for all the decision-making, and Democrats were in charge of Congress in 2008 as well, so it's starting to look like Congressional Democrats more or less own this bonus fiasco.

 

The AP has an interesting write-up of the political implications for Dodd here:

http://www.google.com/hostednews/ap/article/ALeqM5j2D2gxTNCtz_IpnKzTEDIE92sPJwD971EKBO0

[padren]

Am I the only one here that isn't so arrogant to assume that I could do a better job at running AIG than the AIG execs?

 

You don't have to be a mechanic to be realize you are being screwed by one when you take your car into the shop. Honestly, it's the same feeling: You're pretty sure you're getting screwed, you don't have an easy way to know for sure, and you sure as hell know you don't trust the shifty little weasel.

 

These companies are failing miserably on the PR side: they just got bailed out by the taxpayer, they'd be filing bankruptcy and not getting any bonuses without us and they aren't even trying to explain themselves, just that "legally they can get away with it so sucks to be you."

 

Of course, maybe the goal of PR is to avoid heat on how the other 99.9% of that money is being spent - in which case it's an ingenious distraction.

[ParanoiA]

These companies are failing miserably on the PR side: they just got bailed out by the taxpayer, they'd be filing bankruptcy and not getting any bonuses without us and they aren't even trying to explain themselves, just that "legally they can get away with it so sucks to be you."

 

See this whole thing just stinks. I keep coming up with new reasons to be suspicious - our attitudes don't add up to anything sound either.

 

Let me get this straight...we needed to bailout AIG, or so we convinced ourselves. We think, apparently, that they are incompetent, yet we still give them billions of dollars. Why? No restructuring? No one gets fired? No one gets replaced? Oh no...our grand plan was to...not give them bonuses? That's our idea of "saving" AIG? Keeping the same supposed "idiots" there, but taking the froth off the top of their latte?

 

That's stupid. Just plain stupid. Look, they're either incompetent or they're not. If they're not, then they deserve their bonuses, and I suppose they'll do well with taxpayer dollars. If they are inept at this business, then why bail them out? Why give them any money? Where is the logic?

 

When private lenders provide restructuring funds for struggling businesses, they get involved the details of the effort, including salaries and bonuses. We apparently did not do this. Our government missed it, for whatever reason, and now they want to pretend as if it's some back stabbing exercise by AIG. From what I understand, and I'll admit it's somewhat limited, these were contracted bonuses so the records were there. None of this was a secret.

 

I'm still putting thoughts together because emotions are poisoning all of the logic in this situation. Class envy brought to a boil. It's exactly what your politicians want. It serves them well.

[iNow]

That's stupid. Just plain stupid. Look, they're either incompetent or they're not. If they're not, then they deserve their bonuses, and I suppose they'll do well with taxpayer dollars.

 

In nearly every company on the planet, employee bonuses are directly contingent on company performance. If the company does poorly, bonuses are unavailable. If the company performs well, then employees get to share in the wealth through bonuses. Why in the name of Zeus should a company that was failing so badly that it needed government help just to survive be "sharing the wealth" with its employees?

 

That's the point as I see it, and why so many people are freaking out about this. Yeah, the bonuses are small as a percentage of the bailout, but bonuses are something which are not supposed to be offered unless the company is doing well and making money. AIG is neither doing well nor making money, ergo this whole bonus thing reaks of an elitist sense of entitlement and deservedly inspires deep rage among a populace struggling to put food on their tables and avoid forclosure on their homes.

[blike]

In nearly every company on the planet, employee bonuses are directly contingent on company performance.

Apparently not in AIG.

 

Why in the name of Zeus should a company that was failing so badly that it needed government help just to survive be "sharing the wealth" with its employees?

Because when said employees signed up to work for AIG, they were contracted to receive the bonus apparently irregardless of AIG's financial situation. A company should honor its contracts, right?

