David Sirota should take a look at a sample retention bonus contract because I do think he has the first clue what one is. Apparently, it is impossible for Mr. Sirota to understand the concepts of deferred or lump-sum compensation, or even of the utility and need for retention bonuses in the first place.
What’s most remarkable is his concept that people that sign contracts to do a defined amount of work have not ‘earned’ the money if they actually fulfill their end of the contract. That’s an amazing lack of imagination if you ask me. And then there is his excuse for this sloppy thinking, which is his assertion that the recipients of these bonuses are actually the same people that lost billions of dollars that we, the taxpayers, have to make whole. The problem is, in the vast majority of cases, that isn’t even true. They’re not the people that lost billions, but mere bystanders.
Look, I don’t even care that a bunch of rich people lost their money. We have bigger problems. But to get indignant that someone would suggest there is nothing wrong with expecting to get paid what you were promised? I do work for you and you refuse to pay me? Well…that ain’t gonna go over too well with me.
Think of it this way.
If the company had failed or could have been brought into bankruptcy, no bonuses would have been delivered unless those contracts were able to put the recipients in line in front of other creditors – doubtful!
But now the Company is bailed out instead of being bankrupt or just dropping off the face of the Earth.
While there isn’t a hand name to put on it yet, the company has been transformed as it would have been in bankruptcy court.
The claim that these contracts are iron clad is only remotely plausible because of the unprecedented situation: there is no law telling folks what not to do.
Simply because no one thought of this in advance doesn’t mean these contracts aren’t in jeopardy as they would be under bankruptcy due to the ‘special’ circumstances the company finds itself.
So some of the new regulations describing how to take down a ‘too big to fail’ company are to be retro-active? It wouldn’t be the first time.
If written generally enough, the new regulation won’t be struck down for being overly targeted at individual companies, etc.
Let the SCOTUS decide, since there is this whole system for that, but don’t be a pussy about it when this can serve as one hell of a salve for all the raw nerves out there and will likely reflect the ultimate state of regulation of this circumstance.
Frankly, I doubt there is a chance in hell that a bankruptcy wouldn’t honor these contracts unless they were blatantly and egregiously out of the norm for the industry…which they weren’t.
I don’t care that these folks aren’t getting their money. I really don’t. But they have a right to be a trifle concerned that they were promised money for work, did the work, didn’t get the money.
If you are one of the ones that forsook your base salary on top of it? All the more.
My issue is rank stupidity in analysis. I understand the politics.
But what about pensions and stuff where companies go bankrupt? How much have the UAW had to give back mid-contract?
When a company with union employees is going broke and it renegotiates with the union to lesson the previous compensation, they do it to prevent making layoffs and to avoid going broke. In general, I think the unions get screwed repeatedly because they always take a bigger brunt of the hit than the management that made the lousy business decisions. And you would hope that a company could keep its obligations through the duration of a union contract without welshing on the negotiated deal.
So, I think it would be wrong for the government to come into General Motors and rip up contracts and wipe out people’s benefits or wages. If they have to do that to save the balance sheets, I’d like to see them bleed management dry first. But in both cases (AIG and GM) the presumption should be that employees get paid in full for work they have already done.
Because US law is UNFAIR. Corporate managers negotiate binding contracts. UAW employees have “labor agreements” between the union and the company. The courts have held that labor agreements have low precedence among bankruptcy debts and the labor movement has not been able to have congress overrride it.
American law is and has become more biased towards the rich.
Pinche bad analysis!
Don’t bother. Booman has clearly chosen the side of the powerful against the weak. It’s like his comment during TARP about those of us who ‘don’t own anything’. He knows where his interests lay. He doesn’t care about what is ‘politically feasible’ for those of us on the ground. We don’t matter. The only people who matter are those with too much money and too much power. The people who own everything.
I don’t think Booman should bother either, he’s clearly chosen his position and others have chosen theirs and all the logic in the world is not going to change that. However I don’t follow anything after your first sentence/blurb.
Basically it boils down to rich people did this to us and rich people should suffer for it since they been making us suffer for a long time.
All I can say is wow, that was a really uninformed comment, re Booman.
Booman has chosen to think as if Obama and Giethner are bound by US Law and political reality instead of stamping his feet and having a temper tantrum because they won’t wave a magic wand and turn Bankers into toads.
It’s inexcusable to cooperate with the media in acting like a powerless bawling infant. All these supposed lefties should get merit badges from Sam Huntington for being conditioned to act like powerless babies.
US Law? Has Glennzilla has pointed out time and again, there is one law for the little guy and a different one for the rich/powerful.
Did you just discover that the law is not just and that the US is not an egalitarian wonderland or do you think I don’t know it.
