Page 3 of 4 FirstFirst 1234 LastLast
Results 21 to 30 of 37

Thread: Executive Bonuses should not be paid with public money.

  1. #21
    Another day in paradise..
    ReverendHellh0und's Avatar
    Join Date
    Sep 2007
    Last Seen
    Today @ 03:37 PM
    Gender
    Lean
    Libertarian
    Posts
    68,026

    Re: Executive Bonuses should not be paid with public money.

    Quote Originally Posted by obvious Child View Post
    I provided a link to an argument regarding the actual nature of the bonuses. You are free to read it and discuss things like adults. If you wish to continue the "I hate OC and will make disparaging comments to him whenever I reply to him" go to the basement.



    its bunk. its excuse making for party and in no way worthy of attention in another thread. stop crying.


    Matthew 10:34
    Think not that I am come to send peace on earth: I came not to send peace, but a sword.

  2. #22
    Equal Opportunity Hater
    obvious Child's Avatar
    Join Date
    Apr 2008
    Location
    0.0, -2.3 on the Political Compass
    Last Seen
    12-09-14 @ 10:36 PM
    Lean
    Other
    Posts
    19,883

    Re: Executive Bonuses should not be paid with public money.

    Quote Originally Posted by Reverend_Hellh0und View Post
    its bunk. its excuse making for party and in no way worthy of attention in another thread. stop crying.
    "If you wish to continue the "I hate OC and will make disparaging comments to him whenever I reply to him" go to the basement."

    Saw that coming.

    Leave the discussion to those who understand the nature of the bonuses. You clearly do not nor do you wish to learn.
    "If your opponent is of choleric temperament, seek to irritate him." - Sun Tzu

  3. #23
    Clown Prince of Politics
    Psychoclown's Avatar
    Join Date
    Nov 2006
    Location
    Hiding from the voices in my head.
    Last Seen
    09-26-16 @ 11:11 PM
    Gender
    Lean
    Libertarian - Right
    Posts
    1,723

    Re: Executive Bonuses should not be paid with public money.

    Quote Originally Posted by obvious Child View Post
    Driven? Questionable. People keep hammering on the sub prime mortgages themselves while ignoring everything else. The real problem when you examine it is not necessarily the mortgages themselves. It's the leveraging that went on to buy all of the securitized assets. As I've stated several times here, investment banks took out huge loans to purchase such assets. When the revenue streams from the mortgages dried up, the securitized assets essentially became worthless. Normally, on an equity purchase the firm merely writes it down, takes a charge on income and is done with it. It hurts no question and they'll likely have to restrict lending to cover their losses but it's more or less a done deal once the charge dries. Now, what had was leveraged purchases. So instead of writing it off and being done, the investment banks now have to make payments on their loans, largely commercial paper. So no revenue from those assets and liabilities on the original purchase. You see the problem. So banks slash lending to conserve case to try to stay afloat. They call in their lines of credit from regular banks who suddenly see huge outflows from their off the books obligations. So they start cutting lending to cover their lines of credit. So not only are investment banks slowing or stopping lending but regular banks. If the asset backed securities had merely been equity purchases, we wouldn't have this problem. This is lost on so many people it's amazing. Remember that the US housing market is only around 3% of the entire economy and sub prime is a tiny fraction of that 3%. It alone cannot account for this problem. The reason why most mainland European banks are no where near our level of mess is because their leveraging never exceeded something like 15 to 1. At home in the good ol' USA we had leveraging of over 60 to 1. Similar instances happened in England.

    The problem itself isn't the sub prime. It's the obscene leveraging. AIG is in the mess because it's essentially insured bonds with CDS which it historically made billions off doing nothing (literally nothing) but is now called upon contractually to make firms whole on largely commercial loans that are going bad.
    Interesting, but I'm not quite following you. I'm not a finance or economics major, so I'm a little unclear on some of the terminology. Would you mind breaking it down in a little more layman's terms to help me understand what you're exactly claiming is the problem?
    Slipping into madness is good for the sake of comparison - Unknown.

  4. #24
    Equal Opportunity Hater
    obvious Child's Avatar
    Join Date
    Apr 2008
    Location
    0.0, -2.3 on the Political Compass
    Last Seen
    12-09-14 @ 10:36 PM
    Lean
    Other
    Posts
    19,883

    Re: Executive Bonuses should not be paid with public money.

    Quote Originally Posted by Psychoclown View Post
    Interesting, but I'm not quite following you. I'm not a finance or economics major, so I'm a little unclear on some of the terminology. Would you mind breaking it down in a little more layman's terms to help me understand what you're exactly claiming is the problem?
    Alright, I'll try do this relatively simple.

    The sub prime mortgages got securitized, meaning the loans were chopped up and sold. The people/firms which bought them bought them for the revenues which would be the loan payments. This is primarily how the securities were valued. But they purchased these securities with loans themselves. When the revenues from the securities stopped they still had to make payments on the money they borrowed to buy the securities. Thus the toxic asset was born. No revenues but liabilities to be paid on it. If firms had just paid cash for the securities they would be essentially done with it once the security became worthless. Instead they have to make payments on an asset that generates no income. Pretty bad situation.

