30 Billion to JPMorgan to cover Bear Stearns, 100 Billion to cover Fannie and Freddie, 85 Billion to cover AIG…why there aren’t riots in the streets over this is beyond me. Anyone who cries Socialism, or Entitlement, or Welfare should be beaten to death with the latest edition of Fortune magazine.

Golly. When people used to claim the US and Chinese economic systems would inevitably converge, I never realized they were talking about us adopting the Chinese system! Now it all becomes clear.

Golly. When people used to claim the US and Chinese economic systems would inevitably converge, I never realized they were talking about us adopting the Chinese system! Now it all becomes clear.

Actually….the US is moving more towards the system the Mainland Chinese used to have by bailing out the large companies…....while the Mainland Chinese government has been moving away from subsidizing the money sinkholes known as State Owned Enterprises (SOEs) since the late 1980’s and early 1990s by selling off/privatizing the viable ones and allowing the non-viable ones to fail. 

The sheer amount of SOE workers who lost their supposedly lifetime jobs as a result was one factor in the 1989 Tienanmen crackdown when the Chinese Communist leadership became worried once those workers joined the students in protesting that government. They feared that could result in a revolution against them as that was how they saw the history of other Marxist derived regimes…including their own….

What I find astounding is the “logic” behind a company like AIG being too big to (be allowed to) fail.  Shouldn’t we have thought of that before we allowed it to get that big in the first place?  What sort of idiocy claims now that it is too big to fail, but kept silent or even encouraged them to get that big?

What “teat” is being sucked by AIG?  The management will be fired, the investors are wiped out, and the employees will be hit by huge layoffs.  Every single one of the government bailouts has involved wiping out investor value.  The deal AIG was forced to accept was in every sense the equivalent of losing the house.  A default by AIG on its obligations would have a massive, destructive impact on the global economy.  A lot more Joes and Janes would lose their jobs, homes, retirement funds, etc. if there were no backstop to prevent AIG from collapsing and defaulting on its various obligations.

In any case, the AIG risk is supposed to be pretty small because the company has a number of profitable divisions and the collateral put up matches the value of the government’s loan.

So does this mean that the government now owns a controlling interest in AIG?  Can we the people expect to share in the profits?  If we are going all out socialism, I want my share…

In the end, given past performance on these things, I have every faith that this will end up being a transfer of wealth from us proles to the few in The Party who will figure out how to work the situation for their personal benefit.

We’ll end up a little poorer, they’ll end up a lot richer, and the next idiotic bubble will start inflating using government money as a base.  You’d think we would have learned something from the S&L;scandal.

The government now reportedly owns 80% of AIG.  But it would be socialism for us to have a voice in management.

I thought the Republicans decried class warfare. But with the AIG bailout, the Capitalist Class is leeching off the workers to stay alive. Can I haz penthouse now? How ‘bout hookers ‘n’ blow?

Ok, if the government now owns 80% of AIG, does it mean the creation of a new government agency?  I can see it now: The Department of Homeland Insurance

They can have different colors to represent the danger of economic collapse due to maladministration.  My guess, it’s red right now.

Just so we’re clear on this, the free market doesn’t work, right?

Isn’t funny how the rethugs managed to trash their own free market idiocy?

I thought the Republicans decried class warfare.

Only when they’re not winning it.

Oh, while we’re on the topic of Carly Fiorina, her comments that both McCain and Palin lack the skills to run a major corporation, the McCain campaign is tossing her under the bus.

She’s a fine one to talk considering she presided over the problematic Compaq-HP merger and got effectively ousted from her CEO position due to some questionable practices.  She is certainly not someone I would consider to be a model of effective competent corporate leadership….

Considering all of that, Carly Fiorina has been selected as McCain’s economic advisor. 

Unless Pam or other IT professionals on this blog knows differently, no IT/Computer professional I know of takes her seriously due to her record as HP CEO.  That appointment alone puts McCain and his campaign’s judgment into serious question…...

Then it becomes socialism - has conservatism completely failed or what?

Considering what just happened, I am somewhat shocked no one from the GOP has celebrated that by singing and dancing to “Socialism is Good”.....a popular Cultural Revolution song as this student is doing here:

http://www.youtube.com/watch?v=JoANlC5nj2c

I am already hearing a great deal of anger over this and other bailouts from both Democrat and Republican acquaintances and friends…..especially the Ron Paulites and the libertarians.