Obama is not dictator. He has in front of him the example that the rich nearly mounted an armed coup against FDR and that Clinton and Carter were both rendered powerless because they were tripped up by conservadems and military/industrial + banking elites. The US is a nation where the rich and powerful are entrenched and have vast resources. Yet, so many “leftists” who supposedly know all this are incensed that Obama does not dissolve the corporate state with a stern gesture and lead us all up the hill towards the machine guns. Do you know why? The answer is simple. The US left is conditioned to insist on futile losing tactics and will accept no substitute.
And conservadems like you insist on protecting the interests of the powerful and the safety of their business allies over all deceny and justice. You laugh in the face of good people, and pretend that you’re forced to do evil because you have no choice.
Lets be honest here, you’re no different than the Chamber of Commerce screaming it’s lungs out every time the US government raises the minimum wage a nickel. You have no idea if bad things will happen. All you know is that it would be bad for you and men of your class.
Exactly. If a normal “consumer” or a small business debtor was insolvent and he made a number of “contracts” (or even just outright gifts) to supposedly necessary folks the trustee (and maybe police) would be all over him like flies on shit. Normal people that are on the verge of bankruptcy are intimidated and coerced into paying their creditors back (the banks) and are scared to death of making insider deals or even giving any money away period because the system treats them as criminals and pretty much assumes they are committing fraud. There couldn’t be a bigger juxtaposition between how the rich are treated and how normal folks are treated.
Bankruptcy law is rigged against the small guy. That’s why A.I.G. was too good to go through it. They are above the same laws you or I would be if we were in the same position. Shit, we would be sitting in prison if we made sweetheart contracts to give the remaining assets of an insolvent company to the insiders. Literally. Yet these guys get government assistance for their crimes. Straight from the O-man.
The difference is stark. And guess whose bright idea it was to make the BK laws even more draconian in 2005? That’s right, our Democratic “friends” that are pretending to give a shit. Don’t be fooled. I’m frankly insulted that people that claim to be my allies fall for this obvious sham and tell me despite all the obvious evidence to the contrary, that the Democrats aren’t bought and paid for hookers for Wall Street.
What will you do if, a year and a half from now, things are running smoothly in the manner of 1996-8?
If our public and private debt gets back to the levels of that period and the financial services industry shrinks back to the level it was at that period (and more) and if we put the laws back in place that regulate important economic functions like banking and insurance and make all shadow assets come on balance sheets and on public exchanges–then I would be one happy camper indeed.
Those are my basic, simple demands for “fixing” our economy.
Then I would want to roll back consumer and worker protections to what they were before. Encourage more industry and development in the U.S. I’d want to reinstate usury laws and fix bankruptcy law and shore up social security and make corporations fund and honor their retirement promises.
So, I’m a reasonable guy. That gets us back to pre-Reagan.
But I think that reasonable request will go unmet and I fear we are instead headed for inevitable collapse.
And if things are indeed calm a year from now and all that has been done is the current bailing wire and duct tape . . . .then I would be preparing for the worst . . . because there’s no wishing away what these criminals did.
30 years of entrenched increases of power for the finance/mil-industrial state just presto-chango disappeared like that?
In a country where Dennis Kucinich never topped 7% in the Democratic primaries?
I can see why you are disappointed in Obama. He can never make Rock-Candy-Mountain materialize magically.
Then stop telling me Obama is proposing the most sweeping regulations since . . . . . Huey Long . . . . and is a transformative changer . . .
When you really mean that liberals are foolish to think that the Democrats mean an ounce of what they claim to stand for.
And your real goal is to snowball real liberals and progressives into accepting your (not so) hidden conservative agenda.
Thanks for being honest about what side you’re on.
I was a dennis kucinich supporter. He got 7% of the votes and he is, in my book, not particularly radical. So I go for what I can get because I believe in empiricism and Molly Ivins principle that the lessor of two evils is less evil.
Gitmo closes
Tax cuts for poor people
Ledbetter act
Sweeping expansion of wilderness
Publication of the secret torture memos
The largest public works bill in 30 years
Chance at really expanding medical coverage
Serious investment in R&D and infrastructure
Major destruction of the Republican power base
I’m fucking thrilled. And I support the President.
I’m not sitting on the sidelines echoing Republican spin points about Geithner and pretending that those make up a leftist critique.
Do you know anyone on the face of the planet who is willing to make that promise? lets b honest here, things were only ‘running smoothly’ in ’96 due to a tech expansion and another series of artificially inflated bubbles. It’s like pointing to our global domination of the economy and claiming it was due to our great ingenuity instead of the fact that we were the only people on earth who hadn’t been bombed to oblivion.
Thats what’s wrong with people like you and Booman. You actually WANT to go back to a fake economy where wages stagnate and bonuses sky-rocket. You’re almost Randian in your pursuit of the market as a moral imperative. Hell, not only as a Moral imperative but as a moral arbitrator.
you are talking out of your ass.
