Chaos at AIG

[Jon Miller]

The same Treasury that is run by people who use to run those same type of companies?

JM

[Darius871]

No, that's what I meant. I'm not familiar with the law here, but that's Treasury's line.

The official also said that Treasury has determined there is no way the government can actually extract the money from the individuals who already received the bonus payments. The government would face lawsuits with the potential of significant damage payouts and lawyer fees that could easily exceed the cost of the bonuses.

http://online.wsj.com/article/SB1237...ml#mod=testMod

Wow... I can't help but think that is nothing more than their "line" as you say, since there's absolutely no case the execs could make against a congressional action, aside from extremely weak constitutional arguments.

[Guynemer]

I say we take off, nuke the entire site from orbit.

It's the only way to be sure.

[Ramo]

OTOH, they say that they're amenable to a ~100% tax. There are a few shady aspects to the AIG deal (chiefly, the counterparties are being paid 100%), but I'm not sure this is one on of them.

[The Mad Monk]

A precedent that allows Congress to break legal contracts is very worrying. No matter how you try to dress it up, it amounts to giving the government carte blanche to cancel or rewrite any contract they find inconvenient.

[Rufus T. Firefly]

If I just heard the NewsHour correctly (and I was in the kitchen cooking, so maybe I got it wrong), Cuomo's office has determined that a number of the f*cking retention bonuses are to be paid to people who have actually left AIG!

Chuck Grassley's clearly got the right idea.

[Zkribbler]

I would really like to get ahold of one of these contracts and sees what it says.
Retention bonuses to those who leave... Performance bonuses to those who don't perform... We're either down a rabbit hole or through a lookinglass. Anyone see a white rabbit in a waistcoat being pursued by a little blond girl?

[Darius871]

A precedent that allows Congress to break legal contracts is very worrying. No matter how you try to dress it up, it amounts to giving the government carte blanche to cancel or rewrite any contract they find inconvenient.

How many times do I have to point out that this is not a "precedent" at all? Congressional power to abrogate pre-existing contracts (i.e. not just future contracts) has been not only recognized but exercised for decades. At least as early as the Depression pre-existing contracts for mortgage balloons, wages, weekly hours, product prices, non-membership of unions, undertaking services by insurers, agency fees, etc. were routinely invalidated after the fact, for instance, and statutes doing so were routinely upheld by the SCOTUS (notwithstanding the Constitution's mandate not to "impair the obligation of contracts").

What Congress is doing now is no more a "precedent" than regulating poaching in a national park, levying a tax, or approving a drug.

[notyoueither]

I've heard that many of the bonuses were paid to staff in London. Is that true? What then the effect of the Congressional hissy fit on those people?

[Victor Galis]

They should have paid those bonuses in toxic assets offered to them at face value.

[Kuciwalker]

Darius: doesn't the contract clause only apply to states?

[Darius871]

Darius: doesn't the contract clause only apply to states?

Right you are, so it could only be argued against what Cuomo's up to. I was just using the clause's gutting as an example of how commonplace and legally unassailable legislation retroactively abrogating contracts has been historically. It might be bad policy, but as far as hornbook law goes, there but for the grace of legislatures contract I.

[mrmitchell]

You guys laugh but AIG stock is back up to almost a dollar, a 130% gain just in the past two days. This is clearly a growth company. Sure there may be some unwanted volatility but that's what happens when you play with the movers and shakers. I see AIG hitting and maintaining over $2 by the end of the year. Buy buy buy.

[Japher]

Question: How is AIG paying bonuses any worse than GM paying a dividend? Both are paid out from retained earnings, or should be. However, neither company has earnings and both have taken a lot of the government's money.

[pchang]

When I hear Congress, Treasury, and the President talk about how shocked they are at AIG's paying bonuses, the only thing I can think of is the scene in Casablanca where the French policemen says, "I'm shocked, shocked, to see gambling in this establishment." as a waiter hands him his winnings.