random drive by AIG moment

A couple of days ago I was talking about how the market, as far as I can tell, is schizophrenic.

Example:

American International Group (AIG) is currently being raked fore and aft over that entire messy bonus issue. Late last week, it traded at less than fifty cents a share. I know this because I have a spreadsheet, and you know, I'm anal. You would think--you know, in a world where the market had something to do with what was going on in the actual business end of a company--this would be bad for the price of shares. Yeah, I would too. You know. Until this morning.

However, I cannot login to my account right now, as suddenly and inexplicably, there is too much trading right now. This was new, and I went to pull my spreadsheet and realized things looked wrong, as there was money there that really shouldn't be, since come on, it's not like I'm using logic here in my buying sprees.

This is because AIG tripled in price*.

Let me point this out again. AIG is being investigated for bonus stuff and is going to get ass-raped by the government with government subsidized lube which is also known as sandpaper and this morning the shares reached two dollars each. Bank of America is also still trading above seven (as of the last fifteen seconds), and see, this is why when people look grim over the state of the economy because the DOW looks unhappy, I kind of laugh. The DOW is not unhappy. A whole bunch of hedge fund managers and assorted brokers just bought new BMWs and are making a down payment. Check car sales in the area. Or you know, whose child was arrested recently. I mean, seriously.

*taps fingers on desk*

So far, two hours of high trading and counting. This is hysterical. And I cannot participate in this historical moment. Not that I would. But I do like to boggle at it in real-time.

Comments

[seperis.livejournal.com]

The only people genuinely punished are the ones who got the bonuses and who haven't done anything wrong.

I would disagree flatly with that.

[ladycat777.livejournal.com]

How so?

Sorry, didn't mean to sound so argumentative about it.

Can you explain, though? Because everything I've read so far (and there are conflicting reports, totally) says that the employees who received the bonuses weren't the same employees who played fast and loose with the market. It's a separate division.

[seperis.livejournal.com]

I don't see losing a bonus for total incompetence in a company that is taking money from the government a kind of punishment.

[ladycat777.livejournal.com]

Ah okay, I had pov issues in my sentence! Wasn't sure which was the part you didn't agree with :)

I think they, the employees who received the money, may see it that way, which was the pov I used when I phrased it. Because, again, as far as I can tell, AIG sent it without them asking for it, or requiring it for continued work. It was a preventative measure from the higher ups, based on idiotic thinking. That isn't their, the employees, fault, necessarily.

That said, I don't disagree. AIG has shown consistently stupid practices in how to handle the government TARP money, and frankly, I kind of want Obama to call a share holder's meeting and fire them all as 80% stock holder. That would be incredibly sweet. But for all I blame group incompetence on the company, I blame most of the real issues on upper level negligence. Sorry I wasn't clear when I said that.

[thearchpoet.livejournal.com]

I think, in the case of AIG specifically, you are 100% right - but I don't like how the media has been painting *everyone* in the financial industry with the same brush. I have friends, first and second year analysts, who work 80 to 100 hours a week *every week* on a salary of 50K a year in NYC (where, even after splitting, they pay over $1000 a month in rent). Without their (much *much* less than $1,000,000) bonuses they'd be taking home minimum wage.

[seperis.livejournal.com]

Er. I mean, not to put down the analysts, and certainly not to tar them with the same brush of incompetence for our current fiscal crisis, but as a caseworker I worked sixty to eighty, and the supervisors eighty to one hundred twenty a week, and our base salary was like, 25K to 30K per year in Austin, and supers, at least, didn't have the option of overtime pay. When I was a clerk, it was like, 17,000 per year, 60-80 a week, with occaional 100s. Child protective services don't even qualify for overtime and I know most average 100 a week including travel to and from homes, court, etc.

I don't think the same level of corruption is in the first and second year analysts, but massive overwork is pretty much across the board no matter the salary or job description.

mindless gibberish ahead

[thearchpoet.livejournal.com]

Ok, so what I'm about to say is going to get me smacked if I say it wrong so a) please understand that I don't mean to give offense and that b) I occasionally word things really badly b/c I have terminal foot in mouth syndrome but:

1. I don't know what the cost of living is in Austin, so I'm not sure how to compare the numbers you just gave me to Manhattan and

2. I don't know about at other firms but my friends don't get bonuses unless they personally (meaning their clients and the accounts they manage) have profitable fiscal years.

I do understand your point and I don't disagree with it on principle but... in practice, idk. I guess I'm a little emotional and it's hard for me to separate personal friends of mine from the rest of the industry. Like you said, a good number of people (including I myself) work damned hard for way less than 50k a year (hell, I worked 100 hrs/week on a presidential campaign last year for way less than minimum wage) but like... God, there's just no good way to say this: When I work for a non-profit or on a government job, my motivations are rarely monetary. When my friends knowingly took on jobs where the *minimal expectation* is (openly) 80 hours a week of staring at spreadsheets and being yelled at like your someone's bitch on a string, it's in the hope that they can (quickly) pay off the six figures in debt they amassed paying for the finance degree from the top tier school they had to attend to even get their resumes into an inbox. By which I mean that these are people whose qualifications are pretty damned high and could, if they wanted to, go get a job with a 50K annual salary that worked them a great *great* deal less than these Wall Street firms do - when it comes to picking these jobs over other jobs however, that aforementioned bonus has a lot to do with why. Does that make them any less greedy than anyone else? No of course not, but those are what the incentives are and that’s the value the market assigns their work.

