Comments on: G-20 to the Rescue?

By: Kenneth Rogoff: 03-26-09 Economist of the Day « Financial Economics Today - Wayne Marr

Thu, 26 Mar 2009 07:00:59 +0000

[...] Public Radio, On Point, G-20 to the Rescue (podcast), March 16, [...]

By: gabrielle

gabrielle — Tue, 17 Mar 2009 12:48:14 +0000

not exactly G-20 related but a great article on The FED from The Nation magazine http://www.thenation.com/doc/20090330/greider?rel=hp_picks

By: jeffe

jeffe — Tue, 17 Mar 2009 12:11:39 +0000

While I have been mad as hell with all of this the more I have been reading about the AIG bonus debacle it seems more complicated. The contracts were written before the bailouts so legally I don’t think there is much the government can do as these were made before AIG became a ward of the state. Second and this an interesting point made by a few of the business journalist that a fair amount of these people in AIG are still needed to sort out this mess. Firing them is not an option right now.

Third it also seems that to mess with these contracts could backfire the other way, in that business would start to find ways to void contracts that they deemed not to their liking.

Seems we all have to eat this bitter herb.

By: rick

rick — Tue, 17 Mar 2009 03:09:26 +0000

I keep hearing from ceo’s of major institutions that they have to reward their executives with bonuses to maintain them and keep them incented. If these are the same top executives who pushed these companies to the brink of financial disaster, why then are you holding on to them, as well as attempting to pay them these huge bonuses?

By: Betty B.

Betty B. — Tue, 17 Mar 2009 02:30:09 +0000

The AIG executives receiving the ‘contracted’ bonus in the midst of their company tanking and getting bailed out through the taxpayers have the capability of refusing the money. If they choose not to, I think it would be wonderful to publicly announce and publicize their names and the amount of their bonus alongside the amount of money that the government gave to them. I also think it would behoove the IRS to carefully, and thoroughly, audit each of these individual’s 2008, 2009, 2010, 20XX… income tax submittals!

By: David

David — Tue, 17 Mar 2009 02:26:11 +0000

The scam goes on and the American public has not idea what goes on behind closed doors. Where is the America I grew up in as a young boy. Greed, Greed, Greed, Power, Power, Power and dog eat dog is all I see today. We have become a spineless nation of people who complain, yet instead of making things happen for the good, we turn it over to the guys who caused the trouble, the government. Do you not think that they have known all this before hand. Yet! our leaders are only a reflection of us. America, we need to get back to what made this country so great. If we don’t, we are headed down a realy bad stink hole. When nations decay they give off an unbearable odor. This whole mess stinks to high heaven with crooks and we the American taxpayer are FORCED to help clean it up! They get bonuses and the others get re-elected.

By: Hank Hanau, CFP (R)

Hank Hanau, CFP (R) — Tue, 17 Mar 2009 01:26:22 +0000

Fortunately for me and unfortunately for my making comments to your show, I live in NY.
The problem’s occurance is quite simple to understand. In the old days private bankers were paid huge bonuses and that money stayed within the firm to add to the firms capital and ability to trade. The individual did not see that money for years. Traders and the firms they worked for did whatever they could to make money. The risk was tempered by human psychology that says it is less good to make gains than to have losses. When the private banks went public (in addition to growing by buying commercial banks) they were now not playing with there money. Gains were rewarded the year following the gains and went home with the trader. Losses, if they ever occurred were someone else’s problem. The trader already had the money and the money nor the trader could be touched. So, an answer lies in bonuses being put into a defined benefit plan and paid out 6 or 7 years after the profit was made and subject to attachment if the trader lost money. That would be self regulation.

By: Ellen Dibble

Ellen Dibble — Tue, 17 Mar 2009 00:30:33 +0000

A reason I keep money in the market for retirement funds, such as they are, is a determination that the millions who have such funds should have an honorable option, and it pains me, multiplied in scope by the Entire Baby Boom at least, to see no obvious such option. It is hard to get the president and Congress to invest responsibly in our future. But can’t I, solo? The reason I bring it up here is that I suspect AIG is at the root of my investment difficulties. They know how to insure established businesses, what I referred to as “dinosaurs,” which may be edging toward a 21st-century orientation but not too well. And apparently they know how to capitalize on the kind of risk that drove us all to the side of a cliff. But they don’t know how to lend our capital with vision and care. I won’t do it for them. My 2 cents aren’t worth it. Together we can, though. It was a nice rallying cry.
Someone might say retirement funds invest in banks, which in turn invest in forward-looking ventures.
What can I say. The plot thickens.

By: Suleyken

Suleyken — Tue, 17 Mar 2009 00:16:11 +0000

I think it is critical that we are told who these people are that chose to accept the bonuses! What do they tell themselves? I applaud efforts to improve regulation and oversight, and maybe the contracts are iron-clad (which I really really doubt), but we deserve to know who is walking off with our money.

By: Peter

Peter — Mon, 16 Mar 2009 23:52:56 +0000

Now that we, the taxpayers, own AIG why don’t we file for bankruptcy. Under bankruptcy protection, we (AIG) can renegotiate our contracts. We can void out & redo the contracts that say we must pay $165M in in-house bonuses. We can redo the credit-default contacts of any bank that pays its staff bonuses in excess of $X. Etc.

By: John

John — Mon, 16 Mar 2009 23:35:50 +0000

If terrorists created the kind of havoc that AIG and others in the financial sector have we would have declared it the most devastating attack ever experienced by the U.S. So, then how should the payment of bonuses be understood when the payments have been made by the taxpayers that took the hit of this devastation?

