I have a real simple answer to the problem of the AIG bonuses that were handed out recently. Apparently the total is something like half a billion. The CEO says his hands are tied because there are contracts that have to be honored. Any bonus program that I'm familiar with is dependent on the company making a profit. Any bonus program that doesn't have this clause in it is simply embezzling funds. Embezzling is a crime. End of story.
Instead of a bonus these executives should get an arrest warrant. They won't need those extra millions in prison. I read one story that said the bonuses were supposed to be for retention, but that some of them were being payed to people who have been laid off. Hmmm.
Any good corporate lawyer should be able to find the loopholes in those bonus contracts and cancel them. There are always loopholes. And if their employees don't like it, they can go to court to try and get their bonuses. Yeah, the CEO should be fired. The government should appoint their own CEO to keep on eye on these crooks. After all the government is the main stockholder of AIG at this point.
These are the same scam artist that kept going on junkets after receiving bailout funds. Any company that is in financial difficulties immediately cuts all discretionary spending and at the top of the list is travel. AIG was broke to the tune of billions of dollars so what were they thinking? They need to be smacked down and they need to be smacked down hard because they obviously haven't learned their lesson. Most of them should get laid off and the rest should have their salaries cut in half. And if they don't like it, they can leave. Where in the financial industry do they think they are going to go in the current economy? They should just be happy to have a job. There's no need for retention bonuses.
The problem is that the financial industry has been overpaid for so long that they think they are entitled. No way. Why should they make outrageously more money than other professions? Plus I'm convinced that many of the things they do are handled now by computers. So that they are obsolete and only pretending to be relevant.
Look at the NYSE. Is there really a need for all those traders on the stock floor? The NASDAQ in contrast is totally automated. The NYSE and all those traders are anachronisms. It's time to rid ourselves of these antiquated structures - especially when they are so damn expensive to maintain. But of course the financial status quo wants to maintain its life of privilege.
That's one of the sub-themes of this financial crisis as far as I'm concerned. If the system is opened up for competition, then you would see startups like in the high-tech industry that would transform the financial system. And we would end up with a more efficient and fair system that wouldn't eat up huge amounts of the GDP in non-productive activity.
At the top of the financial food chain of course is the Federal Reserve. It's time to take a hard look at the Fed, what it does, what is mission is. And see if there are ways it could be overhauled to serve the interest of the American people. And possibly as some have suggested, it should be abolished.
If that's the case then there has to be a new system put in place. It should be high-tech. It should be streamlined and efficient. It should be open to competition. Why are there companies like Goldman Sachs and Morgan Stanley that operate at huge profit margins? Where is their competition? What are the barriers to entry that prevent new firms from going into these hugely profitable businesses? Isn't that what free markets are all about?
The fact that these firms operate in a monopolistic fashion, without competition leads me to believe that they are wielding "unfair advantages". Could it be that "friendly" politicians have passed laws that create barriers that prevent competition? It all stinks of corruption and bribes. There need to be investigations, but we cannot count on Congress to hold them. Perhaps some independent state's attorney can lead the way. Or maybe the FBI can launch a sting operation.
As we have seen with the current financial crisis which has spread world-wide and is already being called a depression by many, the stakes are too high to let the game continue to be played by the same good old boy rules. It's not enough to bailout the system. It needs to be fundamentally overhauled and cleaned up.
Update: March 16, 2009
Ooops, my bad. The current CEO of AIG was appointed by the government. But in this case "the government" means hand-picked by ex-Treas Sec Hank Paulson. Oooooh, that explains a lot. Another Goldman Sachs lackey. And who does AIG end up handing most of the loot to? Why Goldman Sachs, what a coincidence. Please excuse the sarcasm but this has gotten way out of hand.
OMG! I was looking for a link to document that Paulson picked Liddy to be the AIG CEO. What I found out is shocking to the point of being horrifying. Liddy was sitting on the Board of Goldman Sachs when Paulson picked him to become the new AIG CEO! Wooah... I think I'm going to be sick. Here it is as clear as a bell in a press release on GS's own webpage.
"[Goldman Sachs] today announced that Edward M. Liddy resigned as a member of its Board of Directors in light of his new role as Chairman and Chief Executive Officer of American International Group, Inc. His resignation was effective September 23, 2008. Mr. Liddy had been a director of Goldman Sachs since June 2003. "I hope that all those people that are so enraged right now at AIG will channel some of that negative energy in the direction of Goldman Sachs. Because from where I'm sitting GS looks like it is at the center of this massive con scheme.
I'll know that Congress is serious about getting to the bottom of this when it hauls in Hank Paulson in front of a committee and swears him in and starts asking him the tough questions. Until then it's just kabuki time with lots of fake outrage to satisfy the folks back home.
The Democrats and the Republicans are like a pro wrestling tag team. The Democrats divert the public's attention while the Republicans pick their pockets. The liberals offer softball solutions rather than the radical ones that are really needed, while the conservatives take a more blatantly pro-business approach. The end result is what big business wants, big business gets. And the big losers are the American public aka the taxpayers.