BAILOUT - BONUSES

Dr. Psycho asked me yesterday if I was going to blog (rave on) about the bailout and AIG giving all those bonuses. I wasn't even thinking of doing so but since he asked I have thought about it a lot---so if you don't like what you read blame it on Dr. Psycho.

AIG got over $170 billion in funds for helping (just AIG) get past their bad insured loans in a law that was passed before the current $700+ billion package that is supposed to stimulate the economy. Now everyone is mad that they gave out I believe $243 million (or 1.43% of the $170 billion bailout) in performance bonuses. OK I believe the performance bonuses were unwarranted and I don't see how they can say the people deserved them or earned them by taking the company into bankruptcy - and the only reason they didn't go bankrupt is because they were bailed out with the first $170 billion. But that is just my $0.02.

OK HERE IS THE RAVE. Why did they get in the position financially they were in? Because CONGRESS passed a bunch of laws that made it very easy to borrow (and even pressured banks to lend) more money than you could ever pay back (from banks insured by AIG - not from AIG). Thus hundreds of thousands of people borrowed this money for their dream houses that were much more house than they could afford - others refinanced and bought a lot of other stuff with the money they borrowed - you know so they could have the good life. Then things took a turn for the worse in the market (brought on somewhat by the price of gas - or at least triggered by the ungodly rise in fuel prices).

So here is our insurer of all these bad debts (AIG) looking like they are going into bankruptcy because they can't pay all the insurance claims - hence CONGRESS once again passes a bunch of new laws that gave them the first $170 billion so they don't go under and take the rest of the banks in the United States under with them. Whose fault is it that they are in this situation at this time? I believe it is the CONGRESS of the United States that tried to make everything possible to everybody that is truly to blame for this situation.

Then there is a determination made that there is a much larger need to bailout not only AIG - which already has the first part of the money ($170 billion) - but all of the other banks that were forced by the lending acts CONGRESS passed to make risky loans to people that had more credit on the books than they could ever pay back. And this just kept going and going and going like the energizer bunny. Then the day of reckoning arrived. Mortgages went unpaid, foreclosures were eminent, all those people that were spread too thin were going to lose everything CONGRESS had made possible for them to get. Because of the bad loans other banks began to lose their standing and things just continued to deteriorate from there.

CONGRESS rapidly passed a new stimulus package for an additional $700+ billion to bail out the rest of the failing banking industry and bolster the rest of the economy. These funds are being passed around with no holds barred to stimulate the economy and get us back to the good life we had a couple of years ago.

AIN'T GONNA HAPPEN - JUST AIN'T. I have been a working stiff for 50 years now and I can tell you that in all of that time I have never seen CONGRESS pass a law that fixed anything. In fact I have said for many years that a CONGRESSIONAL solution is never a correct solution. NEVER. NEVER! NEVER!!!

So what about the bonuses? I don't think that it is ethical for the companies to give the bonuses to the people (or for the people to take them for that matter) that brought them close to bankruptcy. However, they did in fact follow the laws of our country and the bank policies and in fact were even pressured to make the loans that got the banks into the financial situation that brought them into the failure. They met the numbers in their contracts that qualified them for the bonus and the amount of the bonus so they probably earned the bonus even though there was no money there to pay it to them. Then CONGRESS stepped in and gave then a hell of a lot of money (I can't even fathom what $170 Billion dollars looks like). They took care of the bad loans and gave their employees the bonuses. I personally don't think that is right but I didn't sign the contracts with the employees of AIG so it is left to their ethics to pay or not to pay and to accept it or not to accept it.

Then along comes CONGRESS and says oops they shouldn't be able to pay their employees bonuses out of this money so they pass a law taking 90% of the bonus in taxes. Is that legitimate? I doubt it - only the courts will be able to determine this - it looks like an ex-pos-facto situation to me. You can't prosecute someone for violation of a law that wasn't passed until after the crime was committed. I doubt you can tax money that was awarded (note I didn't say earned) before the tax law was passed.

HENCE MY BELIEF THAT A CONGRESSIONAL SOLUTION WILL NEVER BE A CORRECT SOLUTION. The second bailout bill was 1071 pages long for nearly $800 billion or nearly $743 million per page - AND CONGRESS COULDN'T EVEN BRING THEMSELVES TO READ THE BILL.

NUFF SAID. UNLESS, OF COURSE, THEY WOULD LIKE TO PAY OFF MY HOUSE AND STIMULATE MY CHECKBOOK. BUT NO - I HAVE STUGGLED AND MADE MY PAYMENTS - I DON'T QUALIFY. I SHOULDA REFINANCED THE HOUSE AND BOUGHT AN RV, AND A BOAT, AND A NEW TRUCK, AND TWO ATV'S WITH THE MONEY SO I WAS READY TO RETIRE IN STYLE.