So you are going to so heavily tax those middle managers so that they locate opportunities elsewhere before they get a chance to fix it. Smart. True...but this also fails to explain why you want to tax so heavily the bonuses of the mid level guys.
Bernstein: AIG Bonus Tax May Go Too Far Last Edited: Sunday, 22 Mar 2009, 10:03 AM CDT Created On: Sunday, 22 Mar 2009, 9:56 AM CDT * By The Associated Press WASHINGTON - Vice President Joe Biden's economic adviser says lawmakers' plan to tax those AIG bonuses could be "dangerous." Biden adviser Jared Bernstein says the House-backed plan to heavily tax the $165 million in bonuses could have gone too far. The Senate has not finished work on its version. American International Group received billions in taxpayer dollars to keep its doors open but still paid employees the bonuses their contracts required. Populist anger led the House to impose a 90 percent tax on bonuses paid this year to companies that needed government bailout money. Obama says the bonuses are outrageous and has condemned them. http://www.myfoxhouston.com/dpp/news/dpg_Bernstein_AIG_Bonus_Tax_May_Go_Too_Far_SAB_032220092296198
Let's be very clear here for a second. With respect to the poor CT and UK-based "middle managers" at AIGFP - they are completely responsible for the demise of the company. Their division singlehandedly killed the company, and by that I mean: they erased trilions of dollars worth of shareholder value and ran up trillions of dollars worth of liabilities which we are now guaranteeing via bailouts. They're also responsible for thousands of their fellow AIG employees now being jobless. That's not debatable - that's simply what happened. AIGFP destroyed the company. They did this by essentially collateralizing the entire company (in at least indirect, if not direct) violation of state regulatory regimes which ban insurers from engaging in behaving like a hedge fund run by drunken morons. Granted, Hank and his minions let it get to this, so they obviously bear some blame as well.....but at the end of the day, these are bad, bad, bad actors. They are not sympathetic in the least.
Why are my brother and I ****ed? Because our wives, who have nothing to do with finance, both do remarkably well. So if they do just as well this year, 100% of my "bonus" is going back to the US Govt if this stupidity passes. My wife is an ICU nurse who works a crapload of OT if she can. My brother's wife is head of HR of a major ad firm. Thanks to the fact that we live in bloodsucking Manhattan, their salaries are around $150-250K a year (I'm pretty sure my brother's wife makes close to $250. Yeah that might sound like a lot but go to www.salary.nytimes.com and you'll see that the pay up here is just higher). The point is that our wives bring us almost to the $250K cap, and dont work in finance. Add the fact that Wall St gigs are currently structured where one gets small base salaries and the majority of our income is commission based (which are still called bonuses). So I might as well not work, bc any commission I make is going to be taxed 100%. I'm not ignorant...the discretionary bonuses given to people at firms who lost money are insulting. But some of us work at firms that made money last year. And yeah I'm sure $200K a year seems like a lot for an ICU nurse but as most of you know 50K in Houston = 123K in NYC thanks to the stupid cost of living. I think its only fair that people realize that "bonus" on Wall St include commissions on trading. If you're 75% commission and you just found out that that 75% is going to be taxed 100%.... Well, I can define that as ****ed. My whining aside..... Tulexan is dead-on. I see the profitable banks paying back the TARP funds with new capital asap. But to claw back our comp for 2008, when our firms made good money that year, thats not American. Last years 2008 net income for top IBs: JP Morgan: 5 billion Goldman Sachs: 3 billion Morgan Stanley: 1.5 billion
A few things need to be reiterated about Wall Street bonuses 1. It's not really a bonus in the traditional sense when compared to other industries. Most bankers/traders live off of their bonus and are paid (relatively) small base salaries. There aren't a ton of people at investment banks who are making base salaries of $1MM+. Higher up employees are paid a couple hundred thousand base with most of their salary coming in a "bonus" at the end of the year. 2. Just because a firm loses money does not mean that every division lost money and every group within the division lost money. Banks may be doing terrible right now, but some groups like restructuring are absolutely killing it right now. Why should a division that is generating a lot of revenue for a company suffer because of the problems of other groups? 3. It may sound strange to people who don't work in Wall Street or live in Manhattan, but $250K is really not that much. Especially if it is household income. I'm sure there are a lot of lower level employees (a few years out of college or 1st year out of MBA) who easily have a household income of well over $250K. This isn't going to just affect the C-level executives, SMD's, and MD's, this will most likely affect most front office employees.
As I said originally, I don't think this idea makes sense at all, and certainly not at the income levels being mentioned. I was just curious how it would affect real world folks. I wasn't implying that you were making stuff up or that you wouldn't be affected. Thanks for answering.
Populists just don't care. It's funny, but $250k isn't even that much for a married couple in NYC. A husband and wife could hit 250k as degreed professionals in jobs that have nothing to do with derivatives. They wouldn't get any bonus, while 2 other people in lower level positions get an $30-40k bonus for being less educated/hard working.
What bonus? 90% of it goes to federal income tax. The rest are taken away by local taxes and medicare.
