Obama told Geithner to take all legal measures to block bonuses awarded to employees of AIG, Reuters reported, citing White House adviser Goolsbee.--WSJ
Update: Jumping on the bandwagon, Matt Nesto reports that Andy Cuomo has written AIG chairman and CEO Edward Liddy to express how deeply "disturbed" he was to find out about the bonus payouts. His demands include: a list of the individuals receiving bonuses, their job descriptions, their performances, their inseam and a swab of saliva while we're at it, by 4PM or Liddy will be subpoenaed (and this dog will be shot).
AIG Letter 3.16.09 [AG's Office]
Posted by guest , Mar 16, 2009 12:24PM
Your bonus just got Obamapenis'd.
Posted by Phobos , Mar 16, 2009 12:28PM
"In order to serve the larger public good" .. "you bear an extra responsibility".
Banks bear no responsibility to serve the public good, large or small.
I'm so fucking livid right now I'm shaking.
Posted by guest , Mar 16, 2009 12:31PM
@phobos- when they take public money they do, ass hat.
Posted by guest , Mar 16, 2009 12:36PM
What you should be livid at is AIG. They sold unlimited CDS and could care less what happened if they blew up. As long as they got their bonus what does it matter if it was reckless.
Obama is right to claw back these bonuses. They gambled with only upside and no downside. Fuck them
Posted by guest , Mar 16, 2009 12:37PM
AIG deserved to fall into the ocean, clearly that wasn't an option. People at AIG should be grateful they get a paycheck at at all. You want someone to be mad at, direct it towards the people who destroyed the company.
Posted by guest , Mar 16, 2009 12:37PM
"I'm so fucking livid right now I'm shaking."
I'm so laughing right now, but crying on the inside.
Posted by guest , Mar 16, 2009 12:38PM
you're an idiot, phobos.
Posted by guest , Mar 16, 2009 12:38PM
Hello, I am a time traveller from the future. What is this 'bonus' you speak of?
Posted by guest , Mar 16, 2009 12:40PM
Phobos are you mentally retarded?
"Banks" or any other financial institution, do bear the responsibility not to fucking blow up our financial system by selling unlimited risk to anyone who wants it.
Posted by guest , Mar 16, 2009 12:42PM
@6- agreed.
phobos, you're a moron.
Posted by guest , Mar 16, 2009 12:43PM
The end of the rule of law in the US. Zimbabwe's looking much better right now, and they're accepting USD, so no need to exchange. All this political posturing does is feed more money through the legal system that bleeds it.
Posted by guest , Mar 16, 2009 12:43PM
This is a clear case of the governemnt trying to change the rules after the game has started.
As much as we all agree that it is dis-tasteful that these bonuses are being paid they are a matter of contracts inacted prior to the blow-up. It is LAW. We live in a country built on contract law and supporting legally binding agreements.
Again, it looks bad but allwoing these to be paid is not a choice. Anyone want to bet that the Supream Court gets involved?
Posted by merkin capital partners , Mar 16, 2009 12:43PM
Obama would like you all to know that Apple, McDonald’s, and Google all started as small business.
Like, they didn’t just hire 10,000 people on the first day and bring in billions in revenue, in case you thought otherwise.
Posted by guest , Mar 16, 2009 12:45PM
@13- pls try and attempt better disses.
thanks,
the management
Posted by guest , Mar 16, 2009 12:45PM
"I'm so fucking livid right now I'm shaking. "
hahahah
Posted by Lowly Assistant , Mar 16, 2009 12:46PM
The AIG situation is so beyond fucked, but shouldn't all this have been taken care of last summer by Bush's admin., as well as this winter by Obama's admin.? Before tossing money into AIG (not one, but two times), the gov. should've broken these contracts. The negligence provided by both AIG and D.C. is beyond absurd.
Posted by guest , Mar 16, 2009 12:47PM
@merkin-- well, the markets rallied, so who cares what he said.
Posted by AJ , Mar 16, 2009 12:49PM
The derivatives group in London should be shutdown and, at the very least, AIG should be working on encouraging those people to quit. They don't deserve their bonuses (even if they were guarantees) and AIG should have dared them to sue for the money. Good luck winning that case...
However, weren't the bonuses paid on Sunday? If those guys were smart they would have moved themselves, their money and their families to Switzerland early this morning... Thank you Obama for coming to the party a day late...
Posted by guest , Mar 16, 2009 12:49PM
AIG up ~70%. we taxpayers are rich! TARP I and II already funded.... .