    So when this happens the firms who bought them, aka Citibank stop lending money out to you, me and that small business over there because they have to conserve cash to pay for the loan they took out to buy the security. And they call in their credit lines to help them which causes the bank providing the credit line to slow lending to everyone else. Overall credit dries up.

    Really simple, you borrow money to buy an asset which generates some money. That asset then stops generating money. You still have to pay your loan but you have no income from that asset.

    As for the leveraging, 60 to 1 means there was $60 of debt for every $1 of equity (like common stock).
    "If your opponent is of choleric temperament, seek to irritate him." - Sun Tzu

  5. #25
    Clown Prince of Politics
    Psychoclown's Avatar
    Join Date
    Nov 2006
    Location
    Hiding from the voices in my head.
    Last Seen
    09-26-16 @ 11:11 PM
    Gender
    Lean
    Libertarian - Right
    Posts
    1,723

    Re: Executive Bonuses should not be paid with public money.

    So the first domino was still the subprime loans going bad? And the companies that owned the loans not only lost the value of the loan but are also saddled with the debt they incurred to purchase the loan. So essentially, if I'm understanding this right, AIG failed to manage its risk exposure and exposed itself to too many high risk loans and compounded that mistake by borrowing money to facilitate that overexposure to risk. Wow, they deserve to go belly up.

    Which brings me back to the point of my previous post, by bailing them out, we're not letting them suffer the market consequences of the gross miscaluclations. Which means they have no real incentive to stop taking such wild risks since they know the government will be there to bail them out.

    So let me ask you this, is it true that AIG is "too big to fail"? It seems to me from your earlier reply you also favor breaking them up. Anything else you'd do? I take it we don't have any regulations on leveraging ratios, it that something worth looking into?
    Slipping into madness is good for the sake of comparison - Unknown.

  6. #26
    Equal Opportunity Hater
    obvious Child's Avatar
    Join Date
    Apr 2008
    Location
    0.0, -2.3 on the Political Compass
    Last Seen
    12-09-14 @ 10:36 PM
    Lean
    Other
    Posts
    19,883

    Re: Executive Bonuses should not be paid with public money.

    Quote Originally Posted by Psychoclown View Post
    So the first domino was still the subprime loans going bad?
    I'm not so sure. That would imply it really caused the mess, where IMO, the real problem is further down the line. If the mortgages themselves just went bad without securitization, then the owners of those mortgages would be in bad shape, aka, Fannie Mae/Freddie Mac. But the damage would largely be limited to them. The securitization, IMO is really where things went horribly wrong. The ratings agencies like S&P and Moody's essentially sold ratings. They took mortgages that were rated triple C (terrible) and took the best of the triple Cs and re-rated them as As (excellent). How they haven't gotten shutdown is really something I'd love to know. Arthur Anderson got shut down partially for selling audits. Why didn't the ratings agencies get shutdown for selling ratings? But that's another thread. Then groups like Citibank bought these securities thinking they were good (gotta to wonder who was in charge of that). And the rest is history.

    Mortgages as social policy can be somewhat blamed as a reason for the mess, but it's hard to put much blame on them. CRA loans never exceeded $20 billion at any one time and were profitable for over a decade. The Republican removal of obstacles to getting a mortgage also were partially at fault but those I think never exceeded something like $30 billion. $50 billion in a market of trillions in real estate is a drop in the bucket.

    And the companies that owned the loans not only lost the value of the loan but are also saddled with the debt they incurred to purchase the loan. So essentially, if I'm understanding this right, AIG failed to manage its risk exposure and exposed itself to too many high risk loans and compounded that mistake by borrowing money to facilitate that overexposure to risk. Wow, they deserve to go belly up.
    Well, not quite. AIG I don't think borrowed money. They insured all kinds of loans. When the firms that gave out the loan went bad, AIG had to make good on insurance to the loan holder. What AIG, or more accurately, AIG's London Financial Products department which apparently is like 30 to 20 people over exposed themselves. Rumor has it that the deal between that office and Corporate was that the London FPD got to keep 50% of whatever it made. That's massive incentive to sell, sell, sell. The sad thing is that AIG insurance is pretty solid and does a good job. One over seas department numbering fewer then Corporate Office's cleaning staff has done them in.

    Which brings me back to the point of my previous post, by bailing them out, we're not letting them suffer the market consequences of the gross miscaluclations. Which means they have no real incentive to stop taking such wild risks since they know the government will be there to bail them out.
    That is the problem of a moral hazard. But it doesn't seem right to let insurance based employees get hammered for the failure of the financial products division, which is the reason I'm for giving the insurance executives who brought in billions in profits to get their bonuses. They are helping keep AIG alive. That deserves a reward.