 

but bonuses are something which are not supposed to be offered unless the company is doing well and making money.

There is no "supposed to". A company is allowed to make its own compensation rules.

 

I have absolutely no problem with AIG honoring it's employee contracts. This would be a non-issue had it been considered before throwing taxpayer money around. But it was an emergency.

[iNow]

Because when said employees signed up to work for AIG, they were contracted to receive the bonus apparently irregardless of AIG's financial situation. A company should honor its contracts, right?

How is this supposed to be any different from the renegotiation of contracts which we forced on autoworkers in Detroit? That's a big source of disconnect for me. We not only thought it was a good thing, but we mandated it with the union employees. Now, with AIG, I'm supposed to get all in a tizzy at the mere suggestion of renegotiation?

 

I understand your points. I work for a company that provides bonuses, and I'm hurting pretty badly this year since I'm not receiving them.

 

The two main issues I'm tryint explore here are a) if bonuses are not contingent on company performance, then the person who wrote the contract is a complete and total moron who needs to have his ass handed to him, and b) why is everyone so worked up about renegotiation in the context of AIG despite the fact we did EXACTLY that with the Big 3 auto companies?

[blike]

How is this supposed to be any different from the renegotiation of contracts which we forced on autoworkers in Detroit? That's a big source of disconnect for me. We not only thought it was a good thing, but we mandated it with the union employees. Now, with AIG, I'm supposed to get all in a tizzy at the mere suggestion of renegotiation?

I think there should have been renegotiation of the contracts with AIG, but it should have been done before the money was given to them.

 

The two main issues I'm tryint explore here are a) if bonuses are not contingent on company performance, then the person who wrote the contract is a complete and total moron who needs to have his ass handed to him

I agree.

 

Had someone been doing their job (and I'm not pointing any fingers or implying any specific person), this wouldn't have happened.

[ParanoiA]

In nearly every company on the planet, employee bonuses are directly contingent on company performance. If the company does poorly, bonuses are unavailable. If the company performs well, then employees get to share in the wealth through bonuses.

 

I've never heard of bonuses that are contingent on company performance only. It's always about individual performance, which can be measured by company performance in the form of stock price, or not.

 

My company offers a bonus based on the positive change in stock price measured over the year - so that would be a company performance based bonus, which AIG wouldn't have qualified for since they're in tatters. My company also offers a series of bonuses based on our personal performance (they have an ignorant measurement system for this, but that's another matter...). The company can tank, while I still satisfy my personal bonus requirements. As a matter of contract, I want my damn money. I fulfilled my end of the bargain. I'm not particularly impressed with who owns the company now and their excuses for screwing me out of my contract.

 

 

But that doesn't really address my point. I'm not understanding the attraction to the supposed middle ground here. Why do we LIKE the idea of keeping people whom we claim are incompetent if the goal is to save this company for the foreseeable future? What's the deal, are we employing a new business model in the financial / insurance market where instead of paying top dollar for talent, we go with the Wal-mart method and pay bottom dollar for bottom of the barrel workers?

 

It's not passing my bullshit meter. Something is wrong with this thinking. And I'm getting closer to the issue. Since the government is bailing them out against the background of persecuted capitalism, it's fairly clear the government isn't comfortable taking the risks necessary for private business to succeed. Which is expected since they aren't used to competing for anything.

 

And you don't have to take that as a disparagement either, it's just a clinical observation. I doubt private business has much experience with putting people over profits, so they'd probably stumble trying to play "government" too.

 

Anyway, it just seems we want to bail them out, but then simultaneously get all squeemish about tossing around money the way these businesses do, in order to succeed in this market. But we can't save them, and then restrict them, and expect it to work out. We haven't solved the problem AT ALL. Haven't even addressed it. All we've done in that context, is made ourselves feel better by not letting them fall, and made ourselves feel better about THAT, by not letting them spend it all crazy-capitalist like.

