Should Geithner take the blame for the AIG bonuses?

myp · Mar 17, 2009

I'm sure most of you have heard by now that AIG gave over $120 billion in bonuses this past Friday and that has caused a lot of outrage across the country since they have received a lot of bailout money. Obama knew about the bonuses on Thursday and Geithner knew about them even before and a lot of people are now pointing the finger at Geithner, some going as far as to say this is his end as Tresury Secretary.

What is your opinion on this and do you think he should be kicked out of the job? Personally, I do put the blame on him as well as the Obama administration and I think he should be taken out of the job, not only for this, but because of everything that he has done so far (not to mention before he even got the job- like not paying his taxes.) I was always against him getting the position and I still don't think he belongs or deserves to be there.

The Parakeet · Mar 18, 2009

I don't think I can blame them, because I don't think that there was a lot that they could do. The mumblings are that a lot of those bonuses were contractual. I'm a little confused over the 11 retention bonuses paid to people who no longer worked there though...that's a bit of a head-scratcher If it was a rider in their contract though, we can't just pull the bonuses without facing a lawsuit.

The one thing that confuses is this. I was discussing this with someone else, and they pointed out the ridiculously simple option. The government owns 80% or so of AIG. Couldn't they just call an emergency stockholder meeting and have a representative vote for the company to not pay out the bonuses for lack of performance by that sector (pretty easy to prove really)?

There are a bunch of plans being drafted though. It looks like they're going to take a hit in their next capital infusion, with mumbling that they might just not get the $30 billion that was coming to them (if you got money for bonuses what do you need this for?). A few congressmen have also presented "screw-you" bills that would tax the bonuses at a 100% rate. It will at least be fun to watch.

myp · Mar 18, 2009

The blame definitely falls on someone in the government because they did have the information and the power to stop the bonuses before they were given out. Chris Dodd is also taking a lot of heat right now because he has now openly admitted that he was responsible for the part of the stimulus that guaranteed bonuses on the already-existing contracts.

AIG has said that they will require all of the bonus recipients to return atleast 50% of their checks, but most people still feel that is not enough. Reports are also now surfacing that perhaps Obama too knew about the bonuses more than one day in advance, although I have not seen any confirmation on that yet. It is definitely an interesting situation, but in the end it just shows you the mess that happens when the government gets involved. With these pay cuts and bonus cuts a lot of the top employees of companies like AIG are leaving, which is causing more problems.

The Parakeet · Mar 18, 2009

I really don't know why Obama didn't just do an executive order to not give out the bonuses or just rush something through. Think of the PR boost it would have given him, even if the courts would have overthrown it down the line.

I had been excusing them a bit from the actual planning problems, since I thought a lot of that had gone into motion hastily without careful wording to avoid this. That was actually the biggest fears surrounding the bailout.

McSwift · Mar 18, 2009

This administration has already made so many mistakes and it just continues to scurry to cover them up as they unfold, not realizing that they are making even more mistakes in the process. It is not going to end well for Mr. Obama.

deanhills · Mar 19, 2009

I think the whole AIG bonus fiasco is a demonstration of why there should not have been a bail-out of the company in the first place. We have the exact same people who have been responsible for failure, still continuing to manage AIG in the same "greedy" way. Even if Obama had signed a clause that said previous approved contracts allowing bonuses should be honoured, AIG itself should have made a voluntary AIG declaration to forfeit ALL bonuses until it has made X amount of money, and completely repaid its loan to the people of the United States.

myp · Mar 19, 2009

And now it turns out that Geithner was the one that told Dodd to include the bonus guarantees in the bill. Is anyone else sick and tired of these guys walking in circles and trying to fool us? Geithner should never has recieved the position and it is time for him to go.

curious · Mar 19, 2009

Well, if I had a job that required I work 100 hours per week and a contract that said I would get a certain amount of money if certain numbers were met, and I did that, I'd like to think I'd actually get paid. However, in a situation like this, I should have been asked to voluntarily give up some of the money before the bonuses were paid, and if I were in the division that caused the trouble, I should have been asked to give up all of it.

I think that if the company had just decided not to pay the bonuses, the intended recipients could have sued and would have won.

I also think the taxes that Congress wants to levy are probably unconstitutional. That 'Congress shall pass no ex post facto' bit.

The whole thing stinks, but I really am uneasy about just declaring contracts null and void across the board, after the fact. Not a nice precedent. An considering the ones set by the last administration, I hate to see another principle dumped on.

khassa · Mar 20, 2009

well the guy alone is not responsible for that as its a fault of Obama's administration aswell....so according to me Geithner alone is not responsible for this matter....so he alone should not take the blame...

Glee · Mar 20, 2009

You know, I'm at the point where I just want SOMEONE to take the blame for ANYTHING. I mean, really! This government (Bush and Obama's administrations) never claims they had anything to do with something if it fails, and are always quick to point their fingers at someone else. Geithner isn't the main problem, he's only the solution of this mentality in Washington that makes these old crusty power hungry elected swine. These people have lost touch with the real world. The live in the fantasy Washington-Land and when reality comes crashing in, they don't know what went wrong and suddenly its everyones fault BUT theirs.

I just kind of wish we could kick all these people out. Every one. Then put some people that have some common sense. Some people who are intelligent and not ambitious. People that actually want our country to survive for a thousand years instead of survival until the next election. I'm just so sick of it.

myp · Mar 20, 2009

curious said:
Well, if I had a job that required I work 100 hours per week and a contract that said I would get a certain amount of money if certain numbers were met, and I did that, I'd like to think I'd actually get paid. However, in a situation like this, I should have been asked to voluntarily give up some of the money before the bonuses were paid, and if I were in the division that caused the trouble, I should have been asked to give up all of it.

I think that if the company had just decided not to pay the bonuses, the intended recipients could have sued and would have won.

I also think the taxes that Congress wants to levy are probably unconstitutional. That 'Congress shall pass no ex post facto' bit.

The whole thing stinks, but I really am uneasy about just declaring contracts null and void across the board, after the fact. Not a nice precedent. An considering the ones set by the last administration, I hate to see another principle dumped on.

I agree that these people should get their bonuses because of the contracts, but the problem is that the money is from the government. The taxing of the bonuses is unconstitutional and this whole mess just shows you why the government should just leave the markets alone. This is what happens when you have big government- it creates a mess.

Glee said:
You know, I'm at the point where I just want SOMEONE to take the blame for ANYTHING. I mean, really! This government (Bush and Obama's administrations) never claims they had anything to do with something if it fails, and are always quick to point their fingers at someone else. Geithner isn't the main problem, he's only the solution of this mentality in Washington that makes these old crusty power hungry elected swine. These people have lost touch with the real world. The live in the fantasy Washington-Land and when reality comes crashing in, they don't know what went wrong and suddenly its everyones fault BUT theirs.

I just kind of wish we could kick all these people out. Every one. Then put some people that have some common sense. Some people who are intelligent and not ambitious. People that actually want our country to survive for a thousand years instead of survival until the next election. I'm just so sick of it.

The problem is that a lot of the politicians are simply just playing politics to make themselves look good instead of doing what is best for the country. Geithner does deserve the blame for this because he did add the clause, but in the end big government is to blame for getting involved in the markets in the first place.

One politician who actually does care for the people and not just politics is Ron Paul. I think you would really like the way he does his job. In over 20 years in Congress he has had a constant voting record no matter how many people oppose what he is saying. Even during this past presidential election, when he was getting ridiculed by every other person on the stage as well as the moderators sometimes, he stuck by what he stands for and what he believes is best for the nation. His ideas are very good and he always abides by the Constitution; his beliefs being very similar to those of the founding fathers and those that made this country great in the first place.

deanhills · Mar 20, 2009

Glee said:
You know, I'm at the point where I just want SOMEONE to take the blame for ANYTHING. I mean, really! This government (Bush and Obama's administrations) never claims they had anything to do with something if it fails, and are always quick to point their fingers at someone else. Geithner isn't the main problem, he's only the solution of this mentality in Washington that makes these old crusty power hungry elected swine. These people have lost touch with the real world. The live in the fantasy Washington-Land and when reality comes crashing in, they don't know what went wrong and suddenly its everyones fault BUT theirs.

