The rumor mill has kicked into overdrive about Tim Geithner's ouster at Treasury as penance for allowing AIG to pay out contractual bonuses. With such level-headed discourse in DC today (Congressmen suggesting ritual suicide to business executives, for example), it's a wonder Geithner even wants the job any more.
http://www.nypost.com/seven/03182009/news/columni…
It's looking more and more like he's gonna have to take one for the team and fall on his sword. Which is a bit of a shame, if you ask me. It's no secret that I'm not a big fan of Team Obama, but you can do a lot worse than Tim Geithner for Treasury Secretary.
Just as an aside, you're damn right I'd take the bonus money if I was a BSD at AIG. 73 guys pocketed over a million each. Nice. Does anyone else wonder where Congress gets their balls to make a bunch of noise over unseemly compensation when they vote on their own pay raises every year?
So what's the over/under on Tim Geithner's resignation? I'm thinking two weeks. Might make for an entertaining poll.
I'm frankly very suspicious of all these Congressmen, as well as the Obama administration, for kicking up such a fuss now. How could they not have known until now about these guaranteed bonuses? Many of them have probably had an employment agreement in place that did much the same for themselves at some point in their lives...
It's only after these payments went out, the media got wind of it, and oops, all of a sudden Congress is demanding heads. Not that I'm endorsing these bonuses, but something should have been done about them before they got paid out. The blame should fall on both Congress AND the administration for this, and all this political pandering and pointing fingers disgusts me.
Obama found out about the bonuses last Thursday after Geithner briefed the White House about the shit storm to come in the media about it. The interesting part is that these bonuses were actually agreed upon last year over the summer I believe (July?), and AIG guaranteed bonuses for this year and next year in order to retain employees. When the bonus structure/deal was finalized at AIG, Geithner was the Head of the NY Fed, and had to have known about these when they were agreed upon. Thus, by the Gov't attacking AIG, they are also indirectly attacking Geithner and his non-action at that time.
That's what I'm saying. Congress and Obama are both saying, oh I just found out about this last week and this is an outrage, but I don't believe it. Geithner had to have known what was happening as you said, but I am still unconvinced the president and Congress weren't aware of it earlier, as well.
I don't think he's out. Obama knows that whoever got this job is going to have to deal with a shitstorm, and there simply isn't anyone else who is capable/willing/a good political choice for the job. They are having enough trouble as it is filling top positions in the treasury-- the last thing Obama wants to do is have to force it to undergo another leadership change during an economic crisis.
In regards to the 2 posts above me, why the fuck would Geithner have known about the bonuses if they were finalized in AIG during the summer??
Well in the November 2008, I believe AIG formed a committee to review the bonus agenda, and the Fed was represented on this committee and certainly did not seem to raise a ruckus then. I HIGHLY doubt Geithner knew nothing about an intent to distribute bonuses.
Anyway, as to the thread starter, I seriously doubt Geithner is going anywhere as changing Secretary of Treasury in the middle of this crisis would reflect poorly on the Administration and further destroy its credibility.
It's too early. The shitstorm over the bonuses is ridiculous - they're not even very large, I think they average under a million each. Granted, these guys f-ed up, but do you really want to be firing the only guys who understand what they own? And make no mistake, these guys will leave if their bonuses aren't paid.
And congress summoning up the power to abrogate contracts? My God, but have they no decency? If the US gov't starts tearing up contracts, that will put in doubt the validity of the word of every company operating domestically, and of the foundations of our nation. I can dig up some quotes from the founding fathers about how sacrosanct a man's word should be, but I would hope our leaders can remember those themselves.
And as for this bullshit about the IRS instituting a 100% tax on these bonuses, I don't know where to begin. It horrifies me.
If Geithner leaves, whoever replaces him will be marginally to the left of Karl Marx, and God help us then.
These were agreed upon last Fall, in the Bailout package. Why would Geithner have known? Umm let's see, he was in the center of the Bailout Package when it was structured. He, Hank Paulson, and Bernanke were the key people on deciding who to bail out and why. It's said that Geithner's opinions dictated letting AIG get bailed out, and letting Lehman fail. And to make situations worse, he could have corrected the bonus fiasco by attaching conditions to the $30 Billion he gave AIG two weeks ago,
"But wait a minute, wasn't he involved in that bail-out too? Yes, he was. As then president of the Federal Reserve Bank of New York, Geithner was instrumental in crafting AIG's original $85bn and the terms that went with it, which centered on the US government gaining 80 perecent of the insurer's equity and a new broom in the boardroom.
But Geithner was not alone in crafting the legislation, which was signed-off on by his then boss, Fed chairman Ben Bernanke, and the man he would go on to replace, ex-Treasury Secretary Hank Paulson."
I don't think that these guys deserve their bonuses, especially those in the financial products division, but they should be allowed to keep them. Afterall they signed a contract with AIG that said they will get these retention bonuses if they stay with the company. So, give them their god-damn bonuses, and stop messing with contract law.
What's pissing me off the most is that Obama does not have any respect for contracts/contract law; this actually pisses me off ten times more than the amount of money that AIG executives received.
Imagine if someone offered you $1 mln to complete a project, and doesn't pay out after completion, or even worse the government introduces a law that says you will be taxed at 100% for every dollar earned from such projects over $100,000 (yes democrats have just proposed a bill like this yesterday for any executive that received bonuses over $100,000 while working for a company that received bailout money). Wouldn't you be pissed? To make things even worse, you probably already spent a big chunk of that money (mortgage, car, toys etc...) expecting a big payout upon completion.
This administration is really pissing me off. I am at a point that I wish I could stop reading news stories, because everyday there is something that ruins my day, but unfortunately I have to keep up with what's going on in the economy for work purposes.
This is very very minuscule in comparison to the figures we are talking about with the bonuses and bailouts, but last year Obama and Chris Dodd each received over $100K in campaign contributions from AIG. I don't understand attacking a company for using .1% of bailout money for bonuses, but if the government wants to be picky, how about they start by returning that $200K in taxpayer money.
Total loss of confidence! He's out....
I just read a report that Congress believes the 100% AIG Bonus Tax will sail through with no problem.
If I was one of these guys owed the bonus and they did some shit like that, I'd be organizing a mass walkout at AIG, hoping to send the U.S. economy back to the stone age.
You want to steal my bonus? Fuck you. Here's a lesson in systemic risk.
If they tax the bonuses 100%, I agree and hope the employees stand up and walk out. I would then hope China continues on their lack of faith in the U.S. and comes collecting on their debt that we owe them. Let the government deal with that chaos and see what happens.
Obama knows everything about the contracts. He and his Administration are flexing muscles in front of American public, that's all. Creating a good image by shitting on bankers.
These people do not deserve their bonuses, period. If Geithner knew about this back when the bailout was put together, he's a fucking prick (along with everyone else involved). But honestly, some of the replies here are nuts. Chim Chim, for instance, is basically asking for the entire economy to collapse and China to come banging down our door. That would lead to some serious escalation real fast.
I obviously don't realistically want the economy to collapse, because I am apart of it. I just want to stress that the government has no idea what they are doing. The Fed is printing money with no care, and the government is intervening in the economy left and right. We keep borrowing money to pay off debt, not generate more revenue. If China is already showing a loss of faith in the U.S. publicly, imagine what they are saying behind closed doors.
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In fact, I'm going to take this a step further. ANYONE defending the payout the AIG guys are getting is a fucking lunatic. Think about it this way, as an analyst, you work your fucking ass off just to hope to get $20K this year (and that'd be a decent bonus). AIG had the biggest loss in American history, and you're defending them taking the bonuses. Absolutely fucking outrageous. You all need to commit that.
There is a difference between if they deserve the bonuses or if they are entitled to it. They don't deserve the bonuses, but they are legally entitled to the bonuses based on the details in the bailout contract which was overseen by Geithner. If we take away the bonuses that they are legally obligated to, it sets a very dangerous precedent.
Yeah, but if you signed a contract that guaranteed you a $100K bonus and you only got $20K, then you would be pissed right?
I'm pretty sure that nobody here thinks that these guys "deserve" the money, but as chim chim said they are entitled to it.
Oh and BTW, we are not "fucking lunatics", you are just too dumb to understand what we are talking about.
Obama has 'full confidence in Treasury's Geithner.'
http://www.bloomberg.com/apps/news?pid=20601087&sid=aPNnF.2ezVaY&refer=…
I think Geithner knows what he is doing and has done a relatively decent job considering the depths of this mess. People are quick to forget that he is well-respected in both the public and private sectors - the market rallied several hundreds points when Obama announced him as his pick IIRC. His credibility with the public and perhaps Congress has suffered since his tax mistake and the entire AIG bonus situation, but I think the people who are actually in charge still have confidence in him.
Those retards at AIG don't deserve a dime, but as a country, we are walking down a dangerous road.
I like this idea of taxing these bonuses up 100%
God bless Obama
So maybe we should just tax everything we dislike 100%. Lets try to think of another time taxation was used as a punitive instrument directed at a specific class of individuals for wasting government money. hmmmm... Massachusetts Bay Colony? Do you remember your early American history, or do they not let communists learn that?
No, I was just referring to these undeserved bonuses.
How are they undeserved? You seem to be missing the point - they deserve these bonuses based on signing a contract and fulfilling their half of the bargain. This issue is much more major than the piddling amount of money involved - I suggest you read up on transaction costs if you've forgotten how important it is that the government does not unilaterally abrogate contracts.
The ONLY information on this that his been thrown around is the amount these guys are getting, what division they're in, and when the contracts were negotiated. The fact is, you don't even know if these guys are legacy employees, or were brought in to clean up the mess. They're getting less than a million each, which for presumably senior, qualified guys, is hardly very much. Would you rather a) pay the professionals to do their job or b) mindlessly cheer when they commit harakari
Contract is a contract, wether it's a finance, movie, music, or sports industry. Bonuses were promised, and contracts were signed by both parties. The whole reason those 50 something employees stayed was because of promised bonuses, otherwise they'd leave.
Seriously though, Madoff's investors lost over $50,000,000,000.00. There is a scandal with Stanford fund. We are facing $1,750,000,000,000.00 deficit next year. US debt is well over $11,000,000,000,000.00. 45% of world's wealth disappeared. Obama is making it rain like nobody else, total cost of all stimulus plans is well over $1,500,000,000,000.00 And what current administration does? Trying to save some $40,000,000.00? Showing off in front of public? Give me a fucking break.
fiduciary duty, anyone?
Guys, this is a textbook case of entrenchment. These guys created such a complex mess that if they were to leave the company, no one would know how to fix it. That is why they got retention bonus guarantees last summer, so they would stay and fix the problems. If not for these bonuses, they could have left the company last year, because they knew that they didn't deserve any bonuses this year.
...but since they had bonus guarantees in writing, they continued working for AIG and now they got paid according to their contracts. I don't see anything wrong with that.
Obviously the ethical thing to do would be to give your bonus back to the government and fix the mess you created for free, but honestly how many of you would actually do that?
fire geithner!... but then who would replace him?
I have no idea how Geithner will not get fired now. The Treasury released a statement saying Geithner was not aware of the bonuses until March 10th. How in the hell does he not know about them when he structured the deal? He should be fired for either being incompetent and not knowing what he included in his own deal, or be fired for now lying about his knowledge of it.
Edit: Check this.. http://news.yahoo.com/s/ap/20090318/ap_on_go_pr_wh/aig_what_did_they_kn…
Why would he know about this? He is the treasury secretary, and was the NY fed president when these bonuses were negotiated. Those are both pretty damn important positions, do you really expect him to supervise the details of every compensation package in the country? His time is pretty valuable I'd say, I don't care to have him scrutinizing employee contracts to make sure they won't offend anyone - he put a manager in place and let him do his job. Geithner recognizes he is neither expert at compensation nor running a company, so would you feel comfortable if he acted as if he were? Or would you like to fire any executive who can't tell you how much he pays his janitors?
I agree, his time is pretty valuable. However, I'd assume that when you are structuring one of the biggest (if not the biggest) bailouts of all time, and then the bonus structure is actually looked at specifically prior to it being approved (Chris Dodd added the provision that bonuses approved prior to Feb 2009 would not be limited), and then the fact that Congress members have questioned the bonuses since December (Elijah Cummings from Maryland) with Liddy directly numerous times, he might want to look into it. Also, about your "paying a janitor" analogy, with any team or company, if someone messes up, the ax usually falls on the guy at the top.
P.S.-- I forgot to mention that AIG is also Dodd's largest political donor. Though not related to the reasons Geithner should be fired, pretty interesting.
What about the fact that a large percentage of employees have left after receiving these 'retention' bonuses. That's the part that irks me.
As far as entrenchment goes, I would PREFER these guys leave. The argument that 'no one knows the products as well as them' may be valid, but that knowledge sure didn't help them when they were posting a record loss. We need fresh faces in Wall Street. Who will this be? I know alot of people graduating with Masters and MBA's who would be thrilled to get a job like that (and its not just candidates who 'aren't top' that are left unemployed at this point).
Is this a joke? Do you have any idea how complicated companies like AIG, Fannie Mae, Freddie Mac, Citibank, etc. are? You don't just take some schmuck graduate student and put him in charge of an aspect of these companies. I work in apartment real estate finance at one of the GSEs--it takes about a year before you have any clue what's going on in one of these organizations--they are massive, complicated, bureaucratic, and an absolute auditing nightmare (thank you, Sarbanes-Oxley). For this reason, many of the middle and senior managers have been there for decades.
The people are still exiting AIG because they can go to Prudential or New York Life and not have the government threaten to violate the law by breaking their contracts. Outside of mortgage derivaties, AIG has done incredibly well. Low level guys who sell homeowners' insurance, life insurance, etc. should have their work and contracts honored.
Wow, are you serious man? I'm sure you'd love to put a 20 year old college graduate in charge of hundreds of billions of dollars, and at the wheel of a company with the power to destroy our economy. God knows that'd be awesome, what they could they possibly do wrong? Oh wait, I forget, they'll be "thrilled to get a job" and that is all it takes to succeed.
