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Entry: Obama To Take Off Pants, Show Us What He's Made Of?
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.
Entry: Liddy In The House
posted by legal eagle
Mar 18, 2009 2:18PM
I don't really understand why anyone is shocked by this. Angered, fine, but shocked, nonsense. One of the first rules of contract law is that the other party is out to f*ck you in any way it can, which is why we have contracts in the first place--to reduce the moral hazard of transactions If you create a contract that contains no restrictions, covenants, etc., then of course the other party will do whatever the hell it wants, because it's not restricted. Thus, just because the government gives AIG, a bank, or whomever, cash does not mean that the receiving company has to, all of the sudden and magically, behave ethically.
It's all just grandstanding and B.S. If the gov't truly wanted companies indebted to it to behave differently, it would have to contract for it, but that would look socialist by nature, and also (probably) wouldn't fly. And this is what happens when the gov't gets involved in private business, there seems to be no easy answer, possibly no right answer, and probably no good way out.
Entry: 90% Tax Bill Passes House
posted by legal eagle
Mar 19, 2009 4:46PM
I think I see two loopholes (all assumptions are based on non-married individuals) . First, it applies to the lesser of bonus or income over $250. Increase income to $500 and give no bonus is one way to deal. I say $500 because, after that, it's not deductible.
Second, commissions are excluded. What is the possibility of reclassifying bonus payments to be commission based? Would this work only for relationship managers, sales persons, or could you possibly classify groups together and say they they, as a group, get X% commission for each Y dollar the team brings in? This would suck for those not on the deal making side (lawyers, back office, etc.), but maybe for them you just apply option 1.
Am I missing something, or would this work?
Entry: 90% Tax Bill Passes House
posted by legal eagle
Mar 19, 2009 5:03PM
Tax Chick: On a going forward basis, how difficult would it be to reclassify the bonus structure as a commission structure? Since this will apply to everything after FY2008, could they make this happen for 2009 and beyond?
And agree with 84 and 86--this will affect a huge number of people, especially in Manhattan. Riots on the streets of New York tonight?
Entry: 90% Tax Bill Passes House
posted by legal eagle
Mar 19, 2009 5:13PM
Cluzo: Very good point. In that case, base salary could go up much more, which would further defeat much of the purpose of the bill.
Entry: 90% Tax Bill Passes House
posted by legal eagle
Mar 19, 2009 5:50PM
111: But the TARP tax applies to the lesser of the bonus payments and taxable income over $250k. So, if TARP bonus = 0 (i.e., the taxpayer either gets $0 in bonus or all bonus payments are exceptions to "disqualified bonus payments") then the base salary can be any number and there would be no worry of being TARP taxed, since you get TARP taxed on the lesser of TARP bonus and AGI.
Entry: 90% Tax Bill Passes House
posted by legal eagle
Mar 19, 2009 5:52PM
116: I did not know that, thanks for the info. And that sucks ...
Entry: 90% Tax Bill Passes House
posted by legal eagle
Mar 19, 2009 6:09PM
Loophole seeking may be a losing game, but I don't think it's dangerous. Hell, I generally think it's fun. Some even like to argue there is no such thing as a legal loophole, there is simply what is legal and what is not. In this case, what I'm simply trying to do is figure out what is legal based on the words of the bill. If it's legal to pay out any amount you want in commissions or base salary without getting TARP taxed, then hell, pay away. This is the law and this is playing within the rules. If they want to change the rules, then fine, they should change the rules.
For me, this is just a fun academic exercise--like I said earlier, I am entertained by trying to find a legal way to avoid the intended consequence. But no, I don't think what I'm doing is dangerous.
Outside of this little exercise, I am generally against all bailouts and think that companies that have driven themselves into the ground through bad management and bets should go into Chapter 7 or 11 and have their good assets purchased by willing buyers. That may be the ultimate "good bank/bad bank" solution.
