I kind of feel like a boxer coming out of retirement.
It hasn't been that long, really, but I've been so wrapped up in other kinds of writing (kinds that actually pay!) that I haven't been around much, here or elsewhere, on 'teh internets'. Brandon has been incognito as well, perhaps due to a budding addiction to online gaming. Such is life.
At any rate, I am back because I am sick of hearing public outrage at the revelation that executives at AIG (the bank that has $173 billion of our money, remember them?) are getting a combined $165 million just in bonuses despite the fact that they steered their company about as well as the captain of the Exxon Valdez.
Sure, I am as pissed as the next guy. But I am pissed about something different. I am pissed that America is focusing on the wrong issue-- AIG executive bonuses are only tangentially connected to the real issue: a corporate culture in the world of high finance that rewards stupid, negligent risk at the expense of sound economics and steady growth.
Almost more obnoxious than the situation at AIG, though, is the public outcry for the Obama administration to somehow stop these payments. The fact is, the men and women (mostly men) who sunk these companies were guaranteed giant bonuses when they were hired. It was a valid part of a legally binding contract, and government action after the fact doesn't (and shouldn't) invalidate that.
Simply put, there ain't shit Obama can do.
Now, do I want those jackasses to, as Jon Stewart so aptly put it, "burn the fucking house down and walk away millionaires"? Hell no. But what I want even less is for the government, whether led by my boy Barack or Dick "The Only Thing More Evil Than Al Qaeda" Cheney, deciding after the fact what is okay/not okay and legal/not legal and retroactively altering it. This is my issue with "domestic wiretapping" and "enhanced interrogations" as well, but that is another gripe for another time.
Obama is walking a fine line here because he knows the scoop, and knows Americans are pissed, and knows what the real issue at hand is, and how powerless he is. In fact, he hit the nail on the head in a press conference today when he said that the impropriety of the bonuses goes beyond economics. He said "it's about our fundamental values," and urged Geithner to (pay attention!) "pursue every single legal avenue to block these bonuses". Did you catch that? Every single legal avenue. Translation: nothing. Obama is a lawyer, and he knows he can't just say "those contracts you neogtiated a year ago? No longer valid, so sayeth the President". It's been done, and it's time to move on.
What frustrates me, though, is a combination of two things. The first is the shallowness of public reaction. America is outraged, yes, but not for the reasons that would ensure this kind of thing never happens again. The issue isn't $165 million dollars-- we pissed that away in psuedo-defense spending just this afternoon-- the issue is a system which has things like "guaranteed bonuses" in the first place. The entire concept of a guaranteed bonus is antithetical to good business practices, and the reason they exist is to free up CEOs to take stupid risks without fear of personal financial hurt. What this system does is reward short-term, unsustainable profit which will ultimately implode, bankrupting the 401(k) plans of people who, without any experience in finance, know that you don't offer a $500,000 loan to a part-time mariachi singer based solely on a photograph of his sombrero.
The second thing that frustrates me is the virtual lack of clarity and common sense on the part of AIG. True, they can't just not pay these bonuses (the individuals receiving them could refuse them, though most won't) but AIG could alter the fundamental philosophy of their institution to keep this from ever happening again. They could banish guaranteed bonuses and tie any bonus money to actual profits.
But what did AIG do? Pledge to reduce 2009 bonuses by at least 30 percent.
What the fuck?? So if this happens again (and without either government oversight or a new plan of action, it eventually will) they will only hand out $115 million in bonuses? The hell is that? Saying "we are only going to resume 70% of the activities that got us into this mess" is unacceptable, just like a student who got caught plagiarizing saying "sorry, next time I'll only steal 70% of my research."
What needs to happen is that America, corporate and public, wall street and main street, makes the choice to stop abandoning long-term stability for short-term gain. Stop buying houses and cars that put us in luxury now and bankruptcy court later; stop allowing companies to reward undue risk or simply pass their debt onto others.
There is simply no need for the stock market to grow at 30% a year for a decade if it means a multi-year recession teetering on the precipice of a global depression. That's like building extensions onto your house as fast as you can on the assumption that when the next big storm comes, less will fall off than you added on. It's about the dumbest fucking way to build a house, run a company, or put together a damn lego castle. It just doesn't make sense, and every single time this happens I think 'no wonder the terrorists hate us'.
It's not all bad though. In the midst of AIG-sized assholes, there are companies doing the right things for the right reasons, and succeeding because of it. My girlfriend works for one of the only banks on the West Coast that is actually expanding despite the economy. In fact, this bank is planning to give back the TARP funds it received because it doesn't need them. This bank is built on solid fundamentals and conservative leadership. They grow at steady and sustainable rates using common sense practices and the CEO is a class act-- he's worth untold millions yet walks to work every day. When going out of town to broker billion dollar deals, he takes the bus to the airport. While the heads of WaMu and Merrill Lynch would take a gold-plated subma-copter to the deli for a sammidge, this guy is chillin' with the riff-raff on public transportation because he's not blinded by his bank account and knows common sense must eventually trump idiocy.
With luck, more companies like this will grow and develop to a point where they are the financial leaders of our nation. Then shit can calm down and get back to "normal" (read: huge debt, but no housing crisis) and my newspaper can stop being filled with this particular type of bullshit.
Actually, it's not even my newspaper. I steal it from the dude upstairs. What can I say? Times are tough for everyone.
4 comments:
I want a sammidge.
I logged on to write a whole piece on this and you beat me to it you sick bastard.
This whole article is priceless. You can't negate promised money because we live and die by contracts in capitalist markets. And now Congress wants to implement special taxes for AIG. It's like "windfall" taxes for oil companies. It's bullshit. They were in the right place at the right time. If you can prove illegal actions, you can take the money. But if everything was legal, no matter how ethically disgusting, there's not shit you can do.
Here's my solution. 1) Start making these companies actually pay the taxes they owe. The Fortune 500 companies have a book rate of ~30% BUT PAY ONLY 5%!!! How disgusting is that? 2) Start making rules that prevent these kinds of things in the first place rather than waiting until after the fact. 3) No more corporate self-regulation. It's obvious it doesn't work because there's too much incentive to cheat and be greedy. 4) Work on inculcating a culture that is driven by ethical behavior, socially responsible behavior, and good stewardship of resources (environmental, social, and otherwise). Stop saying "greed is bad" but rewarding greedy behavior. Remember- capitalism is all about greed and personal gain. There is nothing in the idea of capitalism about altruism. The message of greed must be tempered or else we end up where we are now. 5) Get educated about how our financial system really works. There are some fundamental flaws in our corporate structure and financing system when CEOs of these companies are rewarded for failure. We need intelligent people to come up with solutions and we need a better educated populace to really understand what is going on and how to make it better. And we need more informed stock holders that will keep companies honest and liable for their actions.
That is all for now. To all the CEOs, CFOs, CIOs, politicians, bankers, and generally stupid and/or blind people that led this country into the current situation knowing full well all high times must end, you can suck it!
Some good oxymorons here..."informed stock holders", "corporate self-regulation", "educated populace", etc. :-)
Simply put, it is not a bonus if it is guaranteed. It is part of your salary. They just choose to pay it in a lump sum.
Call it like it really is, so we can all get on with our lives.
I'll toast to that. A bonus implies extra for doing a good job. Obviously they have done a crappy job but are still receiving the money. Therefore, bonus is the least appropriate word to use.
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