Along with the rest of the population, I was appropriately outraged to hear that the beleaguered AIG, which got over $182.5 billion in federal aid, paid out $165 million in bonuses to the financial products unit that brought them down to begin with. 80% government owned, they are basically nationalized and they’re expecting a Wall Street worthy bonus? That’s probably more than what President Obama makes in a year! (FYI: Obama earns $400,000 per year).
In response to this public outcry, the government cunningly passed a bill to tax bonuses for TARP- funded banks at 90% for all bonuses above $200,000. That’s harsh. Not only are they punishing AIG, but they are bringing down the rest of Wall Street with them! According to Vince Farrell, in some high tax areas, including States, City and FICA taxes, total bonus salary would be 102.5% of the bonus. Granted these firms did take the TARP money and are at fault for the credit crisis, the blame cannot be placed entirely on them. It takes two to default on loans! Bearing in mind that some of the banks were bullied into taking the TARP money and that these banks are not fully owned by the government, such measures to curb the pay seems unjust. There’s nothing to say that the bonuses were not paid out to those executives from the bank’s own balance sheet and not from the TARP amount, which is probably only a portion of the bank’s reserves (in fact, there are rumors that GS would like to pay back TARP as early as next month!). Maybe Citi and Bank of America should be subject to this since they did ask for TARP money twice (or thrice!), but not the others. People go into politics after they are rich, but people go into finance to get rich. You got to give them some incentive to put in the crazy hours.
Despite such harsh punishment though, the next day there were busloads of protestors doing a tour of AIG executive homes in Connecticut- even after some of them have returned their bonus money. The protestors acknowledge that too, and yet they persisted to protest outside these executive’s homes and scaring their family members. For what purpose? It seems that these people, “really want people to help (them)” and ” want AIG executives to do more to help working families” and “consider the experiences of families struggling in this economy” by supporting higher taxes on families earning more than $500,000 a year (according to CNBC).
This sparked my second round of outrage over this whole scenario. This time though, in defense of the AIG executives. Unlike other industries, in Wall Street, a large part of recompensation actually comes from the annual bonuses. Without these bonuses, many will probably be earning less than a Walmart employee on a hourly basis. These executives have already forfeited this pay and these protestors actually want MORE from them? We are a capitalist society, and compensation is based on meritocracy. These executives have worked hard to be where they are today and afford their colonial houses with the beautiful view. If you walk pass a beggar on the streets, you’d give him a dollar or two, but you wouldn’t empty your pockets and invite them into your home just because it’s unfair. Life is unfair. If we were in the business of equal distribution of wealth, we’d be communist.
Then today, there were rumors that these executives did not voluntarily give back their bonuses, but feared that their names would be released to the public (and thus further harassment!) if they don’t. Very classy Cuomo. Considering that as an AIG executive today, you’d be subjected to public outrage, a significant pay cut and government threats, I’m surprise there are any left working to try and get the company out of this mess. If I were them, I’d quit and live off my 401K (correction: life savings). Let them flounder while I chill out in Florida.
So please, stop harassing these poor men and leave them alone!
Looks like I’m not the only one to think this way. You go Mr. DeSantis!