The Republican party has spent generations criticizing government assistance to the poor, fighting minimum wage laws, trying to destroy social security, end welfare and opposing national health care because it would be, “just too costly.” 

They have always favored handouts for their rich friends though.  They want corporations and corporate profits to be private, under taxed, and unregulated and losses to be publicly funded.  They have managed to destroy the economy, plunge us into trillions of dollars in debt, and enrich themselves at the same time.  The last seven years and nine months have taught people nothing though.  McCain is still around 48% in the Gallup tracking polls.

We are a nation of the insane.

mitchforth What “teat” is being sucked by AIG?  The management will be fired

Ah, but the CEO himself made a clean getaway in July with $47-million in severance pay (as you’d know had you RTFA).

I thought Bush wanted all of Social Security privatized.  Well, except for what’s getting paid out to current seniors and soon-to-be seniors.  Gotta keep them voting Republican.

An earlier suggestion, circa the 2000 election, was to put a chunk of Social Security into the stock market, which over the long term could be a good idea, if handled well.  The problem, of course, is that it wouldn’t be handled well.  Cronyism and corruption abound in Republican governance.  Their friends would handle those investments, and their friends would have put our money into Enron and WaMu.

What Bush wanted was private accounts, to be handled pretty much as 401ks.  Very different from what was proposed eight years ago.

And I vote for “Fiorinas” as the new term for executive windfalls.  It has more panache.

Ah, but the CEO himself made a clean getaway in July with $47-million in severance pay (as you’d know had you RTFA).

Executive comp is always criticized, especially whent he company isn’t performing.  Incentive packages strongly tie executive compensation to the company’s performance, which should incentivize better management.

Generous severance packages allow companies to be able to both attract top talent into management positions and still fire managers at will, without cause.

I’m a liberal libertarian (yeah, I know, boo hiss) and I am absolutely disgusted by the bailouts.  When companies do dumb things, they’re supposed to fail - that’s my understanding of how the market is supposed to work.  “Too big to be allowed to fail” is “too big to be allowed to exist” - any other corporations out there big enough that the government would have to prop them up rather than let them fail should be pre-emptively divided up into smaller entities, and any corporations reaching that size thereafter should be likewise divided up.  Oh, and I do support a safety net for individuals in financial trouble - on the personal level, that might be the result of bad luck or one poor decision.  On the $85 billion level that can only be widespread incompetence and unsound policies.

Incentive packages strongly tie executive compensation to the company’s performance, which should incentivize better management.

And yet it doesn’t.  Hugely compensated executives like Fiorina drive their companies into the ground and then walk away with their multi-million-dollar severance package while hundreds of employees lose their jobs.  And people like you defend her because who else could have ruined a profitable company as quickly and as thoroughly as Fiorina did?

You’d think that all of the evidence that giving huge compensation packages is no guarantee that the CEO will do a good job would have brought an end to the practice, but with everyone on everyone’s else’s board of directors, that’s not going to happen.

I don’t know much about Fiorina’s tenure at HP.  But performance incentives pay, by their very nature when the company is performing. 

Unfortunately, there is no accepted metric for isolating the component of company performance attributed to an executive.  Otherwise we would pay less to execs like Fuld and Fiorina who preside in boom times and take home bonuses based on their companies getting buoyed by general economic growth, and we’d probably pay more to people like Thain, who do the best possible in a tough situation.

However, most shareholders and boards seem to be convinced that top managerial talent is worth high prices. 

The pay packages are a side effect of the fact that there are regular house-cleanings in corporate management even when companies are performing.  Offering managers “golden parachutes” is cheaper than offering them job security.

The management will be fired, the investors are wiped out, and the employees will be hit by huge layoffs.  Every single one of the government bailouts has involved wiping out investor value.

There’s no guarantee senior management will be fired.  But I’ll be logging into bloomberg multiple times a day to check.  As for wiping out investor value - this is a risk people take when they invest in securities.  That’s why the SS privatization scheme was so dangerous:  Forcing millions of Americans to become more actively involved in managing their retirement savings by moving them from a virtual no-risk scenario (guaranteed social security benefits) to a risk scenario (market investment) when many of them are low-information investors and there’s a lack of transparency in and regulation of newer security types is asking for trouble.