Posted by Investorcluzo , Mar 16, 2009 12:50PM
too broken, didn't promise...
seriously, this sets a bad precedent (or should it be president?). does this mean bankers at merrill et al shouldn't spend those ill gotten bonuses as well? if gov't wants to run these businesses, let them. but don't say you're not, only to second guess management's and the board's decisions. here we go again with those unintended consequences…
Posted by guest , Mar 16, 2009 12:51PM
Hmm... AIG gets fucked in the ass by Obama, and we have a bank rally.
Perhaps we need to raid the wallets of some more bank exekies so we can have a repeat Oct 13 rally!
Posted by AJ , Mar 16, 2009 12:54PM
@18 and yes, I am advocating AIG breaking its contracts which is obviously a horrible precedent... but really, this small group blew up the whole firm, I'm not advocating clawing back bonuses for anyone else at AIG not tied to the black hole group
Posted by guest , Mar 16, 2009 12:58PM
We need to bring back Tar & Feathering... I would love to see some of these bank CEOs covered in feathers running down Wall Street screaming like a bunch of girls. Seriously...
We need to return to an era where dumbasses who failed, lost. Ya, that era. These Banks need to be taken out and SHOT. If you have tarp funds, your selling off parts of the firm to healthy banks, to pay back the loan.
Fuck this bad bank model, we need some good banks again. Healthy banks. As long as we are subsidizing these fuckers, we will have Zombie Banks.
I am sick and fucking tired of Dawn of the Undead Bank era.
Posted by guest , Mar 16, 2009 12:58PM
But those hard-working AIGer's brought down AIG fair and square, they deserve bonuses while the company fails and the taxpayers foot the bill...
If this were China, we'd be discussing burials not bonuses
Posted by guest , Mar 16, 2009 1:00PM
Nothing surprising here. did they really expect otherwise from Obamby?
The ends justify the means. If the great one thinks the "end" is a good one, he will justify the means to get there. Unintended consequences will be dealt with later by the same method: those consequences will be judged and if deemed bad, they will again be corrected. If the govt. has to grow to deal with all these actions that's cool, because it's all for a good cause. If we destroy contract law and entrepreneurial incentives in the process, no worries; the growing bureaucracy will pick up the slack just fine.
If you're outraged now, just ask yourself this: what will you do when the great ask Geitboy and Cuomodo to find a legal basis for clawing back prior years pay. What will you do when he succeeds in doing this because he's already taken us so far down the communist path that he has enough popular support to do so?
Posted by guest , Mar 16, 2009 1:00PM
Are these fools being guaranteed specific dollar amounts in their contracts, or just that they'll receive bonuses based on performance? I suspect there's some kind of qualifier in the contract for company/personal performance, and that these bonuses can be challenged on that basis.
Posted by guest , Mar 16, 2009 1:05PM
Phobos is speaking to the larger story line that weaves itself into all of BHO's rhetoric which his theory of "serving the public good" and "accountability to all". Where does that rhetoric come from? European Socialism.
Certain banks did NOT take TARP money and these banks are still being asked to "serve the public good". Those banks should have free rein to lend to whomever they want in line with regulators. True Asshats such as GoldmanSachs/Bear/Lehman/Morgan/BofA/ML/etc need to get on their knees to the taxpayers. Remember $47/share at Goldman? They can thank Uncle Sam they're still alive.
The community banks which did not get involved in the silliness should not be folded into this "you must lend for the greater good" BS.
Posted by guest , Mar 16, 2009 1:09PM
@ everyone. If you accept bailout money from the government, the government gets a say. period. (full disclosure, i do not like obama or his policies.) It's much the same as a commercial lender having a say through terms written into a loan doc
Posted by guest , Mar 16, 2009 1:10PM
phobos is an idiot and so are you, @27. he's not referring to central banks, really, he's referring to A FUCKING IG. spare us the "he's a socialist!" bull shit.
Posted by guest , Mar 16, 2009 1:11PM
14: The gov't is now paying people to post on blogs? Cool - you're still able to earn bus fare.
Posted by legal eagle , Mar 16, 2009 1:13PM
Question: Why do we care more about a bonus payout that is (relatively) small than the fact that taxpayer money is being given to AIG so that AIG can pay out its obligations to it's CDS counter parties (banks) at par? I know many argue that this is simply another bank bailout in disguise. But really I don't like this at all--if AIG can't pay back its obligations, it should renegotiate like any other sh*tty company and settle for something less than par.
Needless to say, the bonus thing is absurd, but I'm more livid about the CDS payout using gov't money.
Posted by guest , Mar 16, 2009 1:13PM
Has dealbreaker become painfully slow to laod for anyone else lately? Is Obama clawing back bandwidth?
