AIG

[cowboy]

3) Oh, so now they're threatening us. That's a good reason to pay them hundreds of millions of dollars, isn't it.

If you worked for a company that didn't honor it's contractual obligations to pay you, would you look for another job?

[SeattleUte]

If you worked for a company that didn't honor it's contractual obligations to pay you, would you look for another job?

I didn't say they should be stopped from leaving. Fine. Go. Look, companies in distress renegotiate contracts all the time, including executive compensation contracts. In a real market they'd have to lose the bonuses out of shear necessity. They shouldn't get their "bonuses" because it's not right. It's not good for public morale. That's all.

In case you haven't noticed these high flying financial types generally have the morals of a rat. It's a tragedy for our country and a discredit to our system that we appear to be so dependent on them that they can extort money from the most powerful nation in the world. This should shake anyone's confidence in America.

[YOhio]

If you worked for a company that didn't honor it's contractual obligations to pay you, would you look for another job?

Considering the current state of AIG, I think the point is that these employees don't seem to be particularly exceptional. Losing them may not be such a bad thing.

[cowboy]

In case you haven't noticed these high flying financial types generally have the morals of a rat.

As opposed to attorneys' impeccable reputation.

What do you suppose happens to a company that allows most of its upper level management all at once?

[SeattleUte]

As opposed to attorneys' impeccable reputation.

What do you suppose happens to a company that allows most of its upper level management all at once?

At least lawyers have rules agaisnt conflict of interest and self-dealing and are answerable on a daily basis to judges. Actually, there's no comparison between lawyers and Wall Street financiers in terms of morals. Lawyers are much more ethical.

As for your question, I guess it depends on whether management is competent or incompetent. I see upper management get fired about as often as I do football coaches, i.e., all the time.

[cowboy]

Lawyers are much more ethical.

We could debate that. I've done work for a lot of attorneys, and there are plenty that have neither an ethical, nor a moral bone in their bodies. I also know attorneys who are salt of the earth people. My point was that you are painting with a pretty broad brush. There are a lot of people in the business world who are both moral and ethical.

As for your question, I guess it depends on whether management is competent or incompetent. I see upper management get fired about as often as I do football coaches, i.e., all the time.

Losing one person is different than losing the majority of the management team. Again, you are assuming that the entire management team is incompetent. When a company is in trouble, I believe it is pretty irresponsible to fire the entire upper level or let them leave. The only thing that does is ensure the companies failure in most instances.

[TripletDaddy]

SeattleUte has been terribly grumpy as of late with regards to the topic of bailouts and lost investments.

This leads me to believe that the per unit value at his firm has dropped much more than he was expecting. Compound that by the decrease of his wife's unit value and together they must have taken a big hit.

Hang in there, buddy. We will all get through this together. Even those of us that are not partners at a law firm.

[SeattleUte]

SeattleUte has been terribly grumpy as of late with regards to the topic of bailouts and lost investments.

This leads me to believe that the per unit value at his firm has dropped much more than he was expecting. Compound that by the decrease of his wife's unit value and together they must have taken a big hit.

Hang in there, buddy. We will all get through this together. Even those of us that are not partners at a law firm.

Honest truth is I've been very busy, our revenues are up as they have been every year I've been here, profits per partner have been hanging in there, and as always we have no debt. I've lost value in my savings accounts as much as the next guy, but I learned from the tech bubble (which was much worse for me) and have been well diversified. I've said lawyers are the midwives and undertakers of the economy. Our firm traditionally does a lot of the kind of work that benefits from the current economy or is somewhat indifferent to it. Truth is, like Timmy, I've been sitting this recession out. I'm hoping I can remain a spectator. Life is good, I live in a two professional income household, and what is more, in two months the astronomical alimony payments I have been making for many years will end.

I'm not bragging. I just want you to understand that I'm not speaking from a perspective of loss and bitterness.

