On the Lou Dobbs show tonight, Barney Frank was talking about how he dislikes "retention bonuses". Summed up, he's against people who say "If you don't bribe me, I'll quit and hurt your company."
Isn't that precisely what unions do when they threaten to go on strike? "Pay us more, or we'll all quit working and hurt your company."
Friday, March 20, 2009
Tuesday, March 17, 2009
Pay people MORE bonuses
Politicians and reporters need to stop talking about economics, particularly when they have not the slightest clue as to what they're talking about.
Yes, AIG lost a ton of money last year. Yes, the taxpayers had to bail them out. Yes, they just gave people $165m in bonuses. Yes, reporters and politicians are piling on.
Let's look at this simply: Let's simplify AIG into two divisions (and the numbers are made up) a Securities Division and a Life Insurance Division.
The Securities Division is getting hammered with all their underwriting losses on mortgage backed securities. They lost $125b last year!
The Life Insurance Division by contrast is doing much better. With all the stock-brokers throwing themselves out of windows, they're able to get out of paying off on based on the suiscide clauses (note...this is fiction...but I've gotta spice it up a bit)! Last year was a banner year, and they made $25b for the division.
Overall, the company lost $100b.
So, it comes time to do bonuses. The head of the Securities Division gets, how do I put this, zip, zero, nada, perhaps even a suggestion that he seek other employment in the near future. The Life Insurance division, however, has met and exceeded all of their quotas. Their contracts specify that they should get about $165m in bonuses! Happy days are here!
Now, in comes the Government. They decide to tax those Life Insurance bonuses at a rate of 100% (retroactively and as a bill of atainder, in violation of the US Constitution, but who cares about that). They got to show who was boss in that little p!$$ing contest, didn't they.
So the next year, the guys in Life Insurance say "Why bother working so hard?" The Securities Division doesn't stink up the place quite as bad, losing $100b, but now Life Insurance, who aren't working so hard to get the suiscide clauses in their policies, lose $50b. No bonuses for anyone! Yay, the Government's happy! The press is happy! The proletariat are happy!
The company has, however, now lost $150b this year and needs a bigger bailout...good thing they took those bonuses away!
Yes, AIG lost a ton of money last year. Yes, the taxpayers had to bail them out. Yes, they just gave people $165m in bonuses. Yes, reporters and politicians are piling on.
Let's look at this simply: Let's simplify AIG into two divisions (and the numbers are made up) a Securities Division and a Life Insurance Division.
The Securities Division is getting hammered with all their underwriting losses on mortgage backed securities. They lost $125b last year!
The Life Insurance Division by contrast is doing much better. With all the stock-brokers throwing themselves out of windows, they're able to get out of paying off on based on the suiscide clauses (note...this is fiction...but I've gotta spice it up a bit)! Last year was a banner year, and they made $25b for the division.
Overall, the company lost $100b.
So, it comes time to do bonuses. The head of the Securities Division gets, how do I put this, zip, zero, nada, perhaps even a suggestion that he seek other employment in the near future. The Life Insurance division, however, has met and exceeded all of their quotas. Their contracts specify that they should get about $165m in bonuses! Happy days are here!
Now, in comes the Government. They decide to tax those Life Insurance bonuses at a rate of 100% (retroactively and as a bill of atainder, in violation of the US Constitution, but who cares about that). They got to show who was boss in that little p!$$ing contest, didn't they.
So the next year, the guys in Life Insurance say "Why bother working so hard?" The Securities Division doesn't stink up the place quite as bad, losing $100b, but now Life Insurance, who aren't working so hard to get the suiscide clauses in their policies, lose $50b. No bonuses for anyone! Yay, the Government's happy! The press is happy! The proletariat are happy!
The company has, however, now lost $150b this year and needs a bigger bailout...good thing they took those bonuses away!
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