Posted by guest , Mar 16, 2009 1:15PM
http://www.nytimes.com/2009/03/15/nyregion/thecity/15part.html?pagewanted=1&ref=thecity
"A 29-year-old man who works for a large investment management firm and was at Bagatelle’s brunch one recent Saturday and at Merkato 55’s the next, put it another way: “If you’d asked me in October, I’d say it’d be a different situation, and I don’t think I’d be here. Then the government gave us $10 billion.”
with colleagues like this i can't imagine why any reasonable american wouldn't want to be funding the party.
Posted by guest , Mar 16, 2009 1:17PM
I love it how the anti-Communists here write with such fury at how AIG could ever possibly become a viable business again.
Uhm, even WMT can't pay back nearly 0% interest-free loans of the magnitude AIG was given.
Like anybody gives a shit that some shirts at AIG are about to get probed with a government sphincter.
Nothing to see here, move along.
Posted by guest , Mar 16, 2009 1:19PM
@31 agree completely... the bonus is insignificant compared to the CDS looting of the US Treasury by Timny...
~23
Posted by guest , Mar 16, 2009 1:21PM
Question: If AIG didn't get the gov't funds, would these bonuses be paid?
I think not.. and even worse, these miscreants likely wouldn't even be getting a salary. They should be sued for criminal negligence.
Posted by guest , Mar 16, 2009 1:24PM
All I know is that anything Donny Deutsch is for - I'm against. Sorry lads.
Posted by guest , Mar 16, 2009 1:25PM
@36
if AIG didn't get govt funds we would've experienced what's called a '(Global) Credit Event'.
Then the party REALLY would've gotten started...
Posted by guest , Mar 16, 2009 1:27PM
why are people surprised? of course AIG will pay itself as much as possible - money is dwindling by the minute. If you were at AIG wouldn't you stuff your pockets as much as possible?
It is all Hank and Tim's fault for not imposing harsher terms.
Posted by Investorcluzo , Mar 16, 2009 1:30PM
@32 - yes. annoying...
@28 - I'm not arguing that the gov't shouldn't have/doesn't deserve a say. nonetheless, they shouldn't be closing the barn door after the horses have already left the stable. it makes everyone look stupid. how about a little coordination – perhaps there should be an agreement (you know, like a “contract” – to be broken later when it fits the “public good”) that explicitly states which decisions management may make without the consent of big brother. take a page from purchase agreements, they clearly stipulate how much a company can spend without consent of the buyer…
Posted by guest , Mar 16, 2009 1:33PM
@ 12 -
"rule of law" and "sanctity of contract" has been toast since 1934 --- look up the "Gold Clause" cases.
Any clawbacks from AIG or any of the other pricks sucking at the public teat would be child's play compared to the out and out confiscation FDR pulled back in the day.
Posted by guest , Mar 16, 2009 1:34PM
yes, 31, good point but with a twist here... The teir-1 ib's get a bailout and then get 100 cents on the dollar for CDS contracts... the bonus issue is a feint maneuver to hide the real point:
given the tenuous situations of the ib's, imagine what would happen to the tier-1 capital of these banks had they settled for 80 cents on the dollar. let's say $20 billion of loss to equity accounts... and another whole round of gov't payments to shore up tier-1 capital...
so the CDS payments by AIG to the banks is actually the gov't propping up the banking system yet again, and they use the bonus issue as a way to keep the populace's attention diverted. easier to whip up the Coliseum with "eat the rich" than have an intelligent conversation regarding debits and credits.
Posted by guest , Mar 16, 2009 1:38PM
Now Now. Obama will make things better at some point. heard that credit suisse began rescinding offers to mbas as sign of the times. too many good people being let go for unknowns and the argument they are cheap not much of an issue anymore
Posted by guest , Mar 16, 2009 1:41PM
@12 said:
"As much as we all agree that it is dis-tasteful that these bonuses are being paid they are a matter of contracts inacted prior to the blow-up. It is LAW. We live in a country built on contract law and supporting legally binding agreements."
This is contract law. Contracts are broken all the time. It makes sense for AIG to break these contracts since I doubt that any of these bonus takers will file a lawsuit. In fact, I dare them to since any jury that sits to hear their "arguments" will, in fact, be partial owners of AIG due to the government bailout!
Posted by guest , Mar 16, 2009 1:48PM
If it weren't for the fear of public backlash, would Obama and Tiny Tim be raging hard on AIG? Political expediency (tho' in this case highly justified).
Posted by guest , Mar 16, 2009 1:52PM
This is going nowhere. AIG bonuses are sorted. End of story. Cuomo is a grand standing jagoff.
Too bad for him we still roll by the rule of law in this country. I thought attorneys general were supposed to understand that, some sort of prerequisite if I recall.
