Friday, March 20, 2009

AIG, Q&A, and Vacation

On AIG: Acknowledging the embarrassingly bad PR of the whole thing, can we please elevate the discussion a bit? Let's remember, WE own AIG now. The Treasury is into it for $170 billion, and our #1 goal at this point should be to get that money out, or at least as much of it as we can. How exactly do we plan to do that if we don't pay people?

The first thing I keep hearing is "Why are people getting bonuses for running the company into the ground." Remember, the CEO came on board after the first bailout, which means that he was approved (and possibly even hand-picked) by the Treasury Department for the job of salvaging the company for whatever it could get. If there is anyone left who "ran the company into the ground", then we have much larger problems. The bad people should be gone, and the good people should be left.

He is going to need a HUGE team if he is going to get his job done. And he is unlikely to get any kind of a good team in place if he can't pay people...or if their pay packages are subject to holier-than-thou rants by Congress. Put it this way...if you are a great insurance executive, or a salesman with a huge book, would rather work for AIG (which has no future, and where you get assholes like Chris Dodd telling you that you make too much) or any one of the dozen other insurance companies that would happily pay you to work there?

I think people get hung up on the word "bonus". But really, it is a regular part of the compensation for these types of positions. Let's also remember that many of these people are contractually entitled to their bonuses: i.e., their contract says that they need to reach certain goals to collect certain amounts, and if they hit them, you can't withhold the money. And really, why would you want to? (Side note: how are we going to feel when the Congressional grandstanding leads the top dozen or so people to say "OK, first, we will sue you for what we are owed. And penalties. After we win that slam-dunk settlement, we are starting our own company and cherry-picking all of the best business and best clients for ourselves. And since you broke our employment contract, we are totally and completely within our rights to do that.")

In summary, think of it this way: Taxpayers own AIG. Our goal is to get the most out of it that we can. The Treasury Department installed (or approved) a CEO for that purpose. He says he needed to pay these bonuses to further his overall goal. Why are we questioning him? Either trust him to do his job, or get someone in there that you can trust. And then leave him/her alone to be a CEO. Congress and the President can't be meddling with an insurance company's comp structure or day-to-day business. That is a good way to ensure that we end up losing way more money than is necessary.

One final note: AIG lost $100 billion last year. Congress, on the other hand, took in $2.52 Trillion last year, and spent $2.98 Trillion. So, by the same standard, they lost $460 Billion (it was actually worse, because of the way that they account...$550 Billion is a better number).

AIG could well be profitable this year or next (if any of it is still around.) For the next ten years, Congress has told us that their income statement will continue to get worse than that. And they don't need a bailout...it is always a bailout for them. So...where is the Congressional outrage over their own performance? Shouldn't they have to give back some of what their contract says they are owed?

How about rather than fat salaries and huge expense accounts, we pay Congress based on whether of not we (their bosses) think they are doing a good job? Every year, the voters will examine their performance and vote on whether or not we want to give them a bonus to stay on...seems fair to me, right?

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I know that is kind of serious for a Friday. But, since I will be gone, you can chew on that all week;-).

That's right...I am out for another week:-). To answer Aaron's question, I get 26 days off, and I am very good at taking all of them! To be fair, I do a lot of work on weekends and at nights, so it is not all fun and games. I would say in a normal week I probably work 15 hours during "off hours. And I will almost certainly work two full days next week while I am away...even though it is much easier to do so overlooking the ocean...hee hee.

We are leaving tomorrow morning, and should be on a Mexican beach by afternoon. Me and The Boy, Smoking Hot Roommate and The Rocket Scientist, Big Sis and the Brain Surgeon. Papa Bear is coming down mid-week with his brother and his brother's wife. Munchkin is bringing her two best friends and The Body and The Mouth are meeting us there, too. So...full house! It should be lots of fun, and I will try and stay away from things like this.

I may blog once or twice...we will see how it goes.

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One final note. I have a lot of kind of newish readers, and I seem to be getting a lot of emails with questions about certain things and certain people. As such, maybe it is a good time for a little Q&A. While I am gone, why don't you feel free to ask me anything that may or may not have been causing you some confusion, and I will answer them all when I get back.

Until then...try to get along without me!

5 comments:

laurwilk said...

I enjoy this post and I think you are quite accurate with much of what you say. Regarding bonuses, not only are they often contractual but why should some dude who did great things this year get his bonus withheld just because his idiot colleague who should be let go made some huge errors? I'm pretty sure I'd be irrate if I did a better than average job and then had to pay the consequences of everyone else.

Have fun on vaca! Sorry I missed ya. I'm going to have to think of questions. This could get interesting! :)

W T G said...

Hmmm, an interesting post however there's undeniably a lot more to it than that. At this point, it is what it is. The media has stirred a frenzy on this and people are sheep and will believe most anything they read & hear. Ah, the art of PR !!

On a 'lighter' note, enjoy your time in Mex many fiestas, margaritas and siestas. OLE !!

Ys said...

I agree with WTG: the media do love to hype up politics, picking what they want to publish and often leaving out pretty important details of the story. But, hey, that's politics! It's why we all love it, right ;)

Enjoy your holidays! Sounds like they'll be fun :)

Princess Extraordinaire said...

I think Liddy really got hamered unmercilessly by everyone when in fact he DID come on after all was done...being that hes taking a dollar salary I must say I don't see him as the culprit here...

Aaron said...

Looks like we were thinking the same thing on the 20th!