I think there's some blame displacement here. If there are any crooks here, their crookery is in the past. More crooked things may yet come, but how do you determine pay for future CEOs based on the results of past CEOs? If Citibank hired a new CEO to dig them out, you want to pay the new guy under market because his predecessor was unwise or crooked in company management? Meanwhile the old CEO rides off with his un-earned millions?
So you think Citigroup is going to get some really smart, highly qualified guy who could get paid millions elsewhere to come in to fix Citigroup for free?
I believe Hoover initialy tried to let the markets correct itself (which made him look inept against waves and waves of public suffering), and then in his outgoing days tried some big construction projects that FDR picked up. His notorious crime was signing the Smoot Hawley tarriff act.
I think there are plenty of people that are coming up that would do the job for less than millions of dollars.. Did that lady who got a 42 million dollar severance for running HP into the ground deserve it? Nope. There are lots of people qualified to be CEO....some get the chance, others don't... DD
Most executive compensation on Wall Street is in the form of restricted stock that can't be vested for a few years. The main problem is that good management is hard to find. Large companies must have strict risk management and controls to ensure that they don't blow up, and unfortunately, that is often not the case.
AIG Freezes Executive Salaries, Liddy’s Pay Set at $1 (Update5) Email | Print | A A A By Hugh Son and Karen Freifeld Nov. 25 (Bloomberg) -- American International Group Inc., under pressure to limit executive compensation after a U.S. bailout, froze pay and scrapped bonuses for seven top leaders and said Chief Executive Officer Edward Liddy will get a $1 salary. The insurer’s next 50 highest-ranked executives will forgo pay raises through 2009, New York-based AIG said today in a statement. New York Attorney General Andrew Cuomo, who demanded last week that AIG disclose compensation plans, said the insurer took a “positive step” and called on other firms to follow. Liddy, 62, is cutting costs after lawmakers and regulators criticized AIG for bad bets that forced the insurer to take a taxpayer rescue that was increased this month to more than $150 billion. AIG, crippled by losses tied to mortgages, follows Wall Street firm Goldman Sachs Group Inc. in limiting executive compensation after receiving commitments of capital from the U.S. “It is only fair that top executives, who benefit the most when firms do well, should also bear the burden of the difficult economic consequences their firms now face,” Cuomo said today in a statement. “Taxpayers have been slammed with a one-two punch, seeing their investments dwindle while simultaneously having to fund the Wall Street bailout.” AIG shares have declined about 97 percent this year. The insurer was unchanged today at $1.77 in New York Stock Exchange composite trading at 4 p.m. Show of Confidence Liddy, appointed by the government in September after AIG agreed to cede an 80 percent stake to the U.S. in exchange for an $85 billion loan, will collect the $1 salary through 2009 and an unspecified number of equity grants that “show his confidence” in the firm, the company said. Liddy, who previously was working without pay, will also be eligible for a bonus in 2010 and won’t get any severance. “AIG is mindful that it must act prudently,” Liddy said in a letter to Cuomo dated today. Paula Rosput Reynolds, the former CEO of Safeco Corp. hired in October to lead AIG’s restructuring, will get no salary or bonus this year. Her 2009 compensation besides salary will be tied to company progress, said AIG, which is trying to sell units to repay the government. “To the extent this management turns this company around and the taxpayers are made whole and the company makes a profit, I believe they should be incentivized,” Cuomo said on a telephone conference call with reporters. Waiting for Answers Cuomo said his investigation continues into pay at AIG’s securities-lending unit, which helped push the insurer to the brink of collapse. He also said he was waiting to hear from Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. after sending them letters about executive pay. Cuomo said both federal and state regulators have “jurisdiction” over national banks. Wells Fargo spokeswoman Julia Tunis Bernard, Bank of America’s Scott Silvestri and Citigroup spokesman Mike Hanretta declined to comment. Citigroup will set compensation for senior executives at yearend, Hanretta said. Goldman, the firm that set a record for Wall Street pay last year, became the first U.S. bank to scrap 2008 bonuses for top executives. CEO Lloyd Blankfein, whose 2007 bonus was almost $70 million, and six deputies declined the awards. Liddy’s compensation at Allstate Corp. in 2006, his last year as CEO of the insurer, was $24 million. Liddy’s predecessor, Robert Willumstad, rejected a $22 million severance package after leaving AIG in September. Willumstad had to step down as one of the conditions for AIG to receive government help. Martin Sullivan, who was forced out in June, received 2007 compensation valued at $14.3 million, a 32 percent decrease from the year before as profit dropped on writedowns tied to the housing slump. Liddy previously agreed with Cuomo to freeze $19 million due to Sullivan and $600 million in compensation for other executives. Liddy had been working without a salary or other compensation, spokesman Nicholas Ashooh said last week. “You could say it’s been both thankless and payless so far,” he said Nov. 18. Ashooh declined to name the executives beyond Liddy and Reynolds among the seven leaders. http://www.bloomberg.com/apps/news?pid=20601087&sid=aQUxVH0reSqw&refer=home