 

The problem hasn't been dealt with. Are they competent or not? Did they run the company into the ground or not? These questions should have been dealt with and answered before any money was provided. Not pretend outrage after the taxpayers find out about it.

 

The financial industry relies heavily on talent. Listening to the news last night, I learned that several of these AIG execs everyone is pissed at, are being sought out for employment by other companies. I'd like to verify that before moving on, but if that turns out to be true, then it's yet another clue that we are acting like idiots, letting our emotions cloud our reasoning. These companies wouldn't be looking for failures to work for them, and since they're actually IN the field, I trust that they know what they're talking about and are aware of details that we aren't, or won't realize.

 

There's more to this. This situation is way oversimplified.

 

And this post is way too damn long. I apologize. Too many thoughts, not enough patience to work them out before sharing.

[jackson33]

I've never heard of bonuses that are contingent on company performance only. It's always about individual performance, which can be measured by company performance in the form of stock price, or not.

 

My company offers a bonus based on the positive change in stock price measured over the year - so that would be a company performance based bonus, which AIG wouldn't have qualified for since they're in tatters. My company also offers a series of bonuses based on our personal performance (they have an ignorant measurement system for this, but that's another matter...). The company can tank, while I still satisfy my personal bonus requirements. As a matter of contract, I want my damn money. I fulfilled my end of the bargain. I'm not particularly impressed with who owns the company now and their excuses for screwing me out of my contract.

 

The financial industry relies heavily on talent. Listening to the news last night, I learned that several of these AIG execs everyone is pissed at, are being sought out for employment by other companies. I'd like to verify that before moving on, but if that turns out to be true, then it's yet another clue that we are acting like idiots, letting our emotions cloud our reasoning. These companies wouldn't be looking for failures to work for them, and since they're actually IN the field, I trust that they know what they're talking about and are aware of details that we aren't, or won't realize.

 

Bonus payment are rewards for above average performance...Some do offer Xmas, longevity or a form of a bonus on retirement, which have largely been replaced with 401 or some retirement package...

 

Many Companies, apparently where your employed award each employee according their pay from some projected point in growth, either based on actual profits or the price of their stock.

 

The vast majority however base bonuses strictly on performance. Sales, Truck Drivers to virtually all involved in managing money are directed to individual performance. This is where I think confusion is, with regards to AIG.

To tie your last statement above; Of all the thousands who were eligible to EARN a bonus (all under contract) very few actually did earn (bad year) and those that did were and are the best and brightest, at least in performance.

Obviously most any Company looking for talent, in this area would be happy to have those individuals and add the potential for AIG to become solvent or in the future pay any bonus, has already led to many resignations.

[ParanoiA]

Here's a link to a story I found on the subject of fleeing AIG talent. I'm not sure how reputable the source is, as I'm not familiar with it. Since I heard about this on the news as well, I'm going to assume it's reasonably accurate.

 

http://www.businessinsurance.com/cgi-bin/article.pl?article_id=26381

 

I'm not sure why successful companies that didn't need a bailout would capitalize off the talent churn at AIG and snatch up these guys if they're incompetent and drove AIG into its current condition. These are responsible companies that profit, have weathered the storm thus far, so appeals to their stupidity don't carry much weight.

 

I consider these companies to be more of an expert than myself, or 99% of the public that is crying foul on this. Why are people in the business, successfully, hiring these folks if they are what we think of them?

 

It's almost like they think some of these people did a good job or something. It's almost like they believe not everyone is responsible for the downturn of the whole company. Ha, what morons, right?

 

Yeah, trash their contracts. That's what they get for working for a company that failed. Doing your job right is not enough, you must demonstrate prescience for failure and avoid such jobs or be willing to sacrifice your compensation. That's how we roll, bitches. We're the government, and we're here to help.

 

 

To tie your last statement above; Of all the thousands who were eligible to EARN a bonus (all under contract) very few actually did earn (bad year) and those that did were and are the best and brightest' date=' at least in performance.