3. That said, I *do* understand your point. Hell, if you ask me, our soldiers in Iraq deserve those Wall Street salaries a lot more than a lot of Wall Street managers do - but that doesn't mean that *every person* in an industry deserves to be tarred, feathered, and lynched for the mistakes of others who work in their field – and if they make a 10k bonus (that’s taxed at a higher rate than their salary), well, if they worked hard for it – why shouldn’t they get it?

Re: mindless gibberish ahead

[seperis.livejournal.com]

I don't think most of them do either, to be honest. But a lot of the anger isn't at the rank and file, even though right now, it doesn't feel like that much of a difference.

I don't know about at other firms but my friends don't get bonuses unless they personally (meaning their clients and the accounts they manage) have profitable fiscal years.

The objections here are about bonuses to employees of companies that failed dramatically. While I am boggling at the idea of million dollar bonuses to anyone, that's a company's call if they write that in. The government bailout though, makes that a lot different in those companies.

[thearchpoet.livejournal.com]

Also, I apologize for getting all defensive and tangled up in an issue that's actually tangential to your original post - a lot of what you said (even here in the comments) rings true with me, it's just that I've spent a lot of the last six months listening to people say that everyone on Wall Street is lazy/greedy/evil etc. and that all bankers deserve to be shot etc. and I get over-sensitive about it.

[seperis.livejournal.com]

People got laid off who weren't responsible as well. People lost everything and also weren't responsible. These people really aren't so special they need a million dollar bonus.

[ladycat777.livejournal.com]

I don't disagree, at all*. And if it comes out that they specifically asked for their bonuses, then they get lumped in the same group as the others. But so far, the story is that this was a decision made above their heads with no input. I'm not going to necessarily blame that on them, specifically.

* These people really aren't so special they need a million dollar bonus. You and I don't think so. The higher ups at AIG, clearly, do. That doesn't actually recommend me the philosophy, though, as most everything else AIG higher ups have done has been insane.

[seperis.livejournal.com]

Well, they did have input. It was part of their contract.

[ladycat777.livejournal.com]

If you could put in your contract that you would get a multi-million dollar bonus at certain intervals, wouldn't you? I won't blame them for being greedy. I'm greedy. If I could get more out of my bosses, I would.

I blame the higher ups, hell, even payroll for deciding that not only would they honor that part of the contract, and to use money from the government fund to do it.

[seperis.livejournal.com]

Sure. And I wouldn't be surprised if my company's incompetence and my own in the jobs required I lose it.

[ratcreature]

Yeah, I mean if a company doesn't have any money (or not any that legitimately belongs to it anyway) and didn't make any profit but ginormous loses, you'd think the best employees can hope for is still getting paid the regular amount at all, rather than going under with it or negotiating pay or work hour cuts to salvage it. It's just really bizarre that their contracts apparently give them "bonuses" (which by their very name you'd think would be something extra that a company pays only when they do well) no matter their or the companies performance.

But then I remember a bit back here bank managers who lost over 2.5 billion euro and got their bank ruined (so that it had to be taken over by another bank with government help too iirc) still insisted on getting over 400 million euro in bonuses, and actually intend to go to court to get that money. It's unbelievable. But apparently whatever contracts investment bankers have don't work based on Earth Logic no matter where they are. Like, I think I remember the headlines about how The Royal Bank of Scotland had losses in the double digit billion range and their the managers still got over a billion in bonuses...

[seperis.livejournal.com]

God, I know. The entire system of pay in corporate life is ridiculous.

[fanaddict.livejournal.com]

Actually, many of the people getting bonuses supposed belong to the division (the financial products division, which is basically a hedge fund in all but name) that was at least partially responsible for AIG's problems - or so various news agencies would have me believe. I can't vouch for that being truth.
Link: http://dealbook.blogs.nytimes.com/2009/03/18/dissecting-the-aig-bonus-contract/?ref=business

The part I find hysterical is that something like 70 of the bonuses were retention bonuses - ie to remain with the company - and 11 of those people have left the company. Presumably they fulfilled their contract to get the bonuses, but it's just emblematic of poorly designed contracts for people in the higher echelons of these companies.

I think Obama's administration was going to let it ride given that breaking these perfectly legal contracts would have cost more than the bonuses themselves, but once the media became involved and started shouting down the roof they had to do something otherwise it would have been political suicide and he actually wants to get other things done with his current political capital before it runs out.

[ladycat777.livejournal.com]

The part I find hysterical is that something like 70 of the bonuses were retention bonuses - ie to remain with the company - and 11 of those people have left the company. Presumably they fulfilled their contract to get the bonuses, but it's just emblematic of poorly designed contracts for people in the higher echelons of these companies.

That, particularly, is why I can't blame the employees who got the money in particular. AIG made the decision to pay money that, in some cases, it didn't even need to. That's not their fault.

It's AIG's, obviously, and I want them broken up into teeny, tiny pieces with their current board fucking fired. But I wanted that for a while :)

I know they belonged to finance, but it was the specific part within finance that (I thought; like you, I've seen a lot of contradiction as to where they specifically worked) was separate from the hedge-funds and the bond-trading. I can't really find out definitively one way or the other, though. But even if they were, it wasn't them who contacted payroll and said "gimme" (supposedly; if it comes out they did, I want them all in jail. Every. God damned. One.)

I think Obama's administration was going to let it ride given that breaking these perfectly legal contracts would have cost more than the bonuses themselves

That's my theory, as well. I even agree with it, frankly. This is an explosion of anger that, however rightful, is ultimately more about something specific and personal we can point at go "bad boy!". It's harder when it's an entire industry that needs to be changed.