When you buy common stock or even preferred stock and the company that issues the stock declares bankruptcy, you’re first and second on the list of people who aren’t getting the value of their investment back.  If you buy mortgage-backed securities, expected risks are prepayment risk, default risk and interest rate risk.  These are *known* risks.  People think investing in the market is like sitting at a complicated Black Jack table where you’re guaranteed to win, or at least hit lucky 7s enough to finish the night in the black.  It’s crazy.  But there are thousands of professionals (like myself) who work in the financial services industry, who, regardless of their partisan affiliation, are deeply concerned with the value of their investors’ assets.  It’s not like every portfolio manager is a Republican who sits around gleefully twisting his mustache, eager for the rich to prosper and the poor to end up homeless.  This collapse didn’t happen because Republicans fucked up (though they have fucked up on many other things).  It happened because for twenty years now more and more mortgage-originators have been selling loans to trusts that securitize them, and no one’s discussed the implications for what happens downstream when those lenders are less ethical and less conservative with their loan practices.  The bubble and the recent spike in derivatives and hedge fund sales just made this much, much worse.

Obama gave a speech yesterday or the day before to people in Colorado (caught in on C-Span) in which he suggested we need more regulation of lenders and issuers.  I agree with this, but he then went on to talk about how great the free market is, basically identifying the recent housing bubble/MBS-issuer/insurance failures as altogether separate from the “normal” functioning of the free market.  It’s bullshit.  This kind of emergency is exactly what happens when you have a free market.  Without regulations like suitability requirements, shareholder disclosures, accounting standards, corporate fiscal transparency and broker-dealer compliance and ethics guidelines, our market wouldn’t function.  People need to trust financial institutions for them to work properly, otherwise instead of putting their money in a savings account or buying stock in Citigroup, they’d be shoring up cash in their mattresses.  Stuff like that guarantees economic stagnation and reduced opportunities for growth and development.

So anyway, the point is, it’s time for the Democrats - Obama especially - to stop the fucked-up lovefest with the “free market”.  It doesn’t exist.  And Joe Biden, fierce as he may be on foreign policy, is a big supporter of unfair bankruptcy laws.  This is the last guy on the Democratic ticket I’d expect to help out people who are about to lose their houses.  He IS from Delaware - the home state of robber baron corporate charters.

What I find astounding is the “logic” behind a company like AIG being too big to (be allowed to) fail.  Shouldn’t we have thought of that before we allowed it to get that big in the first place?  What sort of idiocy claims now that it is too big to fail, but kept silent or even encouraged them to get that big?

Sbucher, <a href=“http://en.wikipedia.org/wiki/Social_democracy”>social democracy.  Social democracy, sbucher.

I think you kids are going to get along just swell.

but he then went on to talk about how great the free market is, basically identifying the recent housing bubble/MBS-issuer/insurance failures as altogether separate from the “normal” functioning of the free market.  It’s bullshit.  This kind of emergency is exactly what happens when you have a free market.

“That depends on ‘is’ is”, or in this case what you mean by a “free” market.  Democrats (and most of the country) seem to think that being able to buy and sell goods to whomever makes any market—regardless of regulation—pretty free.  Compare and contrast to state-run economies.  Republicans OTOH seem to think that any regulation whatsoever makes a market not-free.

mitchforth, I would think that it’s obvious that these payouts are not “performance based” as you think of it.  Hint: the executives at Fannie/Freddie, AIG, Merrill Lynch, etc. are getting paid after running their companies into the ground.  Do you think that the shareholders set up these plans to reward failure?

If you want to start reading about capitalism as she is practiced in the real world, and real-world concerns about CEO compensation, you can start here.  Or go google on “CEO compensation negative correlation performance”.

What kind of bail out is this? What kind of business thought will allow this to happen?
You charge them a 11% interest of $85 BILLION???  Hey just paying the interest is almost $0.4 billion per month over 24 months! Its like allowing a bleeding to death person to bleed more so that he dies without any blood left in him/her? What is there to guarantee that the collatoral is worth that much after death IF it comes sooner? That’s what top financial experts can come up with? Simple math - how much profit the company can make in a given year to pay the interest when you let them have a really good year?