Obviously most any Company looking for talent, in this area would be happy to have those individuals and add the potential for AIG to become solvent or in the future pay any bonus, has already led to many resignations.[/quote']

 

So then we're left with all the cheaper, incompetent staff to compete against the superior talent they just let go. Brilliant. Way to completely waste my damn money. There's mob mentality for you. Wasn't smart when they dressed up in white sheets and hung the black man that touched the lilly white skin of a farmer's daughter, and it isn't any more brilliant today.

 

I wonder if anyone can name one incompetent AIG executive without looking it up online. How much do you really know about those you are judging? Shouldn't we evaluate them fairly, outside of the emotive vacuum? (Hint: This is the reason we have courts and don't do trials out in the street, convicting with a show of hands.)

Edited March 20, 2009 by ParanoiA

[Pangloss]

Let me get this straight...we needed to bailout AIG, or so we convinced ourselves. We think, apparently, that they are incompetent, yet we still give them billions of dollars. Why? No restructuring? No one gets fired? No one gets replaced?

 

Well in fairness they did replace the CEO in September. Unfortunately it was (more or less) a somewhat politicized appointment, and the guy seems to have very little control over the company. He's the one who was testifying before Congress this week.

 

 

How is this supposed to be any different from the renegotiation of contracts which we forced on autoworkers in Detroit? That's a big source of disconnect for me. We not only thought it was a good thing, but we mandated it with the union employees. Now, with AIG, I'm supposed to get all in a tizzy at the mere suggestion of renegotiation?

 

Legally the only difference I can see is that we renegotiated those contracts before the fact. In the case of AIG we seem to be going after the bonuses after the fact. Not only that, but we seem to have given them permission to do what they did, and only changed our minds after public outrage was expressed.

 

Chris Dodd may be DONE in Washington, btw. He's up in 2010 and may not be re-electable now, considering the way this is feeding off his earlier scandals regarding Countrywide and Fannie/Freddie. A long fall for a major player in the 2008 Presidential race.

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To update this, the bill to tax the AIG bonuses appears to be stalled in the Senate now.

 

The irony here is that the bill may actually be the only way to stop this sort of thing from happening again. These companies didn't get to apply these bonuses because of previous contracts, folks, they got to apply them because lawmakers explicitly allowed the bailouts to take place without forcing the companies to change their compensation agreements, which they COULD have legally done, just as they did with the UAW and just as they plan to do with mortgage contracts.

 

So a law saying that such bonuses will be taxed at 90% may ultimately be the only way to prevent another massive campaign contribution recipient like Chris Dodd from inserting language in a bailout bill that would allow this to happen all over again.

 

So while I agree with Ron Paul who said yesterday that Congress is just reacting as it always does, I think this time they may be producing, out of ignorance, the best answer to the problem.

 

Only now it's stalled in the Senate and might not get passed because people perceive it as a bill whose only purpose is to exact retribution on AIG!

 

 

 

 

(I tell you what, I can't remember a time when politics was just so damned... interesting!)

Edited March 20, 2009 by Pangloss
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[padren]

(I tell you what, I can't remember a time when politics was just so damned... interesting!)

 

I'm waiting for the Jerry Springer AIG special.

 

It does seem to reek of a whole lot of legal maneuvering and very light on "spirit of the law" all in all. It would be unconscionable in 99.9% of situations for the government to impose such a laser targeted "assassination tax" and it's only because of the public furor over this that people are not screaming bloody murder.

If this was done to target a troublesome union or companies that fail to pay their EPA fines we'd all be screaming there's no way the government should be able to wield so much power.

 

In principle couldn't you say it borders on the unreasonable side of "unreasonable search and seizure" laws?

