• This is a political forum that is non-biased/non-partisan and treats every person's position on topics equally. This debate forum is not aligned to any political party. In today's politics, many ideas are split between and even within all the political parties. Often we find ourselves agreeing on one platform but some topics break our mold. We are here to discuss them in a civil political debate. If this is your first visit to our political forums, be sure to check out the RULES. Registering for debate politics is necessary before posting. Register today to participate - it's free!

Executive Bonuses should not be paid with public money.

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 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?


:2wave:
 
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?


:2wave:

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.
 
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.
 
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.
 
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.


Yes I read that. while great in theory, do you have a link that shows this is how it went down? with a breakdows as to how much went to "fps" and former employees vs the insurance branch?




What do you see happening with AIG, long term, btw?


Perhaps, but these are scary times.


debatable, and depending on the day of the week for Mr. President.
 
Yes I read that. while great in theory, do you have a link that shows this is how it went down? with a breakdows as to how much went to "fps" and former employees vs the insurance branch?

The breakdown is essentially what Congress is trying to subpoena. By getting the names of the bonus receivers we can see the actual breakdown. But given how small the FPS department is compared to the Insurance branch and the now known fact that bonuses were given to several thousand people, it seems highly likely that insurance employees received the retention bonuses.

Here's a non-partisan explanation of AIG's CDS problem:

AIG And The Trouble With 'Credit Default Swaps' : NPR
 
The breakdown is essentially what Congress is trying to subpoena. By getting the names of the bonus receivers we can see the actual breakdown. But given how small the FPS department is compared to the Insurance branch and the now known fact that bonuses were given to several thousand people, it seems highly likely that insurance employees received the retention bonuses.

Here's a non-partisan explanation of AIG's CDS problem:

AIG And The Trouble With 'Credit Default Swaps' : NPR





This is a different argument then. Most of the bailout bonuses went to other peoples, While you speculate it went to thier insurance branch, even if it did, it is a small portion of the pie, no?
 
Perhaps they should not have written previsions in a bill (that no one read) that wrote in to law that said they could have the bonuses.

If they wan t to not pay them, all they need to do is repeal the huge spending bill.

Hard to write a bill that says one thing, and then when people get mad blame someone else.
 
This is a different argument then. Most of the bailout bonuses went to other peoples, While you speculate it went to their insurance branch, even if it did, it is a small portion of the pie, no?

Incorrect. Statistically speaking, as at least a thousand people got retention bonuses and FPS is a percent of staff is on the minority side, it is highly likely that insurance employees got some bonuses.

As for the piece of the bonus pie, we'll have to see just how it breaks down. That's what the subpoena is for.
 
Incorrect. Statistically speaking, as at least a thousand people got retention bonuses and FPS is a percent of staff is on the minority side, it is highly likely that insurance employees got some bonuses.


The insurance side got "some" of the bonuses? Sure, but by your information they are a small small portion of the total AIG, and therefore recieved a minute amount of the bonus money in total.

No? Or am I misunderstanding you.


As for the piece of the bonus pie, we'll have to see just how it breaks down. That's what the subpoena is for.



I think the time for that was before they handed AIG my money. Dragging people through the mudd because Dodd on behalf of the Obama admin wrote in protection for these bonuses is as douche as the bonuses themselves.
 
The insurance side got "some" of the bonuses? Sure, but by your information they are a small small portion of the total AIG, and therefore recieved a minute amount of the bonus money in total.

No? Or am I misunderstanding you.

Incorrect. I don't know for sure the break down of the firm between insurance and FPS, but given the size of the London office at somewhere between 20 and 30 people and the massive size of the insurance business, not to mention their breakdown in assets, the bulk of their people are in insurance.

SEC Info - American International Group Inc - 10-K - For 12/31/06

That's the 2006 10k before this mess really started to show on financials. Financial service operations are tiny compared to the total assets of the firm.
Operating income is 524 in millions. Life insurance is 10,032 and general insurance is 10,412 both in millions. FPS is actually quite peanuts.

It makes far more sense that many of the retention bonuses went to the insurance side as that is where most of AIG's money came from and most of where its staff likely are.
 
Back
Top Bottom