Entry: Where The Jobs At?
posted by legal eagle
Mar 20, 2009 4:11PM
Isn't prostitution legal in Rhode Island as long as it's not done outside? So, if you take the job, you may be signing up for more than you'd anticipated.
Entry: Vikram Pandit: "We removed the people responsible for Citi's financial distress"
posted by legal eagle
Mar 20, 2009 4:46PM
Fight the power Vik! Now would be an awesome time for some random country to ease its incorporation/corporate laws and offer loans to pay off TARP money to any bank that is willing to incorporate in its jurisdiction. It seems that daily the US is getting less and less competitive.
Entry: Weekend Dealbreaker: Now Just Simmer Down. I'm Sure It's Nothing Like It Sounds.
posted by legal eagle
Mar 22, 2009 2:49PM
80: I think a lot of people are missing the point here, and therefore misdirecting the argument. It's absolutely irrelevant whether $250k is a lot of money. What's relevant is that the government is stepping in and dictating a salary cap. There is something fundamentally wrong with this. Now, if there was some provision built into the TARP that said, if you take these loans from gov't you will be subject to X,Y & Z restrictions until the termination of this contract, that would be one thing, but that is not what's going on here. Parties negotiate terms and come to some reasonable meeting point in every contract, BEFORE they sign those contracts. But, entering into a contract with someone and then unilaterally determining, at a later point, that the other party is subject to additional restrictions is mind-blowing.
Entry: Weekend Dealbreaker: Now Just Simmer Down. I'm Sure It's Nothing Like It Sounds.
posted by legal eagle
Mar 22, 2009 3:32PM
90: That's the humor in all of this--the gov't needs the banks to produce revenue to pay back the loans but it's adopting measures that will (probably) ensure that the revenue of those banks will decrease. The greatest asset at a bank is its people because of their connections and book of business. If they take that book elsewhere (whether to a non-TARP institution or to a new firm they create) then the bank revenues go down and the ability for the TARP banks to service their debt decreases.
Fun times contracting with the government ...
Entry: Write-Offs: 04.07.09
posted by legal eagle
Apr 07, 2009 6:19PM
Still the best AIG commercial (and possibly one of the best commercials) I've ever seen:
Entry: Judge Denies Request To Keep Chrysler Secured Lenders' Names Under Seal
posted by legal eagle
May 05, 2009 6:43PM
42: If it's like the GM UST agreement, then the loan converts into a DIP loan upon BK. Also, regarding the liens, Chrysler's senior secured lenders probably had to enter into waivers to either waive the limitations on liens to allow the UST either a first or second priority lien, depending on the collateral. Not that abnormal for restructuring deals: "Waive your rights or we won't lend and the company goes under."
Entry: Judge Denies Request To Keep Chrysler Secured Lenders' Names Under Seal
posted by legal eagle
May 05, 2009 7:30PM
46: Directly from the UST Loan and Security Agreement:
"upon the occurrence of an Event of Default referred to in Sections 9(i) or (j) [BK], the Lender shall have the exclusive right, exercisable at its option, to convert this Loan Agreement into a debtor-in-possession facility in form and substance acceptable to the Lender."
Entry: Judge Denies Request To Keep Chrysler Secured Lenders' Names Under Seal
posted by legal eagle
May 05, 2009 7:38PM
Not a BK attorney nor do I ever deal with it, I just know the UST Loan. Just making the point that the language is there.
Entry: Remember What We Said About Thinking Before You Comment?
posted by legal eagle
Jun 04, 2009 5:07PM
Sugardaddy should get a cheesesteak. Whatever happened to that celebratory ritual anyway?
Entry: There Goes The Neighborhood
posted by legal eagle
Feb 17, 2009 4:48PM
49: I don't know the numbers, so you may be correct, but there are PLENTY of red states that are in serious economic trouble right now, basically, the entire Southeast. Terribly high unemployment rates and they are running out of state unemployment funds so they are having to hit up the federal government for a bailout. Slightly different issue than what you mentioned, but the point is, states of both "color" are in trouble.