Market as moral imperative? If that were true, I wouldn’t support regulating the ever-loving-shit out of it.
The blogosphere also acts like retention bonus agreements in failed companies are some kind of aberration. They happen all the time. Lots of companies that go into bankrupty do retention bonus agreements with key employees. Here’s one from last week that I noticed: Charter Communications is going to file for bankruptcy, going through a reorganization. What’s the first thing that’s going to happen? They are going to lock up key people with retention bonuses. And the bankruptcy court will approve those agreements.
Just as the US government didn’t have a problem with the retention agreements last fall when it came in to do its bailout. Why? Because it wanted AIG to go through an orderly liquidation process. Why? Because a disorderly liquidation process would bring down the whole financial system they believed.
Orderly liquidation for AIG was not possible in bankruptcy (iirc there was no lender willing to provide DIP financing in bankruptcy for AIG which is necessary for an orderly liquidation).
They happen all the time. Lots of companies that go into bankrupty do retention bonus agreements with key employees.
One of these things is not like the other, one of these things just isn’t the same . . .
Retention payments are subject to independent approval by creditors and the court – an advesary system as the creditors know that those payments are going to come out of what they expect to get.
Not so here – no one in charge and no creditors care what bonuses are being paid out because they are all gonna get free taxpayer money forever while they drag their feet, cashing million dollar bonus checks while pretending to unwind their deals. Let’s get bankruptcy attorneys and forensic accountants and sack the Magic Fairy crew who still can’t admit they did anything wrong.
You obviously have a problem with reading comprehension.
No I don’t I’m just wondering where the adversarial process is? Who has both the power and the incentive to limit these bonuses where is the independent judicial review that you get in BK? Congress? Well they didn’t bother because it was no skin off their nose. Besides they rely on Wall Street for funding their campaigns. They guy they brought in to run the place. If he limits everyone else’s bonus he’s gonna have to limit his own as well.
Seriously, do you not understand that there is no one who has an interest in limiting these bonuses? Except your average taxpayer – too bad no one cares what they think.
Who has both the power and the incentive to limit these bonuses where is the independent judicial review that you get in BK?
The time to make that decision is up front. That’s what a bankruptcy judge does. I am WELL aware of the difference between bankrupty and a bailout. But the federal govt. that is providing bailout funds in lieu of bankruptcy knew about these contracts at the time they decided to come in and do the bailout instead of letting AIG go bankrupt and go through a disorderly liquidation. And the federal govt. could have required that these contracts be renegotiated etc. at that time. They didn’t. In effect, the US govt, acting in place of a bankrupty judge, approved these contracts at the beginning of the process just as a bankruptcy judge approves them at the beginning of a process. And the Company and the employees relied on that tacit approval.
If you want to blame someone, blame the Bush administration for mishandling it on the front end. Because these things are dealt with on the front end.
My comment was in fact directed at the people who continually comment that agreements like these would NEVER happen in bankrupt companies and no bankruptcy judge would EVER approve them. They are flat out wrong.
And, there is some question about what legal abilities they had to play around with contracts and pay to counterparties because AIG isn’t a bank.
Those details seem to be dispute, though.
The biggest problem with the whole AIG mess is that the right hand of the govt. doesn’t know what the left hand is doing. Treasury claims it didn’t know about bonuses when the Fed was well aware of them. Congressmen are shocked, SHOCKED, that there were bonuses when they were disclosed in the 10K. What else is congressional staff for except to read pieces of paper like the 10K of a company we now own and keep the congressional committees informed.
I find it outrageous that this whole thing hasn’t been handled better, that there isn’t better oversight. And I think they could have required renegotiated bonus agreements up front and the employees would have agreed to them. But make no mistake – the amount paid wouldn’t have been that much less than what’s being paid out now.
The counterparties are a whole different issue.
And the federal govt. could have required that these contracts be renegotiated etc. at that time.
Once again you seem to be under the impression that congress stands in the same position as a creditor in a BK proceeding. But it’s not the same. Congress doesn’t have money on the line like a creditor does. We don’t have an independent lifetime appointed judge reviewing the bonuses for reasonableness, instead we have a bunch of robber barrons at the Fed and Treasury who until just recently worked for AIGs biggest counter party. While that may seemingly put them in the position of a interested creditor, since there is a bottomless well of taxpayer money to make them whole it doesn’t matter to the Goldman crew how much of your money is paid to these supposedly critical, necessary employees.
I’ll say it again, we need to bring in bankruptcy attorneys and forensic accountants to clean this up – not this addle brained crew whose main skill is cashing their bonus checks apparently
You and I disagree.
Really you should learn a little bit about the BK process before you spout your mouth off.
I am well aware of the BK process.