[Dudde]

I noticed that the CEO of AIG stated that he already asked for employees with over a certain bonus give them back, as has been discussed - a lot of employees just threw 100% of their bonuses back at the company, and I feel these were probably the employees that could justify getting any bonus whatsoever

 

Kinda makes me feel bad for employees doing as good as they can and then getting washed over by the higher level either by greed, or incompetence

[Pangloss]

Oh definitely -- I'm sure there are many good people at AIG, and from what I understand it's just one division that's caused all this trouble (the same division that got these bonuses, I hear). They've brought the whole company down through their foolishness and that's a tragedy for sure.

 

I also think it's probably a good thing that the state attorney general is holding the names of the bonus recipients confidential for the moment. It's good that they were turned over, but a public lynching would be not only a disappointment but also a distraction.

[DrDNA]

You really can't establish fact with Nobel Prize economists, because there's always a Nobel Prize economist out there who thinks differently from your Nobel Prize economist. That's one of the problems with economics -- there is no established factual foundation forming a basis for correct or incorrect economic decisions.

 

I wasn't trying to establish their statements as fact.

 

I was trying to establish the fact that some very bright economists, including at least one Nobel Prize winner and even some former AIG insiders are on record as stating that restructuring/Chapter 11 should have been considered more seriously.

 

In addition to being sheepish (reading this thread, I sort of feel like I'm watching an Obama cheerleading show like MSNBC or CNN), I find some of the comments on here very arrogant.

 

For example, I stated that Chapter 11 might have been a better path and was told that I didn't know what I was talking about.

.......ie, iNow knows more about my point than I do.

I proceeded to support my opinion with quotes from leading economists.

Although nothing similar or anything else of substance was presented to counter my position, the only response I got was that they don't know everything, etc....

 

That doesn't make sense to me.........at least in part because if a guy with a PhD in economics came on here and

started arguing with us about quantum physics, we'd all agree that he is way out of his league.

 

It's whack.

Edited March 20, 2009 by DrDNA

[padren]

For example, if a guy with a PhD in economics came on here and started arguing with us about quantum physics, we'd all agree that he is way out of his league.

In contrast, statements from leading economists, like the one I posted are regarded as foolish.

That doesn't make sense to me.........

 

I do agree, but I think we'd ask for the "whys" and logically try to follow the fellow's arguments, absorb referenced materials debate the topic in a civil manner without resorting to any appeal to authority. If two guys with PhDs in economics came here there is a very good chance they wouldn't see eye to eye on economics at all, if they were from opposing economic schools of thought.

[DrDNA]

I do agree, but I think we'd ask for the "whys" and logically try to follow the fellow's arguments, absorb referenced materials debate the topic in a civil manner without resorting to any appeal to authority. If two guys with PhDs in economics came here there is a very good chance they wouldn't see eye to eye on economics at all, if they were from opposing economic schools of thought.

 

Good point.

Which is why I am looking for some "whys" regarding how throwing more money, more money and then some more money at AIG, without restructuring, is such a great idea.

 

Let's say I give my son $100 to spend on necessities for school, and he blows it on candy.

Then I give him another $100 to spend on the necessities he should have bought with the first $100, and he blows it all on more candy.

 

Only a moron would give him another $100 without exerting some level of control over his expenditures.

In other words, we will need to sit down and restructure our financial arrangement.

I will step in and help him manage his financial priorities.

This is what Chapter 11 is.

I think that many people confuse Chapter 11 with Chapter 7 and are just afraid of the word 'bankruptcy'.

No one has given me any reason to believe that the house of cards will fall if AIG files Chapter 11.

In contrast, I think that this would go a long way towards decreasing the chances of it falling.

 

Since everyone is so hell fire against it, what are the logical, well thought out reasons why it is a rotten idea?

What terrible thing is going to happen?

And when, why and how is it going to happen?

[Dudde]

To be frank, I've never been unfortunate enough (or maybe wise enough) to consider bankruptcy and can't tell the two apart - I'll check it out tonight when I get a chance, are there any sites anybody can point me at that are better than others, or should a generic google suffice?