The funny thing about this bill, is it encourages the spouse that's outside of the industry to quit. If the combined income is over $250k and a spouse doesn't work at one at a bailout company, if the spouse quits the job to stay home with the kids. Their income at the normal tax rate would still be capped at $250k, because the employee would not be taxed at the 90% rate for bonus income under $250k. Great idea, a bill that encourages single income households and decreased economic productivity. If my wife is a teacher and I work at a bank, she might as well quit.
FB, a lot of the folks working on the Street had nothing to do with this mess, and those bonuses are a major part of their income. Sure, they're lucky to have a job right now, the way things are, but it makes no sense to me to tar the thousands of people who work for companies that have accepted TARP money with the same brush as the top people who are really responsible for much of this nightmare and are getting the huge bonuses. A friend of mine that has nothing to do with these companies, but makes his living investing in the market, said this "plan" from Congress is really having a negative impact. I tend to agree with him. Barack should come out against this, IMO. Try and do what we can to hurt the top fools making the huge bonuses? Sure, but not this $250,000/90% stupidity. It's just a political play for public consumption that'll never hold up in court. In my opinion.
Obama's salary regulations are spreading to ALL firms, even if they didn't take 1 penny of the bailout. It doesn't matter if you are a private company. He is moving beyond 90% taxes on bonus over 250k on only bail out companies, to regulating the salary of all financial establishments even responsible ones. Their will be a brain drain from companies that were profitable and responsible. The talent will move overseas to Europe. Before you say, they can't find jobs. There's always work for rockstars, especially ones that are making profit at responsible companies. http://www.foxnews.com/politics/2009/03/22/report-obama-administration-seeks-regulate-executive-pay/ Report: Obama Administration Seeks to Regulate Executive Pay Obama is expected to announce the plan, which officials said would include a broad new role for the Fed to oversee large companies, ahead of the G-20 summit in early April. The Obama administration will call for increased oversight of executive pay at all banks, Wall Street firms and possibly other companies as part of a plan to overhaul financial regulation, the New York Times reported. Obama is expected to announce the plan, which officials said would include a broad new role for the Fed to oversee large companies, ahead of the G-20 summit in early April. The administration was still debating details of the plan including how broadly it should be applied and how far it should go beyond simple reporting requirements, the Times said, quoting unnamed officials. The changes could go into effect through regulations, not legislation, depending on the result of discussions on the issue. The regulations would reportedly cover all financial establishments, not just those receiving federal bailout aid and would likely work to ensure executive pay was in line with the financial interest of the company. Though such rules have been discussed previously, recent uproar over executive bonuses has reportedly prompted action from the administration. Treasury spokeswoman Stephanie Cutter would not discuss what changes to executive compensation the administration might propose, the Associated Press reported. She said the whole issue was being examined in the context of an effort to keep executive bonuses from fostering excessive risk taking.
Part of the cause. Buying up all those crappy securities is the reason they are in trouble. This institutions are so big they can impact an entire economy. Just as GM failing would hurt hundreds of thousands of workers, so would AIG failing. I'll tell you what, how about you pay for those AIG bonuses - but not me. That's fair right? I mean, you and me are actually paying their bonuses - you realize that? So why don't you pay more. They deserve it. You pay it, don't ask me to. Why should i pay someone's bonus who makes more money than i do? forget it. AIG is a gov't company now.
Kinda the point. You don't really want people taking money from the gov't unless it's their absolute last resort.
If true, then Obama is basically pissing all over our own business interests. If financial companies cannot give bonuses, they will have to repackage the compensation as salary. Of course, then Obama will want to put an end to that. The result? The best and brightest will go to work elsewhere. The net result to that will be financial institutions that will not perform as well as they could, thus creating a greater probability that they will encounter further trouble. This is just dumb.
1. Obama's administration has made it clear that they are skeptical of the 90% tax and are not backing that plan. So why do you call it Obama's plan? Do you honestly think it is his plan or are you just playing games with the facts? 2. The article you posted has nothing to do with the tax proposal spurred by AIG bonuses. It has to do with oversight mostly, but also regulations. For example (and I'm just making this up) maybe you won't be allowed to give multi-million dollar performances bonuses when your company is losing billions of dollars. That's a regulation, not a tax. Do you honestly think that the proposal mentioned in the article is to tax all bonuses for incomes above $250,000 in all firms? Seriously, those are honest questions. I'm trying to understand how you went from the text of the article to your comment above it.
No...it will ensure that the greediest will go work elsewhere. I am not so sure we had the best and the brightest at the helm over there in the financial sector the last few years. Or do you disagree? Also, here's the full article: http://www.nytimes.com/2009/03/22/us/politics/22regulate.html?hp Frankly, they are talking about CEO's and such, not even managing directors.
There's no sense in running away to Switzerland unless you like to ski. The feds can get to your money there if they want it. Besides, it's a global economy so there's nowhere to run. If you have been hardening your assets (buying physical gold) over the past couple of years, you'll be fine. If not, it is a little late but not too late. Convert, bury and wait it out somewhere comfortable and out of the way, a little rural, self-contained cottage, for example. When the storm passes, your gold will restore you to your former lifestyle and all will be well. Don't panic. Plan.
Don't worry, Deckard I don't believe the tax is the right way to go about it. I was just talking about facts. A bonus is something paid above the salary. Whether or not it's right to tax 95% above 250k doesn't change what a bonus is.
