AIG execs spend $440K on post-bailout shindig — Page 2

LePetite, thanks for your support.

And nygrl232---I thank you too, but I don't think anyone's been "illegal" here. Isn't that the scary part?

Congress deregulated everything, so it allowed banks to pull the wool over our eyes. And we (the house buyers) said, sure! I'm entitled to have a $600K home, even though I only bring in $55K per year.

Everyone is guilty, but no one has (I don't think?) committed a crime.

So, first thing? Make it a crime to ever do this again. Pass that law NOW.

Then, deal with the mess we have. They may not have committed a crime, but they're S.O.L. with this phony mortgage money. The banks will NEVER see it. Move on. You lose.

Ugh. Honestly, I don't know HOW this is all going to work out.

---

So, does that mean you would adjust all homes, regardless of the loans, or only those with owners who bought with the hearts and not their brains? If you want to reduce the amount of my mortgage in the same proportion (as someone who bought within the last year, and had to come up with lots of money to get an affordable mortgage) then I am listening. But, if you are going to reduce the loans of only those who tried to live beyond their means, then I will have a problem.

As I said before, I have some sympathy for those who put money down and paid to get into a home. And, there were subprime loans sold to those who qualified for better rates. So something has to be done. But, I am getting a bit tired of watching others live reckless lives and get bailed out.

You cannot simply factor in the wages and a multiplier and then say, viola, that is the value. Different areas have different values.

There is not going to be any simple fix.

"So something has to be done. But, I am getting a bit tired of watching others live reckless lives and get bailed out."

Who's getting bailed out, YWIW? They're all getting big foreclosure signs posted on their houses, right?

Is anyone getting bailed out besides the banks and loaning companies?

---

Let me put it another way then.

Why are those of us who played by the rules, lived beneath our means, and put large down payments on homes now going to have to feel like suckers for doing so?

My question is whether you are going to do something for all mortgages, since all home values will be effected? If not, then you will have to look at each situation individually, and see whether or not there was an actual personal stake by the homeowner in the loan. Then, I would propose no interest loans or something almost akin to that, where the principle on the note is not modified, but the loan interest is eliminated (which would reduce the cost of the loan). That would also preclude getting the interest write off on tax returns, which might help repay long term some of the value to the government.

I have this idea that if everything adjusted accordingly across the board (all the loans, the house values and the payments) that this would somehow be more manageable now.

Can somebody tell me why it wouldn't?

---

LePetite,

I was thinking the same thing. For those homes that are adjusted, require gain to be paid on the sale if there is a profit, as opposed to allowing the first $250k to be taken without paying taxes.

And now they're paying millions in bonuses using our money. And I have to ask AGAIN, how can you get a 'bonus' for losing MILLIONS of dollars?!?
Link to article.

the other thing is that these are not bonuses they decided to pay recently. according to the article these are part of contracts that were negotiated in 2008 before anything started to go sideways. how do you just void a contract?

---

i think they should sue. what's john edwards doing now? i bet he could use a good case like this.

---

AIG is just asking to go into bankruptcy - that is one way to void the contracts.

Q, I scanned the article too quickly. My bad.

I just saw the statement "at issue" and was not sure if it reference the entire amount, or a subset that was going to those who got them in this mess. Re-reading it again shows they further detailed the recipients.

Besty, depending on the industry, there are bonuses that are contractually dependent upon individual sales. If you are in a sales job, and you meet certain milestones, you receive more money. It is not uncommon in commission based industries.

I am not saying that I agree with it, but I do not doubt that if certain milestones were met, that AIG was obligated to pay based upon the underlying selling agreement.

Many sales folks have a very small, or non-existence salary, and make money the commissions. Think of it as points on the success of a movie - the studio may be under water, but the individual movie made money, and if someone had points off the profits (not even getting into the fuzzy accounting that can accompany movies) they will get paid, regardless of whether or not the studio is actually making money overall.

ETA: I am reading that the number is possibly even higher. If it were not for the domino effect of a bankruptcy, I would want AIG to go get restructured and void the contracts. AIG was permitted to get too big, and now has everyone by the short hairs... There is no good solution here. If they are contractually obligated, not paying would certainly mean lawsuits. If they go into bankruptcy, they could take a few other financial institutions with them.

Updated On: 3/15/09 at 04:07 PM

Besty - most people selling products are independent contractors, and not company employees - I am not certain of the structure for AIG's producers' but generally they have no stake in the company's performance, only their individual sales objectives. Generally, if they bring in a certain amount of premium, they hit a milestone, regardless of how the company does as a whole.

Think again of the movies - you can have a successful film that makes money, while the studio itself loses money. Under your scenario, a producer' or actor's percentage of the film's gross would be conditioned on the studio making money on all of its films - it is just not done that way. Unless, of course, you are an employee and not an independent contractor. Then often times, a bonus is conditioned on a variety of factors, and overall sales is one of the factors along with company performance and individual performance (at least in my experience).

I think during the past 8-10 years, companies were able to consolidate ownership in ways not previously seen. Just look at what has happened with media, with multiple channels being owned by one company in one market. In the past, Fox would not have been permitted to have such a control over the message being distributed between its papers and networks. Murdoch has been the biggest beneficiary of this. And, AT&T was a monopoly at the time, and controlling both the local and long distance markets was not thought to be consumer-friendly. With all of the options today through cable and VOIP, I doubt the same ruling would occur.

AIG is not a monopoly, but it did acquire many business units in the US and internationally. Many companies compete in the same space so it is not technically a monopoly.

And, it was again the unregulated parts of AIG that created the problems. Credit Default Swaps were not regulated as a product the same way traditional insurance products are. There was just a huge gaping hole in regulation that never caught up in time before the debacle hit.

Part of this can be blamed on greed, and part on a failure of regulation. Part of this can be blamed on interdependence of all of the financial institutions.

If you look at the books, the regulated businesses (American General, SunAmerica, and some other insurance companies) were fine. It was those units that tried to market new financial instruments that created the problems. I don't believe there was a reserving requirement for these sales. It was not that AIG got too big per se, it was that parts of it went unregulated which then compromised the healthy, regulated units.

The fear with Microsoft was its ability to dictate and control the market based upon market saturation. The same is not true for AIG. They did not create the only product in the space, and had plenty of competition for a variety of carriers and financial service companies.

Updated On: 3/16/09 at 06:33 PM