This financial collapse has confirmed a lot of hunches I've had over the years as I've had a lot of direct experience with investment bankers and the like. These AIG bonuses and this Madoff thing really crystalize the problem in different ways. But it all amounts to greed of Biblical proportions. This is really an Old Testament-like calamity, a plague brought on by immorality, literally, a kind of moral squalor. And like all plagues, there are a lot of innocent people suffering.

It should be clear now that Wall Street bankers have earned obscene amounts of money far outstripping their value added or what rational market forces would seem to indicate. What's worse, as we've seen, they are so arrogant they think the world owes them this and they need not make any apology for the mess they've caused or all the money they've caused people to lose or that they continue to make now profiteering off the disaster they created. Still worse, their single minded pursuit of filthy lucre has created the international conditions that led to this recession (so no, it's not just what they earned, but what they were motivated to do in pursuit of vast wealth).

I've said that even Madoff must have felt no twinge of conscience. My overarching point with Madoff is that he's not a lot differnt than thousands of other financiers in Manhattan. I think it's been mostly about sitting at a critical place where money is created out of nothing and being easily able to help yourself. They aren't a tenth of the people or intellects or professionals of most heart surgeons I've known, and they have earned hudreds of times more and expect us to let them keep eating at the trough. They are as bad as Nero's court, and would probably even slit your throat for their bonus checks if they had to.

I have no problem with what Bill Gates or Jeff Bezos have earned. People with the gumption to go out and create something that people need and in doing so putting their security on the line should be spectacularly compensated if they beat the long odds and succeed. But the Wall Street bankers are as coddled as big firm lawyers and paid like successful entrepreneurs. What we've learned from this is that they have been parasites not creators of wealth and comfort and security.

[SeattleUte]

By the way, contrary to 3D's suggestion, I'm not some crank out there holding unorthodox views on this. As usual, I'm with the mainstream including most the American people.

http://www.nytimes.com/2009/03/18/bu...18bailout.html

[UtahDan]

I believe a clever lawyer could figure out how to stop the bonuses if Obama administration decided to go to court. Judges are political creaturs believe it or not and I bet the judiciary would be receptive to such relief.

This is what I really don't know the answer to. If by not paying them AIG is just adding litigation cost to money they will be forced to pay down the road anyway then we are underwriting both. But I don't know whether there is a way out of those contracts.

[Jeff Lebowski]

I'm not some crank out there holding unorthodox views on this. As usual, I'm with the mainstream including most the American people.

You should just put this into your sig line and you wouldn't need to type it so frequently.

[SeattleUte]

This is what I really don't know the answer to. If by not paying them AIG is just adding litigation cost to money they will be forced to pay down the road anyway then we are underwriting both. But I don't know whether there is a way out of those contracts.

All these legal experts (from Boalt, Penn. Harvard) except the guy from Texas Wesleyan (is that an accredited school?) agree with me. Of course the contracts can be abrogated, repudiated, whatever, on myriad grounds.

http://roomfordebate.blogs.nytimes.c...can-be-broken/

Everyone — not just President Barack Obama — is outraged at the American Insurance Group.

Correction, everyone except that contrarian legal expert 3D a/k/a David Blood.

Contracts get repudiated, renegotiated, modified, delayed, worked out, managed — pick the euphemism — all the time. A.I.G. knows this. Its insurance businesses pioneered the use of commercial leverage to get people to accept less than what the contract supposedly required.

--Tom Baker, professor at the University of Pennsylvania Law School.

Since the alternative to the government bailout would have been bankruptcy with a resulting abrogation of these bonus promises along with other contractual obligations, was management remiss in not pressing for a renegotiation and were any of the recipients themselves involved in a self-dealing way in deciding not to renegotiate? And most pertinently, as these bonuses appear to have been related to performance of services, is it clear that the recipients faithfully performed the services for which they were being compensated?

