House passes bill taxing AIG, other bonuses

[Valmy]

God I hate politics and legislation by outrage.

[The Minsky Moment]

I don't see how the administration can sign something like this, while making public-private partnerships a centerpiece of its asset clean-up plan.  The latter is going to require that private financiers have confidence in the contractual commitments being made by the government.

[The Minsky Moment]

It had been mentioned that the tax code is supposed to be amended for legislative purposes, and not for punitive ones, but does anyone know if that's codified, or if it's just political talking points?

The only restriction I know of is the 5th amendment - whether this would run afoul of the 5th I think is a pretty close question.

[Berkut]

God I think this is a horrible idea.  I hope it's vetoed, if it passes the Senate.

Take a look at this http://www.gallup.com/poll/116941/Outraged-Americans-AIG-Bonus-Money-Recovered.aspx Gallup poll from the 17th to understand why even Republicans (who nominally say that the government should be limited) want this irresponsible legislation to pass.  Even 2/3 of Republican voters say that the bonuses should be blocked or recovered.

Bumper-sticker thinking has always led to bd law.  First with the "stimulus" and "rescue" plans, and now with the bonus taxation.

Indeed. I don't find it that surprising, except when otherwise smart people jump on the stupid bandwagon.

[KRonn]

I don't see how the administration can sign something like this, while making public-private partnerships a centerpiece of its asset clean-up plan.  The latter is going to require that private financiers have confidence in the contractual commitments being made by the government.

Yeah, from what I've read, doing this punitive type legislation can put a real damper on anyone thinking of investing in these recovery plans, or taking actions such as buying into the assets that troubled corps try to sell off.

[Berkut]

Hopefully this bill gets delayed long enough that the furor would subside, and it will die a much-deserved death.  As much as I am sickened by the riches lavished on those who broke the financial system, what Congress tried to do was just a badly thought out lunacy.

I disagree - what Congress is trying to do is much worse.

[Ed Anger]

God I hate politics and legislation by outrage.

Mob rule is hilarious.

[Fate]

I don't see how the administration can sign something like this, while making public-private partnerships a centerpiece of its asset clean-up plan.  The latter is going to require that private financiers have confidence in the contractual commitments being made by the government.

Yeah, from what I've read, doing this punitive type legislation can put a real damper on anyone thinking of investing in these recovery plans, or taking actions such as buying into the assets that troubled corps try to sell off.

The investors stand to realize a 700% profit based on Joan's scenario with a limited downside risk. I think Wall Street will swallow just about anything to see those kinds of numbers.

[Fate]

I don't see how the administration can sign something like this, while making public-private partnerships a centerpiece of its asset clean-up plan.  The latter is going to require that private financiers have confidence in the contractual commitments being made by the government.

Is the government actually breaking any contracts that they signed? I thought these payout deals were arranged in 2007 or well before Bush bailed them out.

[Savonarola]

Opinion from todays New York Times:

[http]http://www.nytimes.com/2009/03/25/opinion/25desantis.html?ref=opinion[/http]

DEAR Mr. Liddy,

It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:

I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.

I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.

You and I have never met or spoken to each other, so I'd like to tell you about myself. I was raised by schoolteachers working multiple jobs in a world of closing steel mills. My hard work earned me acceptance to M.I.T., and the institute's generous financial aid enabled me to attend. I had fulfilled my American dream.

I started at this company in 1998 as an equity trader, became the head of equity and commodity trading and, a couple of years before A.I.G.'s meltdown last September, was named the head of business development for commodities. Over this period the equity and commodity units were consistently profitable — in most years generating net profits of well over $100 million. Most recently, during the dismantling of A.I.G.-F.P., I was an integral player in the pending sale of its well-regarded commodity index business to UBS. As you know, business unit sales like this are crucial to A.I.G.'s effort to repay the American taxpayer.

The profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money. I did, however, like many others here, lose a significant portion of my life savings in the form of deferred compensation invested in the capital of A.I.G.-F.P. because of those losses. In this way I have personally suffered from this controversial activity — directly as well as indirectly with the rest of the taxpayers.

I have the utmost respect for the civic duty that you are now performing at A.I.G. You are as blameless for these credit default swap losses as I am. You answered your country's call and you are taking a tremendous beating for it.

But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments, and that you didn't defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.
My guess is that in October, when you learned of these retention contracts, you realized that the employees of the financial products unit needed some incentive to stay and that the contracts, being both ethical and useful, should be left to stand. That's probably why A.I.G. management assured us on three occasions during that month that the company would "live up to its commitment" to honor the contract guarantees.

That may be why you decided to accelerate by three months more than a quarter of the amounts due under the contracts. That action signified to us your support, and was hardly something that one would do if he truly found the contracts "distasteful."

That may also be why you authorized the balance of the payments on March 13.

At no time during the past six months that you have been leading A.I.G. did you ask us to revise, renegotiate or break these contracts — until several hours before your appearance last week before Congress.