    So let me ask you this, is it true that AIG is "too big to fail"? It seems to me from your earlier reply you also favor breaking them up. Anything else you'd do? I take it we don't have any regulations on leveraging ratios, it that something worth looking into?
    I'd favor breaking up AIG into insurance and financial products. The insurance is largely okay. And we can't let that go belly up. The mere fire sale on those policies would destroy the balance sheets of every other insurer (due to mark to market) and we'd be an even deeper hole.

    The problem with regulations on leverage is that every firm is different. Some firms handle leverage better than others. A hard a fast rule would probably do more damage then good. What I'd support is more disclosure requirements on public audits about leverage, specifically what the leverage is tied to and potential risks on what was borrowed for. If they got $500 million in leverage on an asset, I want to know what the risk on that asset is. Given the latest Financial Accounting Standards Board exposure draft, we might be getting there pretty quick.
    "If your opponent is of choleric temperament, seek to irritate him." - Sun Tzu

  7. #27
    Another day in paradise..
    ReverendHellh0und's Avatar
    Join Date
    Sep 2007
    Last Seen
    Today @ 03:37 PM
    Gender
    Lean
    Libertarian
    Posts
    68,026

    Re: Executive Bonuses should not be paid with public money.

    Quote Originally Posted by obvious Child View Post
    "If you wish to continue the "I hate OC and will make disparaging comments to him whenever I reply to him" go to the basement."

    Saw that coming.

    Leave the discussion to those who understand the nature of the bonuses. You clearly do not nor do you wish to learn.



    Tell me OC, what do you think of Dodd writing in the protections of the bonuses at the request of the whitehouse, then pretending to be appalled?




    Matthew 10:34
    Think not that I am come to send peace on earth: I came not to send peace, but a sword.

  8. #28
    Equal Opportunity Hater
    obvious Child's Avatar
    Join Date
    Apr 2008
    Location
    0.0, -2.3 on the Political Compass
    Last Seen
    12-09-14 @ 10:36 PM
    Lean
    Other
    Posts
    19,883

    Re: Executive Bonuses should not be paid with public money.

    Quote Originally Posted by Reverend_Hellh0und View Post
    Tell me OC, what do you think of Dodd writing in the protections of the bonuses at the request of the whitehouse, then pretending to be appalled?


    That issue is far less important then the actual bonuses, and far less then the billions already used to nationalize AIG. Complaining about the political maneuvering about the bonuses ignores what actually matters. The retention bonuses made towards key employees who bring in large insurance profits should not be touched nor taxed more then normal. The goal is to extract our interest from AIG without massive losses. If those retention bonuses keep the employees who will help us get there, I don't care about the political maneuvering. Potential billion even trillion given their nominal CDS amounts is far more important then political chicanery.
    "If your opponent is of choleric temperament, seek to irritate him." - Sun Tzu

  9. #29
    Another day in paradise..
    ReverendHellh0und's Avatar
    Join Date
    Sep 2007
    Last Seen
    Today @ 03:37 PM
    Gender
    Lean
    Libertarian
    Posts
    68,026

    Re: Executive Bonuses should not be paid with public money.

    Quote Originally Posted by obvious Child View Post
    That issue is far less important then the actual bonuses, and far less then the billions already used to nationalize AIG. Complaining about the political maneuvering about the bonuses ignores what actually matters. The retention bonuses made towards key employees who bring in large insurance profits should not be touched nor taxed more then normal. The goal is to extract our interest from AIG without massive losses. If those retention bonuses keep the employees who will help us get there, I don't care about the political maneuvering. Potential billion even trillion given their nominal CDS amounts is far more important then political chicanery.



    How much money did AIG lose, and are these people getting bonuses for failing? I hear this "Retention" position often. However, it seems to me they **** the bed over there. why are they needed for retention? what I bolded makes sense, IF they were making a profit.


    Just to be clear, I was against the bailouts, I understand the bonuses make up little of the actual money, But I am also against unconstitutional punitive taxes as well.

    I think this sets a scary precedent.


    Matthew 10:34
    Think not that I am come to send peace on earth: I came not to send peace, but a sword.

  10. #30
    Equal Opportunity Hater
    obvious Child's Avatar
    Join Date
    Apr 2008
    Location
    0.0, -2.3 on the Political Compass
    Last Seen
    12-09-14 @ 10:36 PM
    Lean
    Other
    Posts
    19,883

    Re: Executive Bonuses should not be paid with public money.

    Quote Originally Posted by Reverend_Hellh0und View Post
    How much money did AIG lose, and are these people getting bonuses for failing?
    I earlier provided a link regarding this. I suggest you read it. It explains quite a bit about retention, why it's good and the division between the two branches in AIG. I see no need to copy paste. That said, the 'retention' bonuses paid to employees who left is absolute garbage as are any bonuses paid to the FPS branch employees.

    I think this sets a scary precedent.
    Perhaps, but these are scary times.
    "If your opponent is of choleric temperament, seek to irritate him." - Sun Tzu

Page 3 of 4 FirstFirst 1234 LastLast

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •