AIG and Just Politics?

I rather enjoy playing on the stock market and prefer politicians to stay out of the process as much as possible. Laissez-faire, you dig?

Of course I realize that the financial markets aren't a level playing field. That the "big boys" have a lot of advantages but to me stocks are like buying lottery tickets--so I don't worry about the political stuff.

However this recent bailout has made it matter to each and every one of us. With the government tossing around a couple of trillion dollars (over $10,000 in dept to every taxpayer if you assume around 200 million people pay tax in the US) one has to wonder how it'll ever get paid off.

Having management at companies like AIG use part of that largess to give bonuses (of over a $ million to some individuals and totaling 165 million at AIG), vacation retreats and raises just seems like an open insult to every taxpayer in the country. Kinda makes Clinton and that BJ thing seem petty in comparison.

In that vein, Representatives Steve Israel of N.Y. and Tim Ryan of Ohio introduced a bill that would that would tax at 100 percent bonuses above $100,000 paid by companies that have received federal bailout money. I don't know if that'll pass muster but it sure sounds good. Hell, Senator Charles Grassley was even more to the point when he suggested on Monday that AIG executives should take a Japanese approach toward accepting responsibility by either resigning or killing themselves.

Scary times, eh? By the way, I picked up 1,000 shares of AIG last week when it dropped as low as 33 cents. I bought a bit early and paid 44 cents a share---today it's trading around 90 cents so maybe I'll get a piece of that bailout back. I can always hope.


kenju said…
Good luck with that, Dave.
Teresa said…
Okay... the whole "bailout" issue makes me mad, but that's a different story -- one I won't attempt to explain here. While I agree that the use of bailout money is outrageous, I actually find some of it acceptable. I find it hard to believe that not one division in AIG made a profit and to penalize those who did a good job because other screwed up -- and some screwed up under company orders -- isn't fair. Excessive bonuses are certainly not warranted, but at least some of the employees probably receive a low base pay and those bonuses are what makes up their salary package. So, in that way, those who did well should receive what they were promised -- theoretically a bonus should be based on fulfilling a promised task.

On the other hand, AIG claims that they'll lose their best employees if they renege on the contractual obligation of giving the bonuses. Since higher income employees tend to be out of a job for over a year when they lose one, and in this economy I'd imagine that most companies are in the same situation, I think they'd be more likely to stay put and wait it out anyway... just my way of thinking, of course.

I also disagree with you regarding the cost to taxpayers. While there will be some cost to us, these bailouts are supposed to be paid back. If they aren't the govt will step in and start disbanding -- eventually. You see it already with the rules being applied when these companies accept the money. It's not quite the same as with the first bailout where there was no accountability.
tiff said…
Teresa gives a fair accounting of accounting, but it still doesn't really douse the fire people feel when 'their' money is going toward bonuses for those people who work for a company that's failed.

I understand WHY AIG is in the position it's in, in that they had to pay out to companies that were foundering, which put their bottom line at tremendous risk. They were also victims of the global crisis. No win for them there. However, I should think that a 100K bonus is plenty, won't be taxed at the new 100% rate, and could keep those high-end employees afloat until things turn around. Shoot, that bonus is more than my yearly salary (though they probably live a touch more lavish lifestyle than I do).

Good luck with your stock choices, Dave.
srp said…
You could have tripled your money if you had picked up some 97 cent citigroup.

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