I think your initial decision to honor the contracts was both ethical and financially astute, but it seems to have been politically unwise. It's now apparent that you either misunderstood the agreements that you had made — tacit or otherwise — with the Federal Reserve, the Treasury, various members of Congress and Attorney General Andrew Cuomo of New York, or were not strong enough to withstand the shifting political winds.

You've now asked the current employees of A.I.G.-F.P. to repay these earnings. As you can imagine, there has been a tremendous amount of serious thought and heated discussion about how we should respond to this breach of trust.

As most of us have done nothing wrong, guilt is not a motivation to surrender our earnings. We have worked 12 long months under these contracts and now deserve to be paid as promised. None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house.

Many of the employees have, in the past six months, turned down job offers from more stable employers, based on A.I.G.'s assurances that the contracts would be honored. They are now angry about having been misled by A.I.G.'s promises and are not inclined to return the money as a favor to you.

The only real motivation that anyone at A.I.G.-F.P. now has is fear. Mr. Cuomo has threatened to "name and shame," and his counterpart in Connecticut, Richard Blumenthal, has made similar threats — even though attorneys general are supposed to stand for due process, to conduct trials in courts and not the press.

So what am I to do? There's no easy answer. I know that because of hard work I have benefited more than most during the economic boom and have saved enough that my family is unlikely to suffer devastating losses during the current bust. Some might argue that members of my profession have been overpaid, and I wouldn't disagree.

That is why I have decided to donate 100 percent of the effective after-tax proceeds of my retention payment directly to organizations that are helping people who are suffering from the global downturn. This is not a tax-deduction gimmick; I simply believe that I at least deserve to dictate how my earnings are spent, and do not want to see them disappear back into the obscurity of A.I.G.'s or the federal government's budget. Our earnings have caused such a distraction for so many from the more pressing issues our country faces, and I would like to see my share of it benefit those truly in need.

On March 16 I received a payment from A.I.G. amounting to $742,006.40, after taxes. In light of the uncertainty over the ultimate taxation and legal status of this payment, the actual amount I donate may be less — in fact, it may end up being far less if the recent House bill raising the tax on the retention payments to 90 percent stands. Once all the money is donated, you will immediately receive a list of all recipients.

This choice is right for me. I wish others at A.I.G.-F.P. luck finding peace with their difficult decision, and only hope their judgment is not clouded by fear.

Mr. Liddy, I wish you success in your commitment to return the money extended by the American government, and luck with the continued unwinding of the company's diverse businesses — especially those remaining credit default swaps. I'll continue over the short term to help make sure no balls are dropped, but after what's happened this past week I can't remain much longer — there is too much bad blood. I'm not sure how you will greet my resignation, but at least Attorney General Blumenthal should be relieved that I'll leave under my own power and will not need to be "shoved out the door."

Sincerely,

Jake DeSantis

I'm disappointed to learn that AIG executives aren't Nazi Space Monsters who spend their time spitting their venemous acid-blood on taxpayers.   Barney Frank lied to us. 

[KRonn]

I'm disappointed to learn that AIG executives aren't Nazi Space Monsters who spend their time spitting their venemous acid-blood on taxpayers.   Barney Frank lied to us. 

Barney lied, corporations died....   

I too was annoyed at the bonuses at first, and still find some of it out of place if rewarding people when a corp goes insolvent, due in part to their activities. But I soon felt that my anger was directed too much at the bonus issue, for AIG in particular. So now, our government has helped turn this all into a lynch mob. Politicians and law enforcement are feeding the frenzy by issuing threats to people who are receiving a legal (if unseemly) wage/bonus/payment. ACORN is sponsoring (at taxpayer's expense I assume?) bus tours and demonstrations of AIG worker's homes. Dogs and cats are NOT living together.... 

As part of a letter I wrote to my Congressman, I asked him to call off the dogs, to speak out against the witch hunts going on, as it's getting ugly and perhaps misdirected. A deflection away from the real and more serious issues.

CEO Liddy, who came out of retirement to try and help resolve AIG's problems, sell off divisions, etc, was made to suffer the slurs and insults of Congress members. Those same members who also have their own measure of infamy, large or small, in the fiscal crisis. 

[Admiral Yi]

Jake heaps a lot of righteous scorn on the AGs and Congress but the letter and the resignation are directed at the CEO of AIG, who's sin is "not being supportive enough."  That's pretty girly-mannish.

[Caliga]

Yeah, I don't understand why more people aren't mad at Congress.  When in doubt, always blame Congress for anything and everything.  Government's not the solution, it's the problem.

[Ed Anger]

Yeah, I don't understand why more people aren't mad at Congress.  When in doubt, always blame Congress for anything and everything.  Government's not the solution, it's the problem.

JOHN GALT! RON PAUL! BUY RV'S!

[Martinus]

I think Liddy - and other AIG executives - deserve as much of a blame as the politicians, so no problem with me, with stringing them up.

I think AIG deserves to fall either way. Whenever they try to call me these days to offer some sort of private investment scheme, I just laugh in their face.