The AIG bonuses really are a mess...

[Lucky Luciano]

I was initially ok with the competent performing people at AIG receiving bonuses, but I was ticked off when it came to light that it was the losers who were getting the bonuses. The trouble is that the losers can hold AIG hostage in the following way:

*The AIG traders of CDS know what AIG's massive positions are.
*If AIG fires them without compensation, then these people, losers as much as they are, still have incredibly valuable information for other traders - namely what AIG's positions are.
*AIG has to close its positions.
*If one of the AIG losers is fired, then another firm will scoop him up and find out what AIG's positions are and what trades AIG will be forced to make.
*Knowing that, for example, AIG had to buy $2B in GE CDS to close their positions in GE, the other firm can buy GE CDS in large size forcing GE's credit spreads wider and causing AIG to pay even more and profiting the ex-AIG loser's new firm rather handsomely and costing the taxpayers a good deal more than the bonuses.
*Therefore firing the employees before they wind down their positions is suboptimal...as is incentivizing them to quit by not paying their bonuses.
*I see a rock to my left and a hard place to my right.

So, to prevent this Catch-22 where we are damned if we fire them and damned if we don't (and pay the bonuses), the government should have:

Please list your ideas here...I was going to try to say force noncompete agreements down their throats, but those do have to be signed by the employee....List away if you can...I have to go to bed now, but I do want to finish this though! Perhaps tomorrow!

[FrenchieCat]

1. IT's gotten boring. Beaten to death.

Manufactured media pushed outrage has a tendency not to do as well as organic grassroot outrage.

[donheld]

2. AIG, Bonuses

Never heard of them :eyes:

[napoleon_in_rags]

3. The government has to do what it needs to increase transparency.

When we get down to it here, we're really talking about information as commodity, and we're talking about a bubble. But the natural economic forces for information are summed up best by the free content movement: information wants to be free this bubble is delicate and the thing to do here is pop it before the losers have a chance. Decrease demand. I'm talking about a little short term chaos for a final outcome where mysterious magical "quants" aren't leading the market off a cliff with voodoo nobody understands and these assholes no longer have the country by the balls. Devalue the information. Increase transparency. That's the right action I believe.

[quakerboy]

4. You are telling me that AIG

wasn't smart enough to have any of these people sign confidentiality and/or non compete clauses?

I would assume they did, being such crackerjack business people and what with all the lawyers. And given that the US government is the majority shareholder in AIG, I doubt getting those enforced would be all that dubious a proposition.

[dkf]

5. Can they insist on non-competes if they let you go?

[Lucky Luciano]

7. non-competes must be signed by an employee as it is a contract

that two parties have to agree to, so it is hard to force it on someone who does not agree.

[marshall]

6. The bonuses are one tenth of one percent of AIG's total bailout

It's like getting outraged over money blown buying morning coffee and donuts.

[Lucky Luciano]

8. moral hazard issue. nt

[AngryAmish]

10. I could really go for some donuts right now

[Lucky Luciano]

11. Funny...I guess the uproar passed.

[depakid]

9. The solution(s) lies with these folks:

http://www.sfo.gov.uk/

Been awhile since I looked at British law- but one imagines that there would be remedies, just as there are under various American statutes (that thus far, aren't being used).

[paparush]

12. Its such a purely American reaction...

We get pissed REALLY pissed off when AIG tries to give 1/1000th of their bailout total as bonuses, but not nearly as strong a reaction to the $170BILLION itself.

These bonus contracts are seriously wrong.

"Dave, you're division lost $3.2 BILLION dollars last year gambling on shady derivatives. Here, here's a million dollar bonus."

I just don't get it.