Totally agreed. Geithner is running a company and has to report to his Board of Directors as well as Shareholders. Obama did sign a clause to allow previous contracts that included bonuses to be honoured. So obviously he thought that was OK, BUT I am almost certain Obama did not look carefully what he signed, and you're so right, now he is pointing fingers at the company. I find it almost of a puky variety, as what does Government know about business anyway? Government should never have been involved with the bail-out package at all. Either the company should have been allowed to die a natural death, since it obviously failed in its business, or a Financial Watchdog Committee with financial professionals should have been appointed to sign off on bail-out dealings.

myp · Mar 20, 2009

Deanhills, I think you are mistaken on who Timothy Geithner is. He is not part of AIG, he is the United States Treasury Secretary- a part of Obama's presidential cabinet. As for the situation, sadly this is what happens when the government gets involved and if we had a capitalist system in the first place this whole crisis would be a lot smaller.

deanhills · Mar 20, 2009

myp said:
Reports are also now surfacing that perhaps Obama too knew about the bonuses more than one day in advance

If he did not know about it I would be more worried than if he did know, as that would mean that he does not have full information in front of him.

I'm probably going to sound like a tape-recorder of myself, but I sincerely think that Government should not be involved in bail-out negotiations. They are not trained, qualified or probably even have the time to start a learning curve from the bottom about Banks and Insurance companies. There is a critical need for an appointment of a Bail-out Watchdog Committee consisting of top financial gurus in the country, and perhaps one or two representatives from Government.

Sparks · Mar 21, 2009

If the bailout, for good or bad, allowed for previous bonuses to be honored, no one is at fault except those who drafted the agreement. Good gosh, everyone has their hand out these days, I'm not getting my skivies in a bundle over it.

I have little use for the bail out, though I do acknowledge Chrysler's handling their government assistance some years back by paying it off early as an exemplary instance.

myp · Mar 22, 2009

Sparks said:
I have little use for the bail out, though I do acknowledge Chrysler's handling their government assistance some years back by paying it off early as an exemplary instance.

Yea, but they are back for more now- doesn't that tell you something? And what if Chrysler had ended up failing? The money would've been lost and the jobs would still have been lost in the end. By providing these bailouts the government is only creating a safety net and it gives companies that bad idea because it makes them more likely to be inefficient, knowing that the government will bail them out if needed. This is not capitalism and it really isn't fair.

deanhills · Mar 23, 2009

What worries me most is that when you have a bail-out that mentions trillion dollars, millions become short change, and Governments notoriously have no sensitivity for value of money anyway. Also when the trillion dollars have to be obtained through bonds, which are in essence debt instruments (ironically it was debt instruments for real estate loans that allegedly created the problem in the first place), we are talking about much worse than trillion dollars, as of course this is going to effect the value of the dollar downwords and today's 1.2 trillion may be tomorrow's 3-trillion. Next thing we are going to need a bail-out of a bail-out.

curious · Mar 25, 2009

There is a article in the New York Times today that is simply the resignation letter of an AIG executive. He worked only in the profitable section of the company and had nothing to do with the credit swaps. He was asked, a year ago, to stay, and take a salary of only $1 per year, with the bonus at the end if his division made a good profit. It did, and he got his bonus. He also pointed out that he had a good deal of his retirement money invested in AIG stock, and that that money is all gone now. He plans to keep his bonus, and give whatever is left after taxes to charity.

deanhills · Mar 25, 2009

curious said:
There is a article in the New York Times today that is simply the resignation letter of an AIG executive. He worked only in the profitable section of the company and had nothing to do with the credit swaps. He was asked, a year ago, to stay, and take a salary of only $1 per year, with the bonus at the end if his division made a good profit. It did, and he got his bonus. He also pointed out that he had a good deal of his retirement money invested in AIG stock, and that that money is all gone now. He plans to keep his bonus, and give whatever is left after taxes to charity.

Sounds like a guy with principles, also gives at least some inside information too. Bottomline, Government should not be interfering with the inner business dealings of a company. If that company is no longer profitable, it should be allowed to go its normal course. Otherwise we are going to get ethical issues like we are facing now. We have to keep it real.

The Parakeet · Mar 25, 2009

Sounds like a really good guy. The world would be a much better place if we had a lot more people like him.

The biggest problem is just what to do with AIG though. Letting it fail would kill a lot of banks who really didn't do anything wrong and harm the operating abilities of a lot of good corporations. We just have to grin and bear it for now. We can work on the revenge side later

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Should Geithner take the blame for the AIG bonuses?

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