Here's a better clawback idea. It's taxpayer dough...how about a clawback on every douche's GS 16 (or whatever) govi pay check that ever backed the phony 'affordable housing' initiatives that have gotten us here. Say we go back to a start date of '75 with CRA's passing. I'm sure we'll net at least a billion...6x's AIG's bonus tab.
Posted by guest , Mar 16, 2009 1:55PM
@44 - right, and if you breach a contract, you must pay damages. The amount of damages would be the unpaid bonuses. So AIG can expend money for litigation against what would likely be a class action, and be found liable to pay the bonuses, or just pay them and avoid costly litigation.
Also, generally, you're not going to see juries in commercial courts.
Posted by guest , Mar 16, 2009 2:10PM
Is anyone else worried about the new mob rule here? I am about to head to wall street with my torch and pitchfork. I think Obama is leading the way. I'm not saying that I agree with AIG on this at all. I just don't agree that populism will lead to anything positive.
Posted by Investorcluzo , Mar 16, 2009 2:14PM
@48 - I believe I saw this before in the gangs of new york, maybe you've read the book or seen the movie?
Posted by guest , Mar 16, 2009 2:26PM
Phobos and 12, S--t-eaters of the day.
You realize, right, that if AIG had been allowed to sink, officers wouldn't have gotten their "LAW"fully enacted bonuses by "LAW" in this "country built on contract law and supporting legally binding agreements"?
You're insolvent and need a handout, the "LAW"s change, that's part of the "LAW" too, asshats.
Posted by guest , Mar 16, 2009 2:40PM
@33 thanks for posting that link. I saw that article about sybaritic brunches and I was disgusted. It's difficult to justify bailouts for financial institutions when they go off and do bone-headed things like giving bonuses to the "best and the brightest" (Liddy's words, not mine) that torpedoed AIG and, with it, the entire CDS market. If they are going to give any bonuses to the financial products group at the center of this mess, then they should be bonuses in AIG stock, or in the rubbish securities that they were so quick to guarantee during the boom.
There's a time and a place for jeroboams of bubbly and generous compensation for work done well. AIG is not that place, and this is certainly not that time.
Posted by guest , Mar 16, 2009 2:47PM
@50 no one is talking about What If's.
For better or worse AIG had been bailed out last time we checked.
Guess what? Laws weren't changed to facilitate the bailout. They got their hands on that cake with no strings attached other than the obvious obligation to assume the prone position for a public a-whipping every time some class warfare populist wanted/needed a headline.
The guy who runs that joint (Liddy) is a govi appointee, yet the bonuses were still paid, don't you think that is a bit too convenient for the a-whippers? They are playing you like a fiddle.
Posted by guest , Mar 16, 2009 2:52PM
What contract stipulation could possibly result in a "bonus" being granted given these results.
How can they even call it a bonus, when a bonus must be performanced based by definition.
It is salary disguised as a bonus!
& If it is in fact, just gussied up salary...then withholding for incompetence is not a breach of contract.
Posted by guest , Mar 16, 2009 3:07PM
@42, well-said. It isn't a bailout of AIG insomuch as a bailout of its clients. A back door way of shoveling money to ibanks.
Posted by guest , Mar 16, 2009 4:19PM
@47 said:
"right, and if you breach a contract, you must pay damages. The amount of damages would be the unpaid bonuses. So AIG can expend money for litigation against what would likely be a class action, and be found liable to pay the bonuses, or just pay them and avoid costly litigation."
As I have said elsewhere, the expected value of not paying the bonuses, even with legal fees added, is about the same as just paying the bonuses. More specifically,
E = (0.99 * (0.99 * $170M + 0.01 * $5M) + 0.01 * $0) ~ $167M
That is, given a 0.99 probability of a lawsuit, a 0.99 probability that the plaintiffs win the lawsuit, and a total $5M in legal fees if a lawsuit occurs, then the expected loss is approximately equivalent to the current bonus payout.
Plus, you get the stimulative effects of hiring lots of lawyers on both sides!
Posted by guest , Mar 16, 2009 9:59PM
Few different ways to look at this. One, gov't simply didn't do enough due diligence. You know, the stuff you are supposed to do before making an investment this size. Or, the gov't didn't draft its purchase agreement correctly. They could have easily held a gun to AIGs head on the issue of compensation and cut off bonuses completely if so desired. Three, the gov't is getting paid for some of this headache/political risk in the form of LIBOR plus 850 or whatever the rate was.
I'm no AIG apologist and could give a fuck if those guys get their bonuses. But if the gov't wants to play the big shot, white knight equity investor, better learn the rules. And the main rule is caveat emptor.