(1) Do you really believe that these people are financial wizards? Look at biographies, look at their educational qualifications. They are managers who didn't understand their business enough to prevent catastrophic outcomes. Usually what happens is that good technicians get promoted to management positions and as the business grows in complexity the lose their cutting-edge expertise (and current technicians run the complex details).
(2) At this point, technicians AREN'T EVEN NEEDED. They are unwinding businesses and selling assets. There will be losses- but smart technicians will not be able to do anything about it anyways. It's not about complex mortgage securitization here people- don't "pull an Iraq"- it's about cleanly disposing of a hedge fund with pending commitments and keeping healthy insurance businesses- pruning at most.
(3) some are leaving anyways after their bonus is paid.
Like I said, AIG Financial Products will not exist- technicians are not as necessary right now. But JUST TO BE SAFE- Who said anything about 20 year olds? Bring in Ph.D.'s in Finance, Accounting. Maybe along with some of the best restructuring lawyers. (Personally I think that's overkill) If you REALLY BELIEVE that AIG executives are geniuses (you're stupid and wide-eyed if you do), then what do you say about academics from harvard business and wharton, along with top industry securities lawyers? People who didn't destroy their own businesses or reputations with incompetence? (again though, I think that is overkill)
Lastly, I think Geithner should be fired. I think he is an arrogant idiot that understands much less than he puts on. The very premise that a man who evades taxes is now throwing honest taxpayers money at AIG which in turns pays hundreds of millions in bonuses to (some) incompetent boobs while, even worse, tens of billions to counterparty investment banks under the table which will use the money to inflate their own strength and try to payout even more ridiculous bonuses at the end of this year pending legislation on special taxation of employees of companies receiving bailout money--- is sad and undemocratic. I want to work in high finance-but I believe in earning in some way, my wealth.
You seriously have no grasp of history if you think academics can just waltz in and run a company, even the top academics. Ever heard of Long Term Capital Management? Black-Scholes?
lol dumbass. you have the intelligence of a blue collar bum- typical of your alma mater (tragedy aside). pick out one event and discuss its failure- will it prove your point? How about the original failure of AIG management or the millions of other failed management teams in history.
I do agree that Academics aren't businessmen. But this isn't a business anymore- there is no profit-making or grand vision. Instead It is a government run decoupling of a toxic AIG from the financial markets. Just as Academics and PhD's run government public policy, they could be helpful here (but like I said- it probably isn't necessary and would be overkill).
Say what you will about my alma mater--you are a prospective. I've been in the industry--both investment banking and RE finance--which is infinitely longer than you've been. You are in textbooks and have virtually no real world experience. Your opinions about AIG are just that--opinions. I sit next to, interact with, have lunch with and am personal friends with the head of counterparty credit risk at my firm who is actively working on AIG, Citibank, Wachovia, Lehman Brothers, etc. Call me when you get a real job.
And by the way, you just paid me a 37.5% bonus on Monday, March 16th. Thank you, tax payers.
As far as academics running government programs--yeah, they've done a great job with that. $52 trillion in unfunded liabilities. I'm incredibly impressed at the competency of government and its pinhead academics.
You are showing a complete lack of experience and common sense. Academics are not cut out to run companies - if you think "technicians" can't function as managers, what makes you think guys who've never worked a real job in their life could do so? The fact is, as VT says, these guys are the only ones who know what they have - if you stick the smartest Ph.D. in there, it will still take him six months to get up to speed. But I'm sure you'd be happy to fund AIG for another six month as it flounders around rather than pay a few bonuses to "technicians."
answer me this: what incentive do these people have to even fix anything in a timely manner? Apparently they get paid good bonuses to stay.
But in the end, all I'm saying is that these people failed at their job. Keeping them on to do the same line of work makes no sense. Do you try to force an arsonist to take down the fire he created-- or do you (a)arrest him and take him out of the picture and (b) bring in firefighter specialists? Here you want to pay an arsonist to fix his mistake because "he knows the most about fire". And don't try to argue with me about their technical training- Did you look at their biographies like I asked? And lastly, I never said technicians can't function as managers!! Look at the biographies. Many were "technicians" when they were low-level but they don't keep track of the technical details as managers; meanwhile the details have become more and more "technical" since the 1980s onward. For Example- do you think John Mack knows much about the details of mortgage finance mathematics- he doesn't and he doesn't need to.
bP.S.- the virginia guy.[/B] Yes I'm just a prospective. But judging from what youve said you don't seem to guy with senior expertise or insight to me. and (good logic and common sense)>>>(dumb logic and bitchwork expertise)
My example (its 6 am and i havent slept in over 24 hours so i hope it makes a little sense) -
Your child steals your carkeys and hides them. Now while you may want to punish him, you won't get rid of him and bring in your neighbour's kid to find them. Technically, you and your neighbour's kid could try and find the keys yourselves, but your own child would clearly be able to retrieve them a whole lot quicker.
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