hey guys, you know something that really irks me…that governmental regulation of companies come from the congress.  and who controls the congress right now… o ya the dems.  so what has basically happened is that the democrats failed to do one of their most basic philosophy’s and then blame bush when things go bad.  that is playground politics.  furthermore, a company cannot be to be to big to exist.  are there any pc users in all the above commenters?? if there are you cant sit there and say that it would be hypocritical.  the basic problem is not the size of the company but how senior management runs the company.  bill gates owns one of the biggest companies in the world but it is run extremely well and it is in no danger of going belly up.  AIG, Fannie Mae and Freddie Mac, Merryl Lynch and all the other companies are going belly up because their ceo’s have lost all common sense.  they gambled and they lost.  they should return all of their severance packages to the government or the company or the stockholders as a form of apology for the incompetence.  as for the notion that we are moving towards socialism that is bs. we have a long way to go before we even begin to resemble a socialist country and i might add there two documents that pretty much make that impossible.  those documents are the declaration of independence and the constitution.  if they get ignored or circumvented or destroyed i will be in the streets with whatever guns i can get my hands on, which is protected in the bill of rights like or not, and march on washington to take back the country.  but enough of my political flame baiting.  what needs to happen is that major corporations need to get together and establish a guideline for how they are to protect the economy from what is happening and going to happen, they need a strong economy just like the average joe.  secondly, we need to abolish the political parties as they exist now because they have proven george Washington’s warning about political parties and how they represent geographical regions (democrats control and represent urban areas and the republicans control and represent everywhere else) and replace them with people that are willing to work together to pass bills that are the most beneficial to the country and not a party line.  lastly, i want to leave you with a closing thought.  it does not make one difference who wins the presidency; what matters is who wins the congress.  the congress is the branch that legislates and yes they can override a presidential veto.  do you really think that obama will be able to do anything he wants with a republican congress or mccain with a democratic one.  if the congress goes to the opposite party of the president it is going to be two more years of the past two years before we might be able to change anything.  so i say watch the congressional votes.

mitchforth, I would think that it’s obvious that these payouts are not “performance based” as you think of it.  Hint: the executives at Fannie/Freddie, AIG, Merrill Lynch, etc. are getting paid after running their companies into the ground.  Do you think that the shareholders set up these plans to reward failure?
If you want to start reading about capitalism as she is practiced in the real world, and real-world concerns about CEO compensation, you can start here.  Or go google on “CEO compensation negative correlation performance”.

Bonuses are performance based. Severance for dismissal without cause is built into contracts so companies can fire their executives a lot. 

The performance of the company is probably less contingent upon the performance of managers than either bonus pay or executive firing seem to infer.  But this is accepted in corporate culture.

The severance agreements are for the purpose of enticing people who are highly sought after and have a number of options into a job with no security.  If the company falls slightly short of analyst predictions one quarter, they will fire the executives.  Ordinarily punting out your talent conspicuously for no particularly good reason would have a negative impact on your ability to hire new talent.  “Golden parachutes” are the mechanism designed to allow these companies to fire executives all the time and still be able to get top people to work for them.

Trolls…sigh…

ya the dems.  so what has basically happened is that the democrats failed to do one of their most basic philosophy’s and then blame bush when things go bad.

It takes 60 senate votes to pass a bill.  The Democrats have 49 + 1 independent.  The Republicans have 49, plus Joe Lieberman to cover their back on any bills that would have a significant impact.  This mess also took a couple decades to get into, expecting ANY Congress to manage to right this ship within two years—especially with a Presidential veto working against them—is incredibly naive.

KL - the Republican definition of “free market” (aka little to no regulation, unrestrained competition within a supply/demand economy) IS the accepted definition of the term.  Check these definitions, or look it up on investorwords.com. 

That’s why I’m saying we don’t live in a free market, and Democrats should stop talking like we do.  It just plays into the notion that business on any scale functions ethically or efficiently without government regulation.  We have all sorts of direct and indirect regulation of supplies and prices.  Just look at big agro and subsidies, or the fact that the NYSE can suspend trading if the Dow drops by more than 10%.

You’re right, there is a dichotomy in the understanding of the term, but it’s the Democrats who misrepresent the free market as something that encourages (or allows for) government regulation beyond fraud protection.

Chris - take off the blinders.  The executive branch matters significantly in that it executes the laws, and it’s the office of the presidency that nominates judges to the multiple federal trial and appellate courts.  SCOTUS!  The president is also the commander-in-chief of the armed forces and directs multiple federal administrative agencies, controlling whether money allotted by Congress is actually spent doing the things they budgeted it to do.  The president is also head of state and has veto power over legislation.  I can’t imagine why you would assert it doesn’t matter who wins the presidency.  You also must not know anyone with ovaries.

so what has basically happened is that the democrats failed to do one of their most basic philosophy’s and then blame bush when things go bad.

So the Democrats were supposed to repair in 2 years all of the damage that the Republican-dominated Congress had done in the previous 12 years?

mitchforth wrote: Severance for dismissal without cause is built into contracts so companies can fire their executives a lot.