--Charles Fried, contract and constitutional law professor at Harvard Law School

As any lawyer knows, there are few things more common — or easier — than finding legal arguments that call into question the meaning and validity of contracts. Every day, America’s commercial courts are filled with litigations between parties to seemingly clear-cut agreements. Particularly in circumstances as extreme as those prevailing at A.I.G., there are arguments and legal strategies that any lawyer would immediately recognize that bestow A.I.G. with leverage either to be able to avoid these dubious payments or, at the very least, force substantial concessions.

The only reason for a company like A.I.G. to throw up its hands from the start and announce that there is simply nothing to be done is that it is eager to make these payments.

There are almost certainly viable claims that the contracts were induced via fraud or that the bonus-demanding executives themselves violated their contractual obligations. Separately, there must be substantial counterclaims that A.I.G. could assert against any executives suing to obtain these bonuses, a threat which, by itself, provides substantial leverage to compel meaningful concessions. Many of these executives were, after all, the very ones responsible for the cataclysmic losses. The only reason for a company like A.I.G. to throw up its hands from the start and announce that there is simply nothing to be done is that it is eager to make these payments.

Legal strategies aside, just as a common business matter, one of the first steps taken by every company in severe distress is to go to its creditors, explain that it cannot make the required payments and force renegotiations of the terms. That is as basic as it gets (see, for instance, the forced contractual concessions from unionized autoworkers last month as a condition for government loans). If a company goes into bankruptcy, then contracts to pay executive bonuses are immediately rendered virtually worthless, and the payments made to executives thus far could even be declared invalid as a fraudulent attempt to evade payment obligations to creditors in bankruptcy. The mere threat of such events is, for obvious reasons, very compelling leverage to force substantial concessions.

There is no lack of legal and business strategies that A.I.G. could use to evade or substantially dilute these payment obligations. What is lacking is the will to do so — on the part of A.I.G. and, at least initially, on the part of the Obama economic team.

--Glenn Greenwald, a former constitutional lawyer, is a columnist at Salon.com

What I said.

[YOhio]

All these legal experts (from Boalt, Penn. Harvard) except the guy from Texas Wesleyan (is that an accredited school?) agree with me. Of course the contracts can be abrogated, repudiated, whatever, on myriad grounds.

What I said.

Add Mitt Romney to your list.

http://corner.nationalreview.com/pos...AwZjQzYjg5Yzk=

What I think is most obnoxious about all of this is what I perceive to be the lack of decency among AIG leadership who have taken bonuses. They know no shame. Instead they resort to the fine print as they try to slip one past the American taxpayer.

[SeattleUte]

Add Mitt Romney to your list.

http://corner.nationalreview.com/pos...AwZjQzYjg5Yzk=

What I think is most obnoxious about all of this is what I perceive to be the lack of decency among AIG leadership who have taken bonuses. They know no shame. Instead they resort to the fine print as they try to slip one past the American taxpayer.

They are complete reptiles, I assure you. They would gas you to death and burn you to cinders if they thought that would gurantee their bonuses. They are a type that is easy to recognize.

[PaloAltoCougar]

Of course the contracts can be abrogated, repudiated, whatever, on myriad grounds.

Even ignoring the hyperbolic "myriad", that's not exactly what the brief essays said. Rather, the ones I read state that there may be grounds for rescission, repudiation or modification. But since none of the authors have apparently even seen the contracts, and they appear not to have opined unequivocally that the contracts can be set aside. BTW, I would love for the contracts to be nullified, but only without doing violence to constitutional or contract law.

What I find both painful and funny is the shrill outcry from Congress over the bonuses, with members trying to outdo each other in their righteous anger. And yet information regarding the bonuses was made available to Congress before they started bailing out AIG. Before lending even a couple of million dollars, responsible lenders do a thorough job of due diligence, and then impose a lengthy list of affirmative and negative covenants (including, e.g., limitations on compensation) before lending a nickel. Apparently Congress and the White House dumped many billions into AIG with nothing approaching the level of due diligence and lender protection your local bank would have imposed on a small business.