 

I believe the government is doing what they think is right, but in a rushed and haphazard way - which can only bring oversight and miscalculations - I disagree, however, with Obama throwing any more money at the larger banks and corporations henceforth, it seems they've been buttered up pretty sufficiently to last half the country for quite a while

 

<offtopic>I'm starting to like Obama, and it may be just because of what I've had to compare against - since I was really too young to pay attention to presidential affairs before Bush, I was a Junior when he took office, when I really started delving into intellectual designs

</off topic>

[padren]

Good point.

Which is why I am looking for some "whys" regarding how throwing more money, more money and then some more money at AIG, without restructuring, is such a great idea.

 

Let's say I give my son $100 to spend on necessities for school, and he blows it on candy.

Then I give him another $100 to spend on the necessities he should have bought with the first $100, and he blows it all on more candy.

 

Only a moron would give him another $100 without exerting some level of control over his expenditures.

 

I agree, I think the problem boils down to the fact that it's really hard to get people to agree on economic policy. The initial concept was that AIG made top of bubble mistakes, but overall was a steady company with smart people. They got greedy in a bubble and would have gone bankrupt for it if we didn't step in. No one is going to make any "top of bubble" mistakes any time soon, so the "danger has passed" and we don't have to be too worried about how they run AIG. No one is going to go crazy with "Gold Fever" for a good while, so we are "hoping" they learned from this and will run their affairs responsibly.

Is that really a smart idea? I have no clue. Maybe all they need is that money and they are good to go, or they need more to even have a shot but don't want to tell us until it's too late so we get pot committed. Maybe they don't even need that money, but feel they can bilk us if they can confuse us with really big financial words. No one is 100% sure, just very weary of trusting them at face value yet hoping they can.

 

If they are for the most part a "policy sound" company that simply got caught up (due to their own greed) in the bubble collapse restructuring can only butcher what would otherwise work fairly well. On the other hand, if they have systemic problems we are all in a lot of trouble.

 

As for why they didn't file Chapter 11 I really can't say. I think that Chapter 11 requires a restructuring plan and if that plan is not feasible, you basically end up in Chapter 7. For all I know filing for Chapter 11 would have caused more damage to their reputation and seen even more clients flee, and revealed numbers that could not be saved by Chapter 11... whereas the bailout put liquid cash straight into their accounts allowing their clients to continue with enough confidence to keep using them.

 

But that's all just conjecture - I really have no idea. Honestly it's one of the reasons it's all so frustrating. You have people who have an idea of what's going on afraid that the simple act of publicly stating their views could impact market confidence, leading to information trickling down in a pre-vetted, almost manipulative fashion. So the fact that the observers can so severally impact what they observe does not help, coupled with the fact that equally noted and intelligent economists in the know will completely shred the views of another... it leaves us all in this mess of conjecture and opinion. It's certainly frustrating.

[DrDNA]

To be frank, I've never been unfortunate enough (or maybe wise enough) to consider bankruptcy and can't tell the two apart - I'll check it out tonight when I get a chance, are there any sites anybody can point me at that are better than others, or should a generic google suffice?

 

http://www.sec.gov/investor/pubs/bankrupt.htm

 

How Does Chapter 11 Work?

 

 

Federal bankruptcy laws govern how companies go out of business or recover from crippling debt.

 

A bankrupt company, the "debtor," might use Chapter 11 of the Bankruptcy Code to "reorganize" its business and try to become profitable again. Management continues to run the day-to-day business operations but all significant business decisions must be approved by a bankruptcy court.

 

The U.S. Trustee, the bankruptcy arm of the Justice Department, will appoint one or more committees to represent the interests of creditors and stockholders in working with the company to develop a plan of reorganization to get out of debt.