Ever occur to you that we don’t think they are rare. We think they should be. If I work at wal-mart, i don’t get a bonus when my drawer has 10% more money in it than it did the day before. If I work on a construction crew, I don’t get paid double if I do twice as much work in one day. I
Why is it you rich elites thing ‘bonuses’ should be given for over performance when you don’t even think RAISES should be given to real Americans for the same thing? Hell, you don’t even think raises should be given at all.
Why do any of us bother, is a better question. The only reason I ever read OpenLeft any more is to see how far off a ledge they all are. I certainly don’t expect to see any reasoned analysis.
700,000+ in bonus money for Mr DeSantis is a ridiculous amount. It doesn’t matter what you’ve signed in terms of a contract, unless you actually develop Cold Fusion no one ‘earns’ that kind of money though they might be ‘legally entitled’ to it. Do you give it to them? Sure.
But I am perfectly okay with deciding “no, it’s a crisis, we need to rob the rich.” That leads to of course other problems, but I am willing to take my chances on playing fast and loose with the rules today and attempting to put it back in the box later. That doesn’t include me since thanks to loans I am in the negative, BUT if I were the one making that money I damn well would want it taken from me to prop-up the survival of civilization.
Josh has a good post related to this at TPM, though I would be highly surprised if it’s supporting the point of view I articulated.
Bingo!
well, this argument seems to turn on the meaning of the word ‘earn’.
Do I think it is possible to ‘earn’ $25 million a year playing third base for the Yankees?
In one sense, clearly no. That kind of compensation is insane and all Yankee fans have to pay extra for tickets, hot dogs, and beer to make up for it. On the other hand, Alex Rodriguez makes that kind of money because he won it essentially in an auction. If he plays all season for a dollar with the understanding that he’ll get the rest of it in October, you don’t tell him he’s screwed because the team came in last place and lost so much money that the team is going out of business.
No, if the taxpayer is on the hook for his salary am I gonna cry if he gets paid half or a quarter or a tenth of his promised salary? No. I really don’t care that he’s getting jacked. But I’m also not gonna say he hasn’t earned it or that it is his fault the team lost money and went bankrupt.
See the difference?
It seems like Sirota thinks A-Rod got a $2/million bonus for his .198 and driving in 40 runs. That’s not what happened. These were not bonuses in that sense.
Short-form I get what you are saying, but I think it’s fair because it’s a crisis.
Long form:
To run with your analogy:
No, no I don’t think it’s possible and Scott Boras should be blinded in one eye, sent into Afghanistan with a giant “I am Dajjal!” sign around his neck and left to his fate.
If the team sucks then is he still getting his money on contract? Yes. But if he is stripped of the extra money, well that’s fair too, he doesn’t deserve it because the team sucks.
4) If the Yankees are in crisis and about to fold I would be happy because as a Twins fan, I hate the Yankees with a passion and they have made life harder for the majority of teams that don’t get to spending ridiculous amounts of money.
A lot of this hinges on the concept of retroactivity.
The Constitution prohibits ex post facto laws for a reason. It’s injust to criminalize something that was legal at the time it happened.
Now, this isn’t legally a matter of criminality, so it’s not precisely applicable. But the principle is the same.
How does that work here?
I’ve seen people talk about union workers having to renegotiate their contract and take less pay and benefits. They take that example and compare it to the situation with these bonus-recipients at AIG. The difference is that the union contract is about how much you will be compensated for work you have not yet done. I don’t think you’ll find a case where a guy that made $45,000/year working at GM was told he had to give back $10,000 dollars. Instead, he is told that next year he will get $35,000, pay higher health premiums, get less matching money in his 401(k) or pension, etc.
In the case of AIG, these bonuses were balloon payments that came after the work was completed. It would be one thing to say that there will be no more bonuses (we did this) or say that next year you will get paid only a fraction of what you were paid this year. But to take away money that was already earned is a different kettle of fish, and that is why a bankruptcy court would almost certainly have respected these contracts in full so long as they were at industry norms and didn’t appear to involve fraud or an intent to skirt some law.
I does prohibit that, but there have been some exceptions as a quick Wiki trawl can tell you.
I’m reading through US v Carlton, 512 US 26 now but the text at the start of the opinion stands out:
Specifically dealing with taxation.
Ah once again, thanks for responding.
I’ll make a deal with ya BooMan, you stop reading Sirota at Open Left, I’ll stop reading Jennifer Rubin over at Commentary.
I got off of Sirota’s list a while back. He’s a blowhard who doesn’t bother to do the research to get his facts straight. That doesn’t mean I don’t agree with his sentiments – many times I do. But I do appreciate people who actually do research and know what they are talking about. And I really couldn’t give a rat’s ass for opinions from those who don’t know what they’re talking about.