By: jeffe

jeffe — Mon, 16 Mar 2009 22:12:01 +0000

Not only to Bush, it goes to Robert Rubin and Summers and Clinton. I’m not a republican, but I think there is plenty of blame to go around for the deregulation of the financial industries for both parties. They are all corrupt practitioners in some way or another.

Repeal the present harsh creditor-oriented bankruptcy law sponsored by the banks and credit-card companies which were pushed through by then-Senator Joe Biden.

The other amazing thing is that AIG kept paying a million dollars a month to the clown who brought them down, Joe Cassano even after he was caught! This is what we are dealing with. This is the kind of mentality we have here.

The whole thing is insane, really.

By: jeffe

jeffe — Mon, 16 Mar 2009 21:56:29 +0000

The other reason that Summers is wrong on the contract issue is that the Obama government is all into forcing the banks to rewrite the mortgages for a huge amount of Americans, at least in theory. Well how is that they can tell one financial branch to rewrite the contracts and not another?

By: Joe Morton

Joe Morton — Mon, 16 Mar 2009 21:33:43 +0000

The root of this problem is that the politicians that control the oversight are all owned by business and specifically big banks.

So we should not look to anyone associated with banks to solve this. And we should not LOOK TO THE FUTURE to “Make sure this doesn’t happen again”. We should fix THIS PROBLEM, NOW, by procecuting the people responsible. It is obvious conspiracy and fraud on a massive scale.

I am already OUT of the market, and so is everyone I know. The damage done to our legal and economic system is incalculable because it is causing a total loss of trust.

We should be placing ALL of the executive management and bank board members into PRISON until we can sort out where the money went and who is responsible. They are FINANCIAL TERRORISTS and this is WAR. It is simply TOO RISKY to have them walking around free where they can continue their conspiracy and fraud.

The damage they have done is 1000 times worse than 9/11. Lets treat it that way. Arrest and procecute… now. And it probably goes all the way to to the top, Bush and Cheney.

By: jeffe

jeffe — Mon, 16 Mar 2009 21:14:00 +0000

Everything is wrong with this picture. Summers and Geithner are the problem. I always thought these two were bad choices. Obama and his team are in a very dangerous position and now, instead of being the leader of our country he sends out these so called economic advisers and cabinet members to spin like tops. This nothing more than SOS. Message to the president, we voted for change, not SOS with the same SOB’s. Right now our government is involved with the biggest transfer of wealth in our country since it’s founding. The government can invade Iraq and Afghanistan and tell manipulate those countries but they can’t tell a bunch of employees at AIG that buck is stopping here.

Enough is enough, screw their contracts they have brought down the entire world economy and they want their bonuses? If it was up to me I would give these SOB’s a good kick in their butts and tell them there lucky we don’t make them eat horse dung on national TV.

They are no better than the terrorist that cause 9/11 in my opinion, all of these people who are involved in this are economic terrorist.

By: Mike

Mike — Mon, 16 Mar 2009 18:36:53 +0000

no, but seriously.

the “in-between the lines” of what you rational, law-abiding folk are saying is that’s it’s o.k. that they did what they did.

you may not think that’s what you’re saying, but the result is that there is no repercussion for collapsing the world economy.

people will die because of this, not in america, but in places where existence is subsistence level.

if we’re not going to start calling this criminal negligence, and creating laws if necessary to prosecute these people, then we shouldn’t complain at all.

because this entire discussion is pointless. they’re stolen our money and they are going to keep it, and in this case, the law is there to protect and secure the guilty.

By: Martyn Strong

Martyn Strong — Mon, 16 Mar 2009 18:34:43 +0000

Capital markets are unstable. In the past there was no way to make them stable. But today we have computer power that can be used to make them stable. By using the greater computer power of today we can have a much higher turn over of capital in the capital market. This higher turnover will make the market harder to game or control and the market will no longer have the unstable run ups or declines. Who can change or control the market when say 20% of the capital is trading each day? So now that we have the compute power to provide for all these transactions that will smooth out the market how do we force people to turn over at a rate of 20% a day? Easy, put a cap gains tax of 0% (zero) on all gains of 7 days or less and put a cap gains tax of 90% of all gains of more than 7 days. The likes of Yahoo, Micosoft and/or Sun Micro Systems will give us the systems that will provide automated software agents to support turning over one’s investments every 7 days (based on the specs you give the agent). A system like this will make the financial markets work as smoothly as the local fruit market.

By: I.Kiraly

I.Kiraly — Mon, 16 Mar 2009 16:59:31 +0000

The straw is being trashed.
The gurus of gangsterism still are followed.
(They even named an airport after their Great Clown).
And while everybody cries and trashes,
the gangsters laugh their head off all the way to their banks.
Stef

By: Will

Will — Mon, 16 Mar 2009 16:40:40 +0000

Although the federal government may not be able to legally ignore contractual obligations, both parties can choose to not enforce any part of a contract. As a member of a small union, we regularly work with management and bend the rules both ways in order to do the best possible job.

I feel that as a high-level worker at AIG, you should voluntarily forfeit your bonus – there is nothing illegal about this.

By: Mike

Mike — Mon, 16 Mar 2009 16:18:48 +0000

Well put!

We live in a culture where willful ignorance that leads to devastating consequences is not prosecutable.

Iraq War #1. Financial collapse #2.

Essentially, you can say “I didn’t know” and there are no repercussions.

But really, based on the impact, these things should be understood as criminal negligence, and prosecuted forcefully.