 

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No one is going to make any "top of bubble" mistakes any time soon, so the "danger has passed" and we don't have to be too worried about how they run AIG. No one is going to go crazy with "Gold Fever" for a good while, so we are "hoping" they learned from this and will run their affairs responsibly.

 

Is that really a smart idea?

Not really.

The kid is on his way to the candy store with the 3rd $100 bill as we type.

 

 

As for why they didn't file Chapter 11 I really can't say. I think that Chapter 11 requires a restructuring plan and if that plan is not feasible, you basically end up in Chapter 7.

Yes. It does require the restruct plan.

 

I don't really get your point. If the restructuring plan is not feasible, either the current plan has been working well (which it obviously has not) and/or the company is doomed no matter what, in which case we are REALLY wasting your childrens' childrens' financial futures.

 

For all I know filing for Chapter 11 would have caused more damage to their reputation ..........

I seriously don't see how that is possible.

 

But that's all just conjecture - I really have no idea. Honestly it's one of the reasons it's all so frustrating. You have people who have an idea of what's going on afraid that the simple act of publicly stating their views could impact market confidence, leading to information trickling down in a pre-vetted, almost manipulative fashion. So the fact that the observers can so severally impact what they observe does not help, coupled with the fact that equally noted and intelligent economists in the know will completely shred the views of another... it leaves us all in this mess of conjecture and opinion. It's certainly frustrating.

I appreciate your direct response to my question as well as your thoughtful conjecture and speculation.

 

Although I am still patiently waiting for someone to back up their claim(s) that Chapter 11 is a bad idea for AIG with a fact based detailed response that can be traced to a reputable source(s).

Edited March 21, 2009 by DrDNA
Consecutive posts merged.

[iNow]

Although I am still patiently waiting for someone to back up their claim(s) that Chapter 11 is a bad idea for AIG with a fact based detailed response that can be traced to a reputable source(s).

I've got two words for you: Lehman Brothers.

 

You're trying to look at this in a vacuum, DrDNA. For your mom and pop sized business, bankruptcy is a viable option where court appointed officials can help make decisions on behalf of creditors to navigate the company to safer waters. If you recall, that's what we did with Lehman Brothers. Did you see what happened? Lehman was so interconnected with all other institutions that the bankruptcy of Lehman is part of the reason things in our economy got so bad in the first place (if you need citations showing how big of an impact Lehman had, they won't be hard to find, just ask or go googling for about two microseconds).

 

Well, I've got news for you... AIG is ginormous compared to Lehman Brothers, and much more heavily interconnected than Lehman ever was or could have been. We've got real world experience from just the past few months which proves why bankruptcy is not a viable option, and if you ignore it, then you are doing a great diservice to the actual issue at hand. The simple fact is that you're trying to treat this as an isolated case, and you're arguing from the false prentense of labelling AIG as posing no systemic risk.

 

 

This document pretty much puts the nails in that "why not bankruptcy" coffin you've been carrying. Grab some coffee and spend some time reviewing it if you're truly curious. Cheers.

 

http://www.scribd.com/doc/13112282/AIG-Risk-Bankruptcy-Report

[ParanoiA]

I'm going to do some reading on it too. I love the idea of Chapter 11 and thought DrDNA was right on the money by suggesting it. It seems to be, in essence, what we expected when they sold us bailouts. But I also understand there are other dynamics to consider which I may be ignorant about, so I'll pause for a research break.

 

Here's a piece written by Newt Gingrich on the subject, and I think he makes a good point on the rule of law over these corporations preferable to the rule of politicians over them.

 

http://www.humanevents.com/article.php?id=31117

 

Edit: Oh, and by the way, I'm not sure if this has been mentioned but going after these bonuses after the fact would seem to qualify as ex-post-facto law, and possibly a bill of attainder, which is entirely illegal and should be rejected with prejudice from any democratic nation of laws.

 

Particularly when it's our government that screwed up.

Edited March 21, 2009 by ParanoiA