^That's pennies to the hundred dollar of what the second AIG bailout will give them. We're far too distracted on this issue to see the real matter at hand...a bailout that American taxpayers shouldn't have signed onto or should have had a choice to accept in the very beginning. http://www.economist.com/finance/displaystory.cfm?story_id=12607251 Cheque mate Nov 13th 2008 From The Economist print edition How AIG got Uncle Sam over a barrel JUST how concerned should American taxpayers be about American International Group (AIG), the insurance company brought to its knees by its escapades in the credit-derivatives market? On November 10th a revised rescue package was announced, comprising $153 billion of capital injections and loans. That is the largest bail-out for any firm, anywhere, during the crisis. Is the government being, as AIG’s new chairman says, “very, very smart”, or has it been taken for one of the most expensive rides in corporate history? Even on September 16th, when the state first intervened, AIG was a controversial candidate for assistance. Its insurance businesses are ring-fenced by local regulators and individually capitalised, precisely so they can survive a collapse of the holding company. A bankruptcy was avoided only because of the size of the holding company’s book of toxic credit derivatives, which senior executives barely understood. These left AIG so intertwined with other financial firms that its failure was judged by the Federal Reserve and Treasury to endanger the financial system. Whether that judgment was right remains unknowable. But it is now clear that the original plan was flawed. That may be understandable: panic was in the air, AIG faced crippling collateral calls and Lehman Brothers had just folded. And the authorities lacked the wide powers granted by the Troubled Asset Relief Programme (TARP) approved by Congress in October. Unorthodox options, such as splitting the systemically threatening credit derivatives from AIG, were not under discussion. As a result, the original plan looked a lot like the traditional remedy for a liquidity crisis at a solvent bank. The Fed offered a two-year, $85 billion loan. AIG would pay a penal interest rate and cede to the state an equity stake of just under 80%. But as collateral calls mounted on the credit derivatives, and AIG admitted to new problems, it became plain that the loan was too small. It was also too expensive: in the first year it would have cost almost as much as AIG’s profits in 2006, its best year ever. Meanwhile the chances of AIG being able to repay the loan also shrank. In the second quarter, it had only $59 billion of core equity capital (defined here as book equity less goodwill, tax assets and stock ceded to the state). By the third quarter, more losses had cut this to a meagre $23 billion. Worse, much if not all of AIG’s capital sits “stranded” in the ring-fenced insurance units. That makes it hard to funnel it up to a holding company that is otherwise almost certainly insolvent. The original solution was to sell the insurance operations to raise cash, but with AIG’s competitors also reeling, this looked less and less realistic. The alternative, of AIG tapping credit markets to repay the state, became ridiculous by early November. AIG’s own credit spreads implied that the company was headed for default (see chart). Prospects of even rolling over the $64 billion of non-government borrowing due to mature by 2011 became increasingly bleak. That forced the hand of the authorities. In one sense the new package does what, with the benefit of hindsight, should have happened all along. The Fed will provide $53 billion of funding for two vehicles which will, in effect, assume AIG’s most toxic credit derivatives and mortgage-backed securities. These positions have been marked to fairly conservative levels. In an alternative universe the government could then walk away, confident that it had dealt with the worst of the systemically important credit derivatives and that the insurance operations remained safely ring-fenced. But in the real world the state is now the biggest lender to AIG, which has drawn down the bulk of the original $85 billion facility. AIG has Uncle Sam in a bind. As a result, the Treasury, through the TARP, has been forced to recapitalise the insurer by purchasing $40 billion of preference shares. Despite this its economic stake in the firm will remain just below 80%. The Fed will also maintain a loan facility, on more generous terms, of $60 billion. And if AIG struggles to refinance its debts, it is quite possible that the state will provide a formal guarantee. The Treasury has secured crowd-pleasing concessions; for example limits on executives’ bonus payments. But the real question is whether the preference shares are safe. AIG has a trillion-dollar balance-sheet. There is now a thin buffer of core equity between the taxpayer’s preference shares and any further losses. The hope is still that as markets recover, AIG can sell the crown jewels of its insurance business at a premium to book value. That may well take years. Plenty of time to reflect on how an offer of a temporary loan, to a company that barely made the list of systemically vital firms, spiralled into one of the biggest corporate bail-outs ever.
The crookery is in the past? All jokes aside about using the word crookery, I believe the real crimes are being commited now. Who's in charge? Anyone? How can any decent soul really support this ransom/bailout? What's the difference between Somali pirates and Financial pirates? Insert punchline here
how can you not support the economic heist? not like congress was threatened with martial law and worse if they didn't pass it. Congress has no control any more, there's no checks and balances, the Constitution has been thrown out the window, and the only power that really matters any more is the executive (corporate) one.
The big thing is that if money is given to "too big to fail" companies than they need to be broken up or heavily regulated like public utilities. None of this taking spectacular risks because you will be bailed out. Their choice it to break up their companies so that they are samll enough to fail or follow very conservative rules that if violated would lead to penalties like you can't work in finance or management for 5 years or whatever. Not as fun, but the speculators should play somewhere else. Wouldn't it be nice if we could all bailed out regardless of the risks we took in the stock market. Sure makes playing a lot more fun and lucrative, but more likely to crap out.
Cute. Bush included a loophole that has been made enormously powerful given the conveniant forsaking of reverse auctions in favor of massive charity checks. Chronicle Link The american citizenry is handing out blank checks to companies that have shown an absolute lack of business sense, decorum, or restraint. And now those executives that hosed the country may get taxpayer-funded bonuses. Aren't you proud?
