Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Where do top executives and employees of AIG flee when economy in turmoil, reliance on investment portfolios, early retirement, bankruptcy, lavish home sale, CD payout with tax payer dollars
There are many places for top employees to go. Many overseas banks (which are not subject to the same punitive regulations as those in the U.S.) are poaching top U.S. bankers. Mid-size investment banks which haven't accepted bailout money would also be very accommodating of the exodus of talent from the largest banks. Top traders and directors can also set up their own hedge funds, private equity funds, or venture capital funds. If such tax measures remain in effect for an extended period of time, presumably it would also affect hiring at the post-undergraduate level and even more so at the post-MBA level, although this would take a few years to materialize. This would have the effect of completely gutting what was once America's largest industry and most enduring competitive advantage in the international marketplace.
The punitive taxes could also encourage banks to raise base salaries massively and reduce bonus compensation altogether. This would be terrible for the industry as it would cause a complete disconnect between compensation and performance, but it might be necessary to retain talent. More likely, many banks would try to give back the TARP money immediately (so as not to be subject to the new regulations), even if they are not really in a position to do so. This would once again greatly contract the supply of credit in the market. At the very least, private institutions will refuse to participate in any further public funding, such as the plan currently on the table to buy toxic assets in a public-private partnership. This whole situation has been highly unfair to those banks which were more or less forced to accept TARP money despite being in a fairly solid position. Further, it is ignoring economic realities in order to appeal to a sense of fairness.
I feel Congress's actions are borderline unconstitutional and really destroy the fabric of democracy and capitalism (contract law, bill of attainder, retroactive application). If Congress wanted stop the AIG bonuses, they should have addressed them as a stipulation upon giving the bailout money. The bonuses were negotiated over a year ago in an effort for AIG to retain key employees who know they wouldn't be receiving a performance bonus. If the 90% tax goes though, I can see these employees leaving the next day, leaving the government in control of a company whose operations and risk exposures they know nothing about. If this were to happen, I think the government and the American people would have another nice lesson on systemic risk. And if that happens, taxpayers should not expect to get any of their bailout money back.
...This would be terrible for the industry as it would cause a complete disconnect between compensation and performance...
The reason the confiscatory measures have near universal support is that there is already a complete disconnect between compensation and performance, with AIG execs claiming bonuses despite the most disastrous results in the sector's history.
My brother-in-law works in the industry, in a different and much less affected country, and no significant player there is hiring much. I for one would be happy to risk the defection of a few overpaid malcontents overseas in order to avoid the misappropriation of taxpayer funds.
The reason the confiscatory measures have near universal support is that there is already a complete disconnect between compensation and performance, with AIG execs claiming bonuses despite the most disastrous results in the sector's history.
My brother-in-law works in the industry, in a different and much less affected country, and no significant player there is hiring much. I for one would be happy to risk the defection of a few overpaid malcontents overseas in order to avoid the misappropriation of taxpayer funds.
Again -- it's not just overseas. The middle market investment bank I work at (which has not accepted any bailout money) poached just under 50 senior level people from large banks in 2008. If this continues it will absolutely destroy those banks' ability to do business. It might help me personally (being that my bank is in a fairly strong position), but I'd nevertheless hate to see the U.S. lose its dominance in the financial industry.
Further, you make it sound like the only people who get bonuses are executives. At investment banks, even 22 year olds have at least a third of their compensation in the form of a bonus. If the tax goes through in the form which the House passed, the bonuses of even associates (often post-MBA late 20s people) will be affected. Thus in order to hire and retain talented people, the banks will somehow need to alter the compensation structure to get around those regulations and taxes.
In any case, the bonuses given out to executives have been such a minuscule portion of the overall bailout (something on the order of one tenth of one percent) that to compromise some of the fundamental concepts of democracy to reclaim them is absurd. It's basically political pandering by both sides but particularly by Democrats. Congress's actions really make me feel ashamed to be an American for the first time in my life. If this sort of populist angst keeps up over the next decade, I'll have to find a more business friendly country to move to and then renounce my U.S. citizenship.
More likely, many banks would try to give back the TARP money immediately (so as not to be subject to the new regulations), even if they are not really in a position to do so. This would once again greatly contract the supply of credit in the market. At the very least, private institutions will refuse to participate in any further public funding, such as the plan currently on the table to buy toxic assets in a public-private partnership.
One can only hope. Give back the funny money and take your lumps. I feel that this will never happen. The idiots in washington have coupled all of this to the crash and we will all be hit by hyperinflation.
Again -- it's not just overseas. The middle market investment bank I work at (which has not accepted any bailout money) poached just under 50 senior level people from large banks in 2008. If this continues it will absolutely destroy those banks' ability to do business.
I'm not sure what you're complaining of here. If the talent circulates from failed or stagnating firms to better situated ones, presumably it becomes better utilized as a result.
As for the destruction of banks' ability to do business, that has already occurred through unsound selection of business models and risk management strategies. The shedding of staff is a second-order effect. Government intervention has if anything slowed this exodus: in the absence of bailout money, the size of the suddenly-available talent pool would be much larger--several Lehman's-worth larger.
The real danger is not that these banks will shrink further, but that they will remain propped up indefinitely and indiscriminately. Failure to decisively cut out the rot flatlined the Japanese economy for 17 years after 1990.
Quote:
Originally Posted by gettys
If this sort of populist angst keeps up over the next decade, I'll have to find a more business friendly country to move to and then renounce my U.S. citizenship.
Only the retroactivity of the tax bothers me, slightly. The strings should have been there at the outset; Geithner was asleep at the switch.
And I'm curious: which country seems so much more banker-friendly at the moment, or likely to be so in 10 years?
Many start their own business like consulting firms.Many of the oil drillers in this country started their own companies that mostly did businesss overseas after the oil embargo end in the 70's.Expertise is always in demand.
Saw it in here. Discusses the bonuses. Says, "Gotta offer great pay or top people will leave."
It's all smoke and mirrors. Outrage over bonuses? Smoke and mirrors.
Keeping top talent? Smoke and mirrors. It's the tail wagging the dog. Get people focused on something while you shift the ball to the other hand.
I'm pretty tired of it, but I know what you know and what others suspect. America isn't motivated any longer. We *****, we cry, we moan, but we think, "Someone should do something." and we don't think "I should do something." Some of us do "do something"....we post about it on message boards, when we should be rising up and standing up...somewhere.
I came to a conclusion a long time ago. It's sort of like that movie, "The Matrix." People are tied up in their own life. You don't rise up against the system. To do so is foolish, isn't it? You've got bills to pay, kids to take care of, places to fish and mountains to climb. You've got a wife to try and keep happy, or a husband that works too hard, and you barely have enough time to sleep, yet alone to start a war on how you're being treated. You become part of the system and eventually, you don't even realize it. You just stop caring. Or maybe you care, but you don't care enough to do something. And what can you do?
You're just a woman with 5 kids...and you gotta scrape up enough to bail out your boyfriend so he can go to work tomorrow.
I agree that it's smoke and mirrors. I'm not overly worried. I won't be until the folks living in tent cities in CA with no money, no job, no credit start picking up guns and shooting up these AIG guys. THEN, I'll be worried.
Looks like the toxic assets plan will feed trose that have the assets to buy if they want to take the risk. Its back to the free market again. All the while putting up mirros and smke stirring the maddening crowd about 165 millon that is the peanuts compared to what the stimulus will do for many specaia interest groups for nothing.All the wile the madenig srowd will get maybe 20 bucks a week.Cheap.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