Talking about what happens when a company decides to move on with a different management team is at best non-responsive to the issue at hand, the collapse of AIG and other firms. Are you seriously arguing that presiding over the collapse, collapse/purchase, or collapse/nationalization of a company should never be considered cause for dismissal?  I don’t know about you, but I think destroying the company should be considered injurious to the company.  There are an awful lot of employees who are going to be out of work this month, and I don’t think they’re getting similar severance packages.

I do agree with you that these packages are accepted in corporate culture.  However, I don’t think that’s exculpatory.

Talking about what happens when a company decides to move on with a different management team is at best non-responsive to the issue at hand, the collapse of AIG and other firms. Are you seriously arguing that presiding over the collapse, collapse/purchase, or collapse/nationalization of a company should never be considered cause for dismissal?  I don’t know about you, but I think destroying the company should be considered injurious to the company.  There are an awful lot of employees who are going to be out of work this month, and I don’t think they’re getting similar severance packages.

I do agree with you that these packages are accepted in corporate culture.  However, I don’t think that’s exculpatory.

If they’re being dismissed at will, regardless of the circumstances, then they’re entitled to their contractual compensation.  If the company had wanted to be able to cut loose its executives at will without severance in the event of unusually poor corporate performance, then such a provision could have been built into the contract.

If the government wants to take the position that the execs are being fired for cause, it can attempt to strip them of the compensation packages.  I don’t know how easy that is to establish, but the failure of the company isn’t necessarily de facto proof of misconduct or mismanagement on the part of the management, especially since the underlying circumstances, i.e. crises of confidence in the market and mortgage backed securities on the balance sheet, may have existed prior to the execs’ tenure or been beyond their control.  And well-managed companies fail sometimes too. 

And there may be an implicit unfairness in the fact that CEOs whose decisions are much more significant to the success of a company getting big payouts when they’re dismissed, while laid-off employees get much less, but that’s a function of the fact that companies compete for top executives, while many other kinds of employees don’t have skills that are scarce.

It takes 60 senate votes to pass a bill.  The Democrats have 49 + 1 independent.  The Republicans have 49, plus Joe Lieberman to cover their back on any bills that would have a significant impact.  This mess also took a couple decades to get into, expecting ANY Congress to manage to right this ship within two years—especially with a Presidential veto working against them—is incredibly naive.

So the Democrats were supposed to repair in 2 years all of the damage that the Republican-dominated Congress had done in the previous 12 years?

Dear KL and Mnemosyne

I do agree that it is incredibly naive to expect that any congress, Democrat or Republican, could right this ship in two years.  It is politically impossible at this juncture, especially with the work ethic that the current congress has.  However, it is not naive to expect that the people that were elected to run this country attempt to do so.  In the past two years what has the Democratic congress done?  Not much of anything.  They won both the House and the Senate and then turn their attention to the Obama/Clinton race and now the Obama/McCain race.  They, as far as I know, even wrote legislation to be debated on concerning congressional oversight.  Furthermore, they could have strengthened their own watchdog committees which do not require presidential permission and funding, but did they? No.  In all honesty, the leaders of congress probably knew what the downfall of all of this would be.  They are by no means idiots.  Here’s what I think happened: they knew and did nothing about it so that they could use it in the upcoming election.  Like I said before, playground politics; and yes the republicans are guilty of this too, I am not as naive as you think.

I can’t imagine why you would assert it doesn’t matter who wins the presidency.  You also must not know anyone with ovaries.

Dear Deep6

You mistook that whole comment.  To paraphrase and clarify: either candidate cannot enact the change that both are talking about unless they have a sympathetic congress, which in today’s political world means that the congress has to be of their own party.  Congress, the last time I checked, the branched imbued and charged with the authority to legislate. That has not and should not be changed, which is why I disagree with line-item veto. So again I assert that the President is not necessarily the most important vote on the ballot come this November, but rather the congress.  I hope I cleared that up for you Deep6.  Now, I need some clarification myself; what was the comment about ovaries all about.  Do you think I live on a desert island or some testosterone overloaded boys only club.  If you don’t want to clarify I will chalk it up to a pathetic attempt to insult me, which was not very effective by the way, and dismiss it from my mind.  I do that a lot as a moderate that happens to have the gumption to disagree with liberals.

Again have a nice evening and lets all hope that the congress, the president, the fed can somehow